U.S. and South Korea Agree Auto Trade Deal
U.S. President Donald Trump and South Korean President Moon Jae-in have signed a new trade agreement designed to increase U.S. auto exports.
Under the old U.S.–Korea Free Trade Agreement (KORUS) signed in 2012, Trump says the U.S. trade deficit skyrocketed from $6.3 billion to $9.8 billion by 2017. Under the new arrangement, South Korea will double the annual number of American automobiles that can enter its market using U.S. safety standards. South Korea has also agreed to address issues with onerous and costly customs procedures that have hindered American exports.
Specifically, the deal means:
• South Korea will double the annual number of American automobiles – from 25,000 to 50,000 per manufacturer per year – that can enter its market using U.S. safety standards without further modifications.
• South Korea is simplifying the sales environment for U.S. cars and parts by taking into account United States environmental and emissions standards.
• American vehicles will be able to meet South Korean gasoline emissions standards based on compliance with U.S. emissions regulations, avoiding additional or duplicative testing.
• South Korea will recognize U.S. standards for auto parts necessary to service U.S. vehicles, and will reduce labeling burdens for auto parts.
• South Korea will expand the number of “eco-credits” available for U.S. automakers to meet South Korean emissions standards.
• When setting fuel economy standards in the future, South Korea will take U.S. corporate average fuel economy regulations into account and will continue to include more lenient standards for smaller volume exporters.
• The phase out of the 25 percent U.S. tariff on trucks will be extended until 2041, well beyond the current phase out date of 2021.
Through KORUS, reports Vox, the two countries have sold more than $60 billion in cars, machinery, and other goods to each other with few restrictions, and South Korea is now America’s sixth-largest trading partner. In 2016, America imported $16 billion worth of Korean cars, and South Korea imported about $1.5 billion worth of U.S. cars.
South Korea is a key ally, and Trump said: “Our two countries have set an example of friendship and cooperation for trade that rarely you see in this age.” However, some commentators have raised the question of whether or not more South Koreans will want U.S.-built cars - indicating the deal may rather be a political win for Trump.
Steel imports have also been important to the U.S., and outside the context of KORUS, the Trump Administration has reached a deal with South Korea it says will protect American steel manufacturers and national security. After announcing tariffs in March, the U.S. has now agreed to an alternative where steel imports from South Korea will be limited to a product-specific quota equal to 70 percent of the U.S.’ average annual import volume from 2015 through 2017.