Sunday, December 5, 2010

PBS Newshour gets it wrong on the KORUS FTA

I've made no secret that I love PBS's Newshour and I recommend it as the single best layperson's source of comprehensive, objective, nonpartisan, and dispassionate analysis of the important political, economic, and social issues facing the United States and much of the world (that, Sesame Street, and low-calorie cranberry-walnut muffin recipes is why we should support public broadcasting).

But every now and then they do get it wrong, and this "News wrap" piece mentioning the FTA, I feel, was a misrepresentation of what's actually going on:
The U.S. and South Korea have reached agreement on the largest trade deal in more than a decade. The announcement today said the U.S. will lift a tariff on Korean autos over five years. In turn, South Korea will allow imports of thousands of American-made cars. The South Koreans also agreed to lift a heavy tariff on U.S. beef.
Listening to that, someone otherwise uninformed about ROK-US trade might get the impression that prior to now, the import of American-made cars is simply not allowed. In fact, there are loads of American cars on the streets and highways of South Korea — they are imported with an 8% tariff — though they don't do nearly as well as Lexus, Honda, Volkswagen, BMW, and Volvo.

What Kwame Holman should have stated was that the pact would allow each US automaker to export 25,000 cars that do not meet ROK safety standards but do meet US safety standards.

Quoting the Los Angeles Times article about President Obama's praise for the deal:
South Korea would allow the U.S. to lift a 2.5 percent tariff on Korean cars in five years, instead of cutting the tariff right away. Each U.S. automaker could export 25,000 cars to South Korea as long as they met U.S. safety standards; disputes over safety standards had effectively stood as a barrier to U.S. auto exports into Korea. A U.S. tariff on Korean trucks would be phased out and South Korea would eliminate its tariff on U.S. trucks immediately.
Ford and Chrysler have claimed that ROK safety standards amount to a non-tariff trade barrier, even though Japanese, German, and Swedish automakers have had no real trouble meeting them. Detroit, for all practical purposes, wanted special consideration for US-made automobiles: Let American-cars into the South Korean market based not on South Korean laws but on American laws. I can imagine the outcry from Detroit if Hyundai and Kia were to have done the reverse with their cars (although actually, Hyundai and Kia are making most of their cars for the US market in the US).

The idea behind the 25K-per-automaker deal is for Chrysler and Ford to be able to break into the South Korean market without making expensive adjustments for which they don't know if there is going to be a payoff down the road (if the cars meet ROK safety standards, there is no limit).

If the South Korean public decides they want F150s, Mustangs, Escapes, and Equinoxes, then it will be worthwhile for Ford and Chrysler to retool some of their output specifically for the South Korean market, just as South Korean automakers (and everyone else) do for California. (I suppose this benefits GM, as well, but since GM already has a sizable presence in South Korea with ownership of GM Daewoo, it's not exactly the same situation).

All in all, despite Montana's Democratic US Senator Max Baucus being "deeply disappointed" that beef was not addressed, the end result isn't a bad one. I don't like the idea of big, polluting vehicles roaming Seoul streets, but I think the "streamlining" compromise sounds reasonable.

Ben Muse of the Korea-US FTA Blog has more on the details of the re-agreement of the FTA.

No comments:

Post a Comment

Share your thoughts, but please be kind and respectful. My mom reads this blog.