The agreement, reached just minutes before a deadline to get the deal considered under the White House's trade-negotiating authority, must be ratified by legislators in both countries to become law. Representatives of Chrysler and Ford said they will oppose it on Capitol Hill.
'As a company that operates and competes in 200 markets globally, we see the real and tangible benefits of free trade. Unfortunately this agreement, as we understand it, will not open the Korean market to free trade in automobiles,' said Steve Biegun, vice president for international governmental affairs at Ford.
South Korea promised to eliminate tariffs and other restrictions on imported cars that include an 8% tariff, a tax on engine size and restrictions on parts. The US will eliminate its lower tariff on South Korean cars over three years and a larger one on pickup trucks over 10 years.
The agreement would create a working group to review government regulation and technical standards in the auto industry. The auto section of the agreement contains a special dispute settlement process for resolving auto industry complaints with enforcement backed by the possibility of penalty tariffs, according to the US Trade Representative's office.
That doesn't go far enough to open South Korea's market, where imports make up just 3.5% of cars sold, compared with a 37% market share for imports in the US.
'The Korean government missed its last, best chance to undo the protectionist policies that over the past two decades have kept the Korean auto market off limits to all manufacturers - Japanese, European, and US This agreement should not be approved by the Congress in its current form,' Biegun said.
Chrysler, too, said it would lobby Congress to vote against the agreement.
'We have been working with the Administration since the beginning of the talks to reduce barriers to the Korean auto market, which is the most closed market in the industrialized world,' the company said in a statement. 'While we have supported every free trade agreement negotiated by the US government, we will not support this agreement as we currently understand it.'
Rep. Sander Levin, D-MI, who chairs the House Ways and Means Trade Subcommittee, said the deal faces certain defeat in Congress.
'The US did not get what was needed - an agreement that assures that the US automotive industry will no longer face the barriers to their products, that trade will be truly a two-way street,' Levin said, noting that South Korean companies export 700,000 vehicles to the US annually while the US sells less than 5,000 in South Korea.
Earlier this month, Levin had proposed that USTR offer South Korea a tariff-rate quota that would grant a zero tariff for a number of autos that would grow only as US auto exports to South Korea increased in the future.
Under rules set by Congress, President George W. Bush must wait 90 days before signing the agreement with South Korea. That means congressional consideration of the agreement will be put off until the second half of this year. (Dow Jones & Company, Inc.)
