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Automobiles are the point of contention chosen by US President Donald Trump as he threatens to withdraw from the South Korea-US Free Trade Agreement (known as the KORUS FTA). Even though German and Japanese vehicles have a much larger share of the US import car market, Trump seems set on attacking South Korean automobile exports because of the free trade agreement.

Statistics accessed on the website of the United States International Trade Commission (USITC) on Sept. 5 show that the import value and trade deficit in the US automobile sector vis-à-vis South Korea, Germany and Japan all increased to a similar degree between 2011 and 2016, around the time that the KORUS FTA took effect (on Mar. 15, 2012). Looking at passenger cars in particular, the import value of South Korean vehicles increased from US$8.6 billion in 2011 to US$16 billion in 2016.

US trade deficit in automobiles

Over the same period, the import value of Japanese cars increased from US$30 billion to US$39.2 billion, and the import value of German cars from US$19.6 billion to US$21.9 billion (US$26.6 billion in 2015). The total import value in the US passenger car market grew from US$123.1 billion to US$171.3 billion. The fact that the increase in import values in the American automobile market is a global phenomenon implies that South Korean automobiles did not receive any unusual benefit from the KORUS FTA.

The increasing imports caused the trade deficit in the US automobile sector to grow. The US trade deficit with South Korea in the sector increased from US$8.1 billion in 2011 to US$14.4 billion in 2016. During the same period, the trade deficit in that sector with Japan and Germany increased as well, from US $29.3 billion to US $38.7 billion and from US $13.9 billion to US $15.3 billion (US $20.4 billion in 2015), respectively.

The Office of the US Trade Representative (USTR) emphasizes that the US had a deficit of US $24 billion with South Korea in the automobile category of commodity trade last year, which accounts for 90% of the yearly deficit (US $27.7 billion) in the goods balance with South Korea. But it’s also possible to argue that the US is the country benefiting from the FTA. The US’s rate of tariffs on importing South Korean cars fell to 0% (from 2.5%) in Jan. 2016 in line with the schedule of tariff concessions, but South Korea’s exports of automobiles to the US actually fell 7% year on year.

In contrast, American exported 60,000 automobiles to South Korea last year, up 356% since 2011, while South Korea’s import duties on American automobiles fell from 8% to 4% in 2012 and then down to 0% in Jan. 2016.

By Cho Kye-wan, staff reporter

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