The US and South Korea have finally ratified the free trade agreement which has been subject to a number of redrafts relating to vehicle tariff proposals and has been four years awaiting final approval.
Members of president Lee Myung-bak’s governing party finally pushed the FTA through the Korean parliament on Tuesday this week amid scenes of chaos as an opposition legislator sprayed tear gas during a last minute plenary session in the parliament building.
The agreement gained less controversial congressional passage in the US last month, something welcomed by the American Automotive Policy Council (AAPC), which represents the interests of Ford, GM and Chrysler. The AAPC worked closely with the US trade representative throughout the negotiations to ensure the agreement secured opportunities for the carmakers to compete in the Korean vehicle market.
“As representatives of the largest exporting sector, this FTA will help open an important auto market for Chrysler, Ford and GM exports,” said AAPC president Matt Blunt.
The council said its member companies supported the agreement’s automotive rule of origin, which maximizes their export opportunities from the US.
“This agreement will help open a major Asian market that has been largely closed to US auto exports,” said Blunt. “Not only is it good for the American auto industry and its workers, but it is good for the nation.”
Ford’s CEO Alan Mulally also commented on the passage of the FTA: "Last night's approval of the US-Korea Free Trade Agreement will open new opportunities for Ford to reach even more Korean customers by selling them more American-made Focuses, Tauruses, Mustangs, Escapes, and Explorers, among other cars and trucks,” he said.
"This would not be possible without the improvements made last year to increase transparency and address trade policies. We deeply appreciate the tireless efforts of the Obama Administration and Congress to both improve the agreement and make this opportunity a reality."
Mulally was referring to negotiations held in December 2010 which led to revisions that halved those tariffs placed on US-made vehicles immediately after ratification while the US maintained its tariff on Korean-made vehicles at 2.5% for the same period. Tariffs will then be removed under the revised proposal.
Improvements also included a clause that the US would continue its 25% tariff on truck imports for eight years and then phase them out over a two-year period. Prior to the most recent revisions the US was bound to begin to phase out truck tariffs immediately.
South Korea has also said it will exempt US carmakers that sell less than 25,000 vehicles in the country from meeting local safety standards provided that they comply with US regulations. This is almost four times the number allowed in the 2007 agreement. It will also lower its CO2 emission standards by 19% for US carmakers that sell less than 4,500 units on the local market.
General Motors also commented on the approval of the agreement stating that the US and South Korea were “vital parts of GM's global operations” and that GM had a “significant design, engineering and manufacturing presence in both countries”.
In a statement the carmaker said: “The Korea-U.S. free trade agreement will further grow this important trade and economic relationship. Greater use of GM's expertise and facilities in the United States and Korea should create new export and market opportunities for both countries.”
