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.

Yee ha! Free Trade Agreement re-agreed!

Good news for President Obama, President Lee, most folks in South Korea, loads of folks in the United States, and me (and probably you, too).

From AP, via WaPo:

The U.S. and South Korea have reached an agreement on a free trade deal sought by the Obama administration to boost American exports and create tens of thousands of U.S. jobs in the largest trade pact in more than a decade.

Negotiators reached a deal on outstanding issues related to the automobile industry, which have been a sticking point in the talks, said a person close to the discussions. The person spoke on condition of anonymity in advance of an official White House announcement.

South Korea is agreeing to allow the U.S. to lift a 2.5 percent tariff on Korean cars in five years, instead of cutting the tariff immediately. The agreement also allows each U.S. automaker to export 25,000 cars to South Korea as long as they meet U.S. federal safety standards and allows the U.S. to continue a 25 percent tariff on trucks for eight years and then phase it out by the 10th year. South Korea would be required to eliminate its 10 perent tariff on U.S. trucks immediately.

The "chicken tax" (the US's anachronistic 25% tariff on imported pickup trucks) still stands, and that could mean no Bongo trucks in Middle America, while the streets of Seoul will be filled with Hillbilly Hummers (aka, the Ford F150). Yee ha, indeed.

And of course, this doesn't mean we're out of the woods yet. While Obama will probably have little real problem getting the FTA through a Republican-dominated House of Representatives and a barely Democratic-controlled Senate, President Lee will face the full force of the chinboistas and maybe the dung-flinging farmers (who are not entirely chinboista-sympathetic) when he tries to get it through the National Assembly. After all, their voice is their only veto.

This could get as big as the Mad Cow candlelight madness of 2008. Expect it to get at least as ugly as the protests against the Chile-Korea FTA (which often saw more farmers than chinboista).

More on the FTA agreement having been reached over at The Marmot's Hole, where a lively discussion will no doubt ensue.

Democrats want more, more, more negotiations on KORUS FTA

More FTA news. It looks like Democratic members of Congress are taking advantage of the post-G20 lull in negotiations to twist President Obama's arm in order to get him to demand more changes to the KORUS FTA, beyond the beefs about cows and cars. And Obama says he'll listen, then think about it, and then maybe say "Screw it, I've got Republican votes now."

From Reuters:

President Barack Obama told congressional critics of a free trade deal with South Korea he would consider asking Seoul for changes to labor, investment and financial provisions of the pact to help win approval of the deal in Congress, a lawmaker said on Thursday.

"He wanted us to give him a list of what our other concerns were," Representative Michael Michaud, a Maine Democrat, told Reuters after he and eight other lawmakers met with Obama.

Obama said he "is willing to go over that list and see which ones they agree with, and the ones that they do (agree with) they'll try (to pursue) when they continue the negotiations with the Koreans," the Maine Democrat said.

But Michaud, who is chairman of the House of Representatives Trade Working Group, said also Obama made clear finalizing the trade deal was a priority and "he definitely does not want to start from scratch" to get that done.

There is still a lot of upbeat talk about the FTA:

Despite the setback at the G20, U.S. business have tried to remain optimistic that a deal is still possible and could be sent to Congress for approval early next year.

Tami Overby, president of the U.S.-Korea Business Council, said Deputy Trade Representative Demeterios Marantis told her on Wednesday he still believes it is "matter of days and weeks" before a deal is sealed.

Obama knows he has to fix his screw-up, and I think that means he'll go it alone (party-wise) if he has to. After all, he's got the Mama Grizzly on his side, and she's working on the Tea Party wing of the GOP.

Oh, and speaking of the the Republicans... Remember all those disgruntled voters who were out of work or underemployed or had lost their homes, and so they voted out the Democrats en masse because President Obama couldn't fix in two years what it took the Republicans eight years to muck up? Well, the GOP gave them a big fat thank you by blocking the extension of jobless benefits for 2 million Americans beyond November 30.

