South Korea Not Living Up to Trade Agreement, American Automobile Official Says
22 September 1997
South Korea Not Living Up to Trade Agreement, American Automobile Official Says
WASHINGTON, Sept. 22 -- Citing South Korea's violations of a
1995 Memorandum of Understanding (MOU) to increase market access for foreign
passenger vehicles, the head of the trade association for America's Car
Companies today urged the U.S. government to begin an unfair trade practice
investigation under "Super 301" trade laws.
"Last year, imports from every other country in the world totaled only
10,315 vehicles, accounting for a mere 0.6 percent of the Korean vehicle
market. No foreign manufacturer ... has managed to sell more than a handful
of cars in Korea," said Andrew H. Card, Jr., President and CEO of the American
Automobile Manufacturers Association (AAMA) during a press conference. AAMA
is the trade association whose members are Chrysler Corporation ,
Ford Motor Company , and General Motors Corporation .
In the MOU, Korea pledged to substantially increase market access for
foreign passenger vehicles and to improve consumer perceptions in Korea of
foreign automobiles.
"This agreement was intended to be a small first step toward opening the
Korean market. However, to our great disappointment, while early steps were
taken to implement some provisions of the MOU, Korea is committing outright
violations of the agreement. We all know that Korea maintains many barriers
to auto imports, but they've even added some new ones," Card said.
At the same time, Korean automakers have continued to add capacity --
reaching more than 3.6 million in 1996 -- and have announced plans to increase
production up to as much as 6 million units annually by 2000, he said.
"Allowing Korea to maintain a closed market while building huge auto assembly
capacity could result in the loss of billions of dollars of U.S. automotive
exports," Card said.
In July, AAMA recommended that the U.S. government initiate an unfair
trade investigation of Korean automotive practices under the "Super 301" trade
provisions.
"We urge the Administration to take this strong step to indicate clearly
to a government that does not appear to be listening, that the United States
will not accept this ongoing pattern of irresponsible trade practices," Card
said.
Card also criticized the lack of progress under a 1995 trade agreement
with Japan. "It's hard to believe that just two short years after the 1995
bilateral auto agreement, the trends in U.S.-Japan automotive trade are all
headed in the wrong direction. Japan is sliding into its old pattern of
exporting its problems. Japan is either unwilling or unable to take seriously
its obligations to be proactive in opening its market," Card said.
AAMA has asked that the Administration place Japan on the Watch List of
the Super 301 unfair trade practices law.
"Chrysler Corporation, Ford Motor Company, and General Motors Corporation
have the ability to compete globally with any competitor on a fair and equal
basis; this requires enforcement of existing hard-won agreements with our
trading partners," Card stated.
The full text of Mr. Card's remarks follows:
ANDREW H. CARD, JR.
PRESIDENT & CEO
AMERICAN AUTOMOBILE MANUFACTURERS ASSOCIATION
Remarks
September 22, 1997
Thank you for joining us this morning. I am Andy Card, President and
Chief Executive Officer of the American Automobile Manufacturers Association.
AAMA's member companies are Chrysler Corporation, Ford Motor Company and
General Motors Corporation.
Trade policy issues are again the center of Congressional attention
because of the President's pending request to renew his trade negotiating
authority, known as "Fast Track."
But this month is also a timely opportunity to review progress being
achieved in opening markets to U.S. exports under existing U.S. trade
agreements, because of the September 30 deadline for the Administration to
report its findings under the U.S. Super 301 review of unfair trade practices
by foreign countries.
Expanding opportunities to reach new consumers in emerging markets around
the world is an important objective of each of America's car companies. In
the automotive industry, the vast majority of growth in vehicle demand is
coming from outside the developed markets of North America, Western Europe and
Japan -- specifically in Central Europe, the Asia Pacific region and Latin
America. And while the United States is considered the most open market in
the world, U.S. firms face significant barriers in gaining access to many
emerging markets.
AAMA believes that securing the renewal of fast track negotiating
authority for the President is a priority. This will allow the United States
to pursue its strategic interests in a global market and maintain
international leadership on trade.
Chrysler, Ford, and General Motors have the ability to compete globally
with any competitor on a fair and equal basis; this requires enforcement of
existing hard won agreements with our trading partners. I'd like to briefly
give you AAMA's assessment of major automotive agreements with two of our
trading partners -- Korea and Japan -- that are growing sources of very
serious concern.
Korea
Korea is a vital potential market for Chrysler, Ford and General Motors.
After Japan, Korea is the largest vehicle market in Asia. Sales have grown by
over 50 percent since 1990 to the current level of over 1.6 million units.
However, last year, imports from every other country in the world totaled only
10,315 vehicles, accounting for a mere 0.6 percent of the Korean vehicle
market. No foreign manufacturer, including any European brand, has managed to
sell more than a handful of cars in Korea.
While imports face serious restrictions in the Korean market, production
by Korean automakers continues to escalate and exports in particular are up.
