Will Koreans Buy More American Cars?

Robert Siegel speaks with Eric Martin, global trade reporter with Bloomberg News, on the chances of Koreans buying more American cars, based on the free-trade agreement with South Korea that passed in Congress this week.

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ROBERT SIEGEL, HOST:

As we've heard, President Obama said today what he has said repeatedly about the trade agreement with South Korea: that it will benefit the U.S. auto industry.

PRESIDENT BARACK OBAMA: Just as Americans buy Hyundais and Kias, I hope that South Koreans will buy more Fords, Chryslers and Chevys.

SIEGEL: Well, reporter Eric Martin writes about this for Bloomberg News today. And the headline of this article is: Koreans Driving Chevys Aren't Assured by U.S. Trade Accord. And Eric Martin joins us now. Welcome to the program.

ERIC MARTIN: Thank you.

SIEGEL: And first, let's acknowledge that the trade agreement with South Korea is likely to boost many U.S. exports: machinery, chemicals, plastics. But what about cars?

MARTIN: Cars will see some gains from this but not nearly as much as some proponents or some supporters had hoped. We currently sell 13,000 cars - the U.S. to Korea each year - versus about 600,000 Korean cars coming into the U.S. So clearly there is a big deficit in car exports, and this agreement will help some.

But it doesn't change the taste of South Korean car buyers and consumers. And that is an issue that underlies a lot of the concern analysts have about making very broad and aggressive projections about how many cars will sell because of this.

SIEGEL: But back to the president's stated desire to see folks in South Korea driving Fords and Chevys and Chryslers, there's a story in USA Today which says, and I quote, "Fords and Chryslers, maybe. But folks in South Korea do drive Chevys." And it says that GM Korea is actually a very big player there already.

MARTIN: That's right. GM has a unit formerly known as Daewoo, which is now being branded under the GM and Chrysler brands. And so there are some consumers in South Korea who are driving cars made by them. But that's under that brand, and a lot of those cars are actually made in South Korea. They're not necessarily exported from the U.S.

SIEGEL: Well, how important - compared to what you described as the fairly bleak prospects for huge car sales by the American automakers exporting to South Korea, how important was this language about the automobiles to getting approval of the deal with South Korea?

MARTIN: The language about Fords, Chevys and Chryslers has been the main rhetorical point that President Obama has used in talking about the agreements. When he made his speech to a joint session of Congress on September 8th, talking about his jobs proposals and his 447 billion plan that's now being debated, this was the line that he used to talk about American exports.

There are many industries that will benefit actually more potentially than autos: beef, machinery, chemicals. Producers of all of those are also excited about these agreements. But the cars aspect of it hasn't really been used as an emblem of how American ingenuity and production are going to benefit.

SIEGEL: And it won over some important votes in Congress, from Michigan, say?

MARTIN: It did. The Obama administration spent two years renegotiating parts of the cars agreement in the South Korea Free Trade Accord. They got the ability for U.S. car manufacturers to export 25,000 vehicles a year that meet U.S. safety standard but not the more stringent South Korean safety standards. They also got an aspect of this agreement where the U.S. makers can send cars that exceed the South Korean emissions rule by up to 19 percent.

So both of those were aspects that were renegotiated by the Obama administration and won the support of initial opponents of this agreement, which were Ford, the United Autoworkers Union and Michigan Congressman Democrat Sander Levin.

And we've also seen a reduction, a scaling back in the tariff reductions, the speed with which this change would happen so they wouldn't face an onslaught from Kia and from Hyundai.

SIEGEL: Well, Eric Martin, thanks a lot for talking with us about this story.

MARTIN: Thanks for having me on.

SIEGEL: Eric Martin, who's global trade reporter for Bloomberg Government and Bloomberg News.

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