WaPo whops Obama on KORUS FTA "setback"

It looks like the failure to get the KORUS FTA agreement done has put the FTA more in the spotlight than it ever was. The Washington Post has some somewhat harsh words for the President:

For those who believe, as we do, that free trade can help fight global recession and prepare the U.S. economy for a new, more competitive future, President Obama's trip to Asia was a disappointment. In particular, Mr. Obama's negotiators were unable to agree with their South Korean counterparts on revisions to a much-delayed U.S.-Korea free trade pact, as Mr. Obama had promised in June. Though both countries insisted the talks would continue, it's anyone's guess when Congress and the Korean National Assembly will finally get to vote on free trade between Korea and the United States.

This setback has many authors, including Korean protectionists who stoked a public overreaction to a long-ago mad-cow disease outbreak in the U.S. cattle herd. But Mr. Obama and his fellow Democrats in Congress have the most to answer for. ...

The vast majority of U.S. business sectors favor the deal, and it would help both economies to grow. However, congressional Democrats blocked it, arguing it would cost American jobs, and as a candidate for president in 2008 Mr. Obama rejected the deal as "badly flawed." In office, he dithered for months, before finally declaring himself in favor of moving forward with a revised treaty.

In opposing the deal during the campaign, Mr. Obama echoed claims by the Ford Motor Company and the United Auto Workers. Under the agreement, Korea and the U.S. would end their respective tariffs on autos and light trucks; Korea additionally pledged to reduce tax and regulatory obstacles to imports, and accepted a mechanism that could permit the US to reimpose tariffs if Korea tried to reestablish non-tariff barriers. Ford and the UAW say that isn't enough, insisting on guarantees that Korea won't use environmental and safety standards as a de facto bar to US vehicles. In the most recent talks, Mr. Obama has been trying to get the Koreans to meet him halfway on this point.

My disappointment with the article is their repetition of the Big Lie:

It's true, as Ford says, that, before the recession, Korean companies sold more than 700,000 cars per year in the US, about 100 times as many as U.S. companies sold in Korea.

Not quite, WaPo. Last I checked, General Motors is a US company, and they are the owners of GM Daewoo, which sold nearly 60,000 cars in South Korea in September alone. When GM's Daewoo vehicles are added to the US side of the calculation, the numbers are far more balanced.

Still, the WaPo redeemed itself a bit by pointing out some other points to consider, mainly that car markets of wildly different sizes will not have car sales parity even if all other things were equal, plus there are all those US-built Hyundais and Kias:

But the US market is 16 times larger than Korea's; and about a third of Korean cars sold in the U.S. are built in U.S. plants, not imported. Maybe what really worries Ford is not the lack of US access to the Korean market, but the potential for increased Korean access to the US market.

All in all, a good article, and I hope more people will realize how many billions of dollars in economic growth the US is missing out on because of the temper tantrums of Ford, Chrysler, and Senator Max Baucus.

Kushibo's big post-G20 FTA post: Anti-FTA crowd says Korea is "like China" (and other notes on the FTA)

We've heard this refrain before: some variation of anti-KORUS FTA sentiment that Americans shouldn't support the free-trade agreement with South Korea because "Americans have... been deeply wronged by Korea and its neighbors." Never mind that it's simply not true.

This guest-blog piece in Foreign Policy follows much the same theme. It even says that South Korea is a currency manipulator "like China," as if South Korea's attempts to control spikes and dips are anything akin to what China has been doing. If South Korea were "like China," it wouldn't be allowing the KRW to float as much as it does, bobbing up and down from 900 won to the dollar up to 1300 and the 1600 and down to 1100 and then upward again.

But what do we expect from protectionists and unionists aimed not at helping workers at large but at securing their own jobs at the expense of others'? (At TMH, Wangkon says the writer of that piece is from an institution that is "a poorly veiled mouthpiece of the organized labor.")

As usual, I'm cautiously optimistic, and I still expect some sort of agreement on the already signed agreement to be made. That it didn't happen at the G20 meeting was a setback, but not fatal blow by any means. The FTA is important on its own merits, but it is also a major piece of a bigger puzzle we don't want to walk away from.

President Obama himself provided the cautious optimism and made clear that this setback did not mean the FTA was not over by any means:

The two sides pledged to continue the discussion, and said that they had made progress in recent days toward narrowing disagreements.

