The American and South Korean auto sectors are closely watching the outcome of informal talks between their governments over removing trade barriers within the 2007 US-South Korea Free Trade Agreement (FTA), which still requires ratification. We take a quick look at the issues and reasons for continued disagreement between the two sides.

The FTA deal was negotiated by the old Bush administration, and is now being reviewed by Obama team, ahead of any renewed ratification push in the US Congress - with the auto sector being a key focus. 

The US has been pressuring South Korea for greater access to its market for exported automobiles than in the 2007 agreement. There, although Seoul agreed to scrap its import duties on American cars, it is less effective regarding South Korean technical trade barriers. These focus on differing engineering standards for the American and South Korean markets.

While in the recently signed European Union (EU)-South Korea free trade agreement, the Koreans have effectively agreed to accept United Nations Economic Commission for Europe (UNECE) standards, which apply in the EU, the US instead secured permission for each American automaker to sell up to 6,500 vehicles per year in South Korea built to US safety standards.

There were also commitments by Seoul to reform its auto tax regime - seen as hampering the sale of US car exports.

It is clear that the Obama administration does not think these concessions go far enough. Speaking at a recent US-Korea Business Council, in Washington, US Trade Representative Ron Kirk said: "For a long time, the Korean playing field was far from level. And we are still dealing with the legacy of Korea's long-closed market, especially with respect to autos. Our market is open to Korean autos. All we are asking for is for our own auto companies to be able compete on a level playing field in the Korean market."

He said American officials were "now developing proposals that will enable us to address concerns with respect to automotive trade" and that his team "looked forward to working respectfully and creatively with Korea, being mindful of Korean concerns and interests as well."

Mr Tae-Nyen Kim, director of the international cooperation team at Korea Automobile Manufacturers Association (KAMA) says the Korean sector is biding its time.

Despite the flurry of diplomatic activity, he told just-auto the USA has yet to put forward any concrete proposed changes to the deal, widely known by the acronym KORUS: "There has been no official pressure from USA government, and they are just buzzing without any specific points with regard to market access…."

Hinting that Washington was playing politics with its delays, he said: "…They [the USA Government] might know well that the Korean market is fully open and General Motors (GM) is manufacturing here in Korea through its affiliate GM Daewoo Auto & Technology (GMDAT)."

The KAMA official also pointed out that the American bargaining position was weakening: "As the Korea-EU FTA was signed and expected to be ratified soon, US will lose the opportunity for better business position in Korea." Along with this major deal, the Asian tiger economy has pursued a number of other free trade agreements recently — sealing one with India and staging trade negotiations with Australia and New Zealand.

By Keith Nuthall and Karryn Miller

See also:

 SOUTH KOREA: Korea willing to 'discuss' US trade concerns

COMMENT: FTA skewed in South Korean automakers' favour

BELGIUM: ACEA calls for non ratification of EU-Korea FTA deal