SEOUL (Bloomberg) – The U.S. and South Korea have restarted a stalled free-trade agreement between the two countries that includes car imports.
On Friday, the U.S. agreed to end its 2.5 percent tariff on automobiles in five years, instead of immediately or after three years, as was previously agreed.
South Korea will cut its 8 percent tariff on U.S. automobile imports to 4 percent immediately, instead of eliminating it entirely, according to a White House fact sheet.
With almost $68 billion in trade between the nations, a deal would be the U.S.'s largest since the North American Free Trade Agreement in 1994, and would help President Barack Obama meet his goal of doubling American exports in five years.
The trade accord is a “win-win for both our countries,” Obama told reporters in Washington. It will level the playing field for automakers, boost U.S. exports by as much as $11 billion, support job growth and enhance the U.S. partnership with South Korea, Obama said.
The U.S. will maintain a 25 percent tariff on truck imports for eight years instead of beginning to phase it out immediately. In addition, each U.S. automaker will be able to send South Korea 25,000 cars a year that meet U.S. safety standards. They would be exempt from separate South Korean standards.
Deal is 'humiliating'
South Korea's main opposition Democratic Party said the deal is “humiliating” and vowed to block its passage in the National Assembly.
“The unfair revisions would open our domestic market wider while allowing the U.S. to close theirs,” the Democratic Party, said Sunday on its Web site. The ruling Grand National Party, which controls the National Assembly with 171 seats, welcomed the deal, however.
“The free trade deal with the U.S. will bring huge economic benefit to both countries,” South Korean President Lee Myung Bak said in a statement.
Lee said the agreement will also help the alliance between the two countries move a step forward, according to the statement. The Korea Automobile Manufacturers Association estimates South Korean car sales in the U.S. will reach 950,000 this year, including 500,000 shipped from South Korea and 450,000 produced in U.S plants.
“The agreement will remove uncertainty, helping boost sales and competitiveness of South Korean cars in the U.S.,” the industry group said in an e-mailed statement.
U.S. manufacturers lagging behind Europe
U.S. market share in South Korea slid to 10.1 percent of imported car sales last year, from 11.3 percent in 2008, according to the Korea Automobile Importers and Distributors Association. European cars held a 62 percent market share in 2009, with Japanese brands on 28 percent.
“Korean consumers prefer premium sedans from Europe and Japan, or small Korean-made cars to U.S. brands,” Song Won Gun, a senior research fellow at the Korea Economic Research Institute in Seoul, said before the announcement.