US: Obama renews Korean Free Trade Agreement to benefit tyre industry
America's Tire Industry Association (TIA) says President Obama has signed into law a renewal of the US Generalised System of Preferences (GSP) which was part of a trade pact originally agreed between the US and the Republic of Korea in 2007, known specifically as the KORUS FTA or Korean-United States Free Trade Agreement.
KORUS FTA will reduce the tariff on the importing of Korean manufactured car and truck radial tyres from 4% (3.4% for non-radial) through a series of graduated step-downs every year to zero starting in the fifth year of the agreement.
The duty free importing of tyres from Korea will extend for a total of 15 years when the free trade agreement will have to be renewed.
The agreement's initial year will be retroactive to January 1, 2011. For US tyre manufacturers, the Korean import duty of US -made tyres will go from the current 8% to 0% starting in the first year of the agreement.
Congress passed the long-anticipated free trade agreement earlier this month which had expired on 31 December 2010. The Obama administration estimates American companies paid nearly US$2m a day in additional duties since the GSP expired last year.
"The renewal of the programme removes 95% of the existing tariffs within five years for goods and services covered by the pact and gives particular preference to the automotive sector for both the importing and exporting of goods, including tyres," said TIA executive vice president Roy Littlefield.
"The agreement also provides greater access to the Korean government procurement market for American companies."
This agreement benefits US consumers who experienced a price hike on tyres in late 2009 when tariffs were imposed on Chinese passenger and light truck tyres imported to America.
Korean tyre exports increased 63% due to the US import duty on Chinese-manufactured tyres and an aggressive manufacturing and marketing programme by manufacturers in the peninsula nation.
The Korean Republic's legislature is expected to approve the agreement by the end of the month, despite some opposition concerning the trade pact's impact on certain Korean industries, especially agriculture.