"We have asked our teams to work tirelessly in the next days and weeks to get an agreement, and we are confident we will do so," President Obama said after his meeting with South Korean President Lee Myung-bak.

Obama said he didn't "want months to pass before we get this done. We want it to be done in a matter of weeks."

A few more weeks will give them time to, as US Trade Representative Ron Kirk says, "get it right" instead of just getting it done. And by "getting it right" they mean getting Seoul to strip away environmental protections to make heavily polluting Fords and Chryslers cheaper, while trying to mix older beef South Korean consumers find questionable with the quality younger American beef that is actually quite popular. Capital strategy there.

[UPDATE: Courtesy of The Marmot's Hole commenter cm, here's an excellent piece in the National Review Online mocking the apparent Democratic Party position that what's wrong with the FTA is that i imposes environmental standards that are too high.]

At Bloomberg's TV arm (via WaPo), the US Ambassador to South Korea, Thomas Hubbard, enthusiastically makes the post-G20 case that the FTA with Seoul is still a top goal, and he expects the agreement to go to Congress early next year.

At this point of final re-negotiations, it's all about cows and cars, but the beef industry itself, supposedly being advocated for by the holdouts, has urged speed in getting this done:

American beef exporters are pushing the Obama administration and Congress to approve a pending trade agreement with South Korea without delay rather than hold out for concessions on their behalf.

U.S. exports of beef are up 175 percent in the first eight months of this year to $331 million, regaining sales that collapsed following concern about mad-cow disease that sickened animals in 2003, according to Commerce Department data. Australia and Canada are pursuing their own free-trade agreements with South Korea, and their suppliers may gain on U.S. producers, according to the American Meat Institute.

“The market is coming back and it would be a shame to lose this opportunity,” said William Westman, vice president for international trade at the Washington group, which represents companies such as Tyson Foods Inc. and Cargill Inc. American exporters “don’t want to be put at a disadvantage to our competitors.”

That means the beef industry is now at odds with US Senator Max Baucus (D-Montana) who, in supposedly acting on their behalf by holding up the FTA for several years now, has said "no deal is better than a bad deal." Yeah, right.

Meanwhile, the Ford dealership in Seoul is not at all pleased that the deal has not gone through. The FTA would mean cheaper cars, and even though some of the luster of foreign goods is their heftier price tag, that's not true for all South Korean consumers, and no doubt more of them would be walking through Ford's door.

Chrysler joins Ford in opposing free trade agreement with South Korea

On the heels of Ford's very public effort to block the KORUS FTA, and with some sort of agreement possibly coming in the next few days so that ROK President Lee Myungbak and US President Barack Obama can shake hands on it, Chrysler has voiced its opposition.

From the Detroit Free Press:

In a statement, the Auburn Hills carmaker – which is owned by Italian automaker Fiat, the U.S. government, and a health benefit plan created by the company and the UAW – said while the company “has supported every free trade agreement” the government has negotiated it can’t support this one “in its current form.”

The article doesn't give any of Chrysler's reasons, but we can assume that they are similar to Ford's. General Motors, meanwhile, owns one of South Korea's main automakers, so they aren't likely to complain.

Would South Koreans buy the Ford F150 pick-up truck?

Over at The Marmot's Hole, where there's a discussion about Ford's opposition to the KORUS FTA, guest blogger Wangkon offered an optimistic scenario involving Detroit's Big Three setting a target of 100,000 units in South Korea that might include sales of the Ford F150 pick-up truck, the kind of thing that does not currently exist in the South Korean market (right?).

Frequent commenter cm is skeptical, saying that SoKo consumers go for the high-end foreign products, like Lexus or BMW, and a Ford just wouldn't cut it, perhaps not even a Ford Mustang muscle car or a Cadillac Escalade pimp mobile.

But that begs the question: instead of Ford, GM, and Chrysler following on with their own luxury vehicles, would it not be wiser to squeeze into a niche market and go from there. In short, is there a market for the Ford F150?

I'm not a big fan of these vehicles. I usually encounter them in the city where they are glorified peoplemovers (and often with just one people) that guzzle gas and create a road hazard for other drivers. Indeed, among my ilk we refer to them as Hillbilly Hummers.

