South Korea Free Trade Deal Could Be Boon For GM

IA Motor automobiles wait to be shipped to foreign countries at a port in Gunsan, South Korea. i i

KIA Motor automobiles wait to be shipped to foreign countries at a port in Gunsan, South Korea. Last year, South Korean automakers sold about 500,000 vehicles in the U.S., while U.S. auto companies sold 6,000 in South Korea. But a new free trade deal seeks to correct the imbalance. Ahn Young-joon/AP hide caption

itoggle caption Ahn Young-joon/AP
IA Motor automobiles wait to be shipped to foreign countries at a port in Gunsan, South Korea.

KIA Motor automobiles wait to be shipped to foreign countries at a port in Gunsan, South Korea. Last year, South Korean automakers sold about 500,000 vehicles in the U.S., while U.S. auto companies sold 6,000 in South Korea. But a new free trade deal seeks to correct the imbalance.

Ahn Young-joon/AP

The Obama administration and the South Korean government have reached a free trade deal that could offer a potential big market for General Motors and other American car companies.

If approved, it would be the second largest agreement after the North American Free Trade Agreement (NAFTA), which passed nearly two decades ago.

Administration officials say the trade pact could mean billions of dollars and hundred of thousands of new jobs.

"It could have an economic impact that is larger than the last nine free trade agreements entered into by the United States," says U.S. trade representative Ron Kirk, who was one of the chief negotiators of the trade pact.

He says if it's approved, it would create a minimum of 70,000 U.S. jobs.

And it would touch almost every area of commerce between the two countries — manufactured products, farm goods, commodities, financial services.

A Market Detroit Must Tap

One of the off-balance exchanges the U.S.-Korea free trade agreement seeks to correct is the sale of cars. Last year, South Korean automakers sold about 500,000 vehicles in the U.S., while U.S. auto companies sold 6,000 in South Korea.

Sean McAlinden with the Center for Automotive Research says that until recently the South Koreans have kept their auto market locked up tight.

"There was a point not too long ago that if you bought an import of any kind — that guaranteed you a federal tax audit," he says. "That would obviously prevent a lot of import sales."

McAlinden says South Korea has been under tremendous pressure to open its markets to trade. So it has reacted to the pressure. The South Koreans have already signed a free trade deal with the European Union and eight other countries.

And with its huge middle class and sophisticated financial system, McAlinden says, South Korea is a market Detroit must tap.

"Sales growth in the auto industry in the United States and Europe is essentially stagnant," he says. "The growth in the next 20 years will be almost entirely in the developing world or in the new markets. All markets are important if you're going to remain competitive as a major international automaker."

The three Detroit car companies agree. So do top Republicans in Congress. The United Auto Workers union is backing the plan because of the major concession won for the auto industry.

Unhappy Unions

But other unions like the United Steelworkers say they've been left out in the cold.

General Motors' launched the Chevrolet Volt hybrid electric cars in November.

General Motors' launched the Chevrolet Volt hybrid electric car in November. Here, the cars are going through assembly. GM is looking to tap foreign markets like South Korea to expand. Bill Pugliano/Getty Images hide caption

itoggle caption Bill Pugliano/Getty Images

Thea Lee, with AFL-CIO, the nation's largest labor organization, says this is just the latest in a long string of bad trade deals.

"It's an economically significant deal with a very powerful exporting country," she says. "And we didn't do enough to protect American jobs."

Lee says while the trade pact may help the auto industry, it will only encourage U.S. manufacturers to move to South Korea in the increasing race to find the cheapest wages.

"The companies are mobile; they can move production all around the world," she says. "They can make money wherever they are. American workers have to make a living on American soil. And so we need a different kind of trade agreement than a lot of the multinational corporations — and that's really the dividing point."

Recent polls have shown Americans increasingly skeptical of free trade. But, the Obama administration and congressional Republicans say the Korean trade deal is a top priority for the new Congress.

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