Currently, Korea exports over 40 percent of its production. With even more
capacity scheduled to come on line over the next several years, its exports of
autos and light trucks are expected to surge.
In 1995, Korea entered into a trade agreement with the United States
entitled "A Memorandum of Understanding to Increase Market Access for Foreign
Passenger Vehicles in the Republic of Korea," which is generally called the
MOU. The intent of the agreement is self explanatory from its title. It
represented an acknowledgment by the Korean Government that its market has
historically been closed to imported autos.
This agreement was intended to be a small first step toward opening the
Korean market. However, to our great disappointment, while early steps were
taken to implement some provisions of the MOU, Korea is committing outright
violations of the agreement. We all know that Korea maintains many barriers
to auto imports, but they've even added some new ones.
Korea pledged in the 1995 agreement to "substantially increase market
access for foreign passenger vehicles" and to "improve consumer perceptions in
Korea of foreign passenger vehicles." However, the Korean government has
taken a series of actions to reinforce the perception that purchasing or
leasing an imported vehicle could lead to government harassment. For
instance, Korea's tax authorities this year again publicly renewed their
threat to conduct tax audits against consumers of imported vehicles.
We believe that Korea does have a sanctuary market. And that sanctuary
market is directly fueling the Korean auto industry's aggressive international
expansion. In the face of mounting global overcapacity in automotive
production and despite the precarious financial position of the Korean
manufacturers, Korean producers have continued to add capacity -- reaching
more than 3.6 million in 1996 -- and have announced plans to increase
production up to as much as 6 million units annually by 2000.
Allowing Korea to maintain a closed market while building huge auto
assembly capacity could result in the loss of billions of dollars of U.S.
automotive exports.
This irrational buildup of capacity has led to Korean companies engaging
in business arrangements that violate international trade rules. The United
States government has joined the European Community and Japan at the WTO in
objecting to a discriminatory national car program in Indonesia that benefits
a single Korean auto company.
Chrysler, Ford and General Motors are not alone in expressing growing
exasperation with Korea's behavior as a trading partner. Korea's unfair trade
practices have also been widely criticized by other nations at the OECD and in
a joint visit to Seoul in July with representatives of the European Automotive
Manufacturers Association. All efforts to have the Korean government honor
its commitments to fair, open trade practices have been met with complete
intransigence.
As a result, the AAMA has recommended that the United States initiate an
unfair trade investigation of Korea automotive practices under the "Super 301"
trade provisions. We urge the Administration to take this strong step to
indicate clearly to a government that does not appear to be listening, that
the United States will not accept this ongoing pattern of irresponsible trade
practices.
Japan
I also want to discuss the status of U.S.-Japan auto trade relations.
Over the past several years, I've been able to report some encouraging or at
least hopeful signs of Japan's commitment to expanding market access for
imported autos. Unfortunately, today, that is not the case. By nearly every
measure, that evidence has disappeared and U.S.-Japan automotive trade figures
demonstrate nothing but bad news.
Just take a brief look at the numbers:
-- The yen has weakened by almost one-third against the dollar.
-- As a direct result, vehicle exports from Japan to the United States and
other countries have surged -- up 23 percent to the United States this
year alone.
-- Meanwhile the weak yen has sharply reduced import sales in Japan.
Total import market share has dropped from 6.0 percent in 1996 to 5.1
percent so far this year.
-- Pressure from the weak yen, Japan's misguided consumption tax hike, a
lack of commitment to deregulation, and restrictions on vehicle
distribution opportunities have limited U.S. sales. All of these
factors resulted in a 15.4 percent decrease in sales for U.S. producers
so far in 1997.
-- Finally, Japan's trade and current account surpluses are exploding
again with the U.S. and with the world. The surplus with the United
States alone is up by nearly 50 percent.
It's hard to believe that just two short years after the 1995 bilateral
auto agreement, the trends in U.S.-Japan automotive trade are all headed in
the wrong direction. Japan is sliding into its old pattern of exporting its
problems. Japan is either unwilling or unable to take seriously its
obligations to be proactive in opening its market. And that is what was
expected under the 1995 agreement.
For all these reasons, back in July AAMA asked that the Administration
place Japan on the Watch List of the Super 301 unfair trade law. It's
important that the United States remind Japan of its commitment under the 1995
Auto Agreement to a five year process of significant market opening. The
Japanese government must make a more serious effort to maintain a positive and
healthy automotive trade relationship than is being demonstrated today.
Open markets ... increased choices for consumers ... fair and equitable
rules of competition ... . These are the goals that AAMA and its member
companies will continue to support, both in enforcing existing trade
agreements and in seeking increased opportunities by removing trade barriers
in developed and emerging markets around the world.
AAMA is the trade association whose members are Chrysler Corporation, Ford
Motor Company and General Motors Corporation. Visit AAMA's site on the World
Wide Web at http://www.aama.com.
SOURCE American Automobile Manufacturers Association