I would hate to see them become prevalent on Seoul streets, but is there a market for them out in the countryside, where trudging loads across snowy hills or muddy roads is something people actually need to do from time to time?

Like Wangkon, I'd like to see these things become more fuel-efficient, since other people's gas consumption does affect you, both with pump price and pollution. But if that can be resolved, would these be a good fit anywhere in provincial Korea?

Discuss.

Ford comes out swinging against the FTA with nationally run ad

[source]

I myself haven't see it yet (and I'm trying to track it down), but Ford Motor Company put an ad in twenty papers across the US aimed at turning the public against the ROK-US free trade agreement (aka KORUS FTA) which now stands a much better chance of passing now that the Democrats in Congress took a "shellacking."

Here is NPR's description of the ad:

We were struck by an advertisement we saw today in The Washington Post. The full-page ad shows a sea of red cars and one lone blue car, along with this text: For every 52 cars Korea ships here, the U.S. can only export one there.

Ford paid for the ad, and it appears today in more than 20 newspapers. So we wondered what it's all about. It turns out it relates to the Korean Free Trade Agreement.

And being NPR, they tried to determine the ad's veracity by talking with Marcus Noland:

NORRIS: Now, speaking of the concerns of the auto industry, is this ad or is the contention made in this ad actually correct? Is Ford or are other American auto companies at a disadvantage because of this free trade agreement?

Mr. NOLAND: No, actually not. Historically, the Korean market has been inhospitable to foreign producers. There's no question about that. Though considerable liberalization has occurred in recent years and, indeed, I was just in Korea last week, and I was surprised by how many non-Korean cars I saw on the road.

The other thing is is that GM, the largest American car manufacturer, actually owns a Korean car company, Daewoo. So it doesn't ship cars from the United States to Korea. It simply manufactures them and sells them in Korea. So when Ford points to its inability to literally export cars from here to Korea, this is really more of a Ford issue than an American automobile sector issue.

I'll try to hit the library and track down the dead-tree edition of the New York Times, the Washington Post, or the Los Angeles Times. More on this when I'm not in class.

UPDATE:
At The Marmot's Hole, Wangkon has put up a pretty good piece on this (with a lot more links) with an interesting comments section. He didn't give me a hat tip, though, even though mine was up hours before his, sitting right there in the TMH Blog Feed.

UPDATE 2:
Would South Koreans buy a Ford F150?

LiNK launching new documentary on North Korean refugees brought to safety

Esther Lee, the communications manager at LiNK (Liberty in North Korea), a highly worthy organization aimed at assisting North Korean refugees hiding in China that you may remember from Pepsi's "Refresh Everything" campaign, passed along some information for me to share with my readers.

From their website's announcement:

This year, we've rescued 20 North Korean refugees from hiding in China, thanks to the help of our incredibly generous supporters.

"Hiding" will follow the story of five individuals whose recues you have helped to fund. The documentary will highlight what life in hiding is really like and the risks that must be taken to escape.

LiNK's Nomads will be taking the film on the road this fall so if you are interested in seeing it, please book a screening to secure a date on our tour. We’ll be traveling to colleges, high schools and churches.

Here is a link (ha ha!) to the teaser. They've also got a list of planned screenings, and a way for folks to host their own screening. Their "tour" doesn't seem to include Hawaii, so if anyone out there would like to join me in co-hosting a screening here in Honolulu, shoot me an email.

Esther also informs that LiNK is doing an eight-week webisode series, with considerable cooperation from the Ford Motor Company, to follow a North Korean defector whom LiNK helped rescue:

We were ecstatic to learn today that we were selected by Ford in a project called The People's Fleet, a two-month program in Los Angeles that will help five influential and socially-conscious organizations drive their unique missions forward with a Ford Fiesta, Flip HD video camera, and a professional cinematographer. Ford will highlight LiNK's work by following us with a film crew for the next eight weeks and promoting our work to Ford's network. This will all be done behind the wheel of the brand new Ford Fiesta!

The Fleet will follow North Korean defector Danny, rescued by LiNK in 2006, as he lives his resettled life in Los Angeles, as well as capture LiNK's headquarters operations.

Some of the webisodes for that can be found here, along with those of several other of Ford's worthy projects (including Habitat for Humanity in Orange County).

