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S. Korean Trade May Be Next U.S. Target : Autos: American car makers say high tariffs and taxes keep foreign vehicles out of the country.

August 14, 1995|From Bloomberg Business News

WASHINGTON — Having won an agreement to further open Japan's markets, the U.S. auto industry is now turning its attention to South Korean trade barriers.

American car manufacturers cite the 0.2% import share in the South Korean auto market and a variety of formal and informal barriers as evidence that South Korea is, in effect, closed to foreign cars.

The American Automobile Manufacturers Assn., which represents Chrysler Corp., Ford Motor Co. and General Motors Corp., has asked the Clinton Administration to consider the use of the so-called Super 301 trade law against South Korea.

The Administration will decide by Sept. 30 whether to target trade practices in South Korea or any other country under Super 301. The trade law provides for negotiations on systemwide trade barriers and mandates retaliation if talks aren't successful.

The AAMA complaint follows the June 28 U.S.-Japan accord to boost sales of foreign autos and auto parts in Japan. That agreement took two years of contentious negotiations and U.S. threats of sanctions.

Though the U.S.-South Korea auto issue isn't likely to turn into a comparable confrontation, the Administration could turn up public pressure on the Seoul government soon.

In a paper sent Aug. 4 to the U.S. trade representative's office, the AAMA said that "in the absence of significant progress in the coming weeks, the U.S. should use all available options, including U.S. trade laws," to tackle South Korea's barriers.

In the past, countries that have been threatened with Super 301 attention have sent delegations to Washington to offer trade concessions. In 1994, South Korea lowered tariffs on autos, loosened restrictions on foreign dealerships and modified auto taxes in a successful bid to avoid designation under Super 301.

There are no high-level U.S.-South Korean trade talks scheduled in the next two months, U.S. officials said, though the AAMA expects the two countries will meet before the Sept. 30 deadline.

Among the South Korean barriers cited by the AAMA are tariffs of 8% on autos (compared to the U.S. tariff of 2.5%), taxes that can boost the price of an imported vehicle by 110%, burdensome safety standards and South Korean government austerity campaigns against purchases of imports.

South Korean producers shipped 206,625 vehicles to the United States in 1994, while the three American manufacturers sold less than 2,000 vehicles in South Korea, the AAMA said.

South "Korea hates to be compared to Japan, but a lot of the problems are similar," said a U.S. trade official. South "Korea isn't playing fair."

Young Ho, a commercial attache at the South Korean Embassy in Washington, said that sales of foreign autos were "increasing rapidly" in his country. The sales grew 142% during the first half of this year compared to the same period in 1994, he said.

Ho said the South Korean auto tariff was the same as most other countries--the United States being the exception with an extremely low rate. "The difficulty in gaining access to the [South] Korean market has been exaggerated," he said.

The South Korean government has made efforts to reverse its anti-import stance, but a high-profile Super 301 case could excite South Korean nationalism and make it harder for the government to show flexibility on trade issues, Ho said.

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