Issue: Oct 2007


AIAM Affirms Its Support For the Korea Free Trade Agreement



by Michael Frank

The Association of International Automobile Manufacturers, Inc. (AIAM) today affirmed its support for the United States-Korea Free Trade Agreement (KORUS FTA) following a recent analysis issued by the U.S. International Trade Commission (ITC). AIAM's support for this agreement is consistent with its historic advocacy of free trade, the removal of trade barriers and the expansion of open investment policies.

"This agreement will greatly benefit consumers on both sides of the Pacific by creating a closer, more dynamic bilateral trade relationship between Korea and the United States and improving the global competitiveness of automakers in both countries," said Michael J. Stanton, President and CEO of AIAM.

Significantly, enactment of the U.S.-Korea FTA will lead to the elimination of U.S. and Korean tariffs on imported motor vehicles and auto parts, the simplification and reduction of Korean taxes based on engine displacement, and an increase in the transparency of Korea's regulatory process. Under the accord, Korea's current 8 percent tariff on imported passenger vehicles would be eliminated immediately.

Another important aspect of the U.S.-Korea FTA involves simplified and flexible "rule of origin" (ROO) calculations. These rules and methodologies are used to determine whether traded products contain a sufficient value of U.S. and Korean-made parts to qualify for the negotiated duty benefits, including reduced or zero tariff rates. AIAM believes the motor vehicle ROO provisions in this FTA provide a useful model for future bilateral and regional trade agreements involving auto trade.

According to the ITC report, implementation of the KORUS FTA would have a beneficial impact on a wide range of American economic sectors, with a likely increase in U.S. GDP by $10.1 to $11.9 billion, including an increase of merchandise exports to Korea by an estimated $9.7 - $10.9 billion, and with U.S. services exports also likely to increase.

"This agreement will create significant opportunities for increased reciprocal trade and investment between the two countries. We encourage Congress to approve the accord," said Stanton. According to the Congressional Research Service (CRS), in 2006 the United States was Korea's third-largest trading partner, second-largest export market, third-largest source of imports, and its second largest supplier of foreign direct investment (FDI).

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