Meanwhile, over at Consumer Reports...

There is a discussion going on over at The Marmot's Hole about whether American cars deserve their sucky-ass reputation. Seouldout gives some impressive stats that I tried to wade through, but I couldn't find the details. Specifically, where do South Korea's top sellers rank in JD Powers or Motor Trend?

South Koreans bought South Korean-made cars for two reasons (though the two reasons were not always present in each person): they were cheaper and they were Korean. Nowadays, South Koreans who can afford more expensive cars might still choose South Korean cars because they're not just better than before, but because they're now supposedly among the best. Why spend as much or more on a Honda or Toyota when you can buy a Hyundai Sonata that will not just be about as good but also a lot easier and cheaper to fix? Same with a Ford or a Chrysler.

At any rate, Consumer Reports, which I used to buy my Acura back in college, is still the most comprehensive approach to getting a reliable, affordable, and safe vehicle. This is what they have to say about the topic:

Asian brands still dominate

The major Japanese brands and South Korea's Hyundai and Kia make plenty of reliable vehicles. Of the 48 models with top reliability scores, 36 were Asian. Toyota accounted for 18; Honda, eight; Nissan, four; and Hyundai/Kia and Subaru, three each.

On the whole, Japanese vehicles are consistently good. All Hondas and Acuras were average or above. Toyota, with its Lexus and Scion brands providing a broader product range, had just one vehicle that was below average in reliability, the Lexus GS AWD.

The Nissan and its Infiniti luxury division have been mostly very good despite lapses such as the subpar Nissan Quest minivan. The once problematic Infiniti QX56 and Nissan Armada SUVs are now average, and the same goes for the 4WD Nissan Titan pickup, although its RWD version is still troublesome. Over the last two surveys, the Nissan Versa hatchback has been average while the sedan has been far below average-an oddity.

Subaru has been a very reliable brand, but this year the turbocharged Impreza WRX turned up with a worse-than-average reliability score even though other versions of the Impreza have been average or better, as were all other Subarus.

Hyundai and Kia continue to make reliable cars. The Hyundai Elantra and Tucson, and the Kia Sportage got top marks. The new Genesis sedan was better than average with the V6, average with the V8. The only models that scored below average were the Kia Sedona minivan and Sorento SUV.

I have nothing against American cars. The first car I ever rode in was a Chrysler, and I learned how to drive with that very same vehicle fifteen and a half years later. I drove that same car to college a couple years after that, and I was twenty when my dad called me and asked if I didn't mind him finally selling that car — which was still running just fine! — which everyone in our family felt had sentimental value. By contrast, my mom's more recent Chrysler, a minivan, has been crap. Two of my siblings also bought Chrysler minivans, and they all seemed to fall apart — in dangerous ways — at the same time.

But I'm sensitive to quality changes. I'd heard good things about Buick, which I think could make a serious dent in the Korean marketplace with the right marketing. (Use Cadillac and Buick to tag-team the market: Market Cadillac as a high-quality, upscale vehicle, while offering Buick as a poor man's Caddy.) When I came to Hawaii, my first time living in the US since returning to South Korea after graduating from college, I took a baby-step toward buying an American vehicle: a used Honda manufactured at an Isuzu plant in Indiana. To be honest, this Honda Passport SUV didn't have the greatest of ratings, but it is reliable and it is a good fit for Oahu's crappy roads. That's my nod toward buying American for now.

Anyway, I'd like to see American cars do well in Korea, just like I'm thrilled to see Korean cars doing better and better in the US. But American carmakers have to stop blaming the Korean government for their failures. If they cannot keep up with the Japanese and Germans in South Korea, then there's something wrong with the way they're doing business.

Whining about South Korea's protectionist practices of a decade and a half ago (e.g., audits of foreign car buyers, which was justified by the presumption that people who could afford vehicles with these huge tariffs were those who had gotten money through corrupt means and/or were hiding sources of income) or pre-GATT tariffs that nearly doubled the cost of a car, are just showing not only how out of touch they are with what's really going on in the ROK, but also how they're trying to distort reality so they can make a better case in Washington.

If you need some ideas, email me. Let's talk.