Ford: Korea Trade Deal Could Hurt U.S. Automakers
MICHELE NORRIS, host:
We were struck by an advertisement we saw today in The Washington Post. The full-page ad shows a sea of red cars and one lone blue car, along with this text: For every 52 cars Korea ships here, the U.S. can only export one there.
Ford paid for the ad, and it appears today in more than 20 newspapers. So we wondered what it's all about. It turns out it relates to the Korean Free Trade Agreement.
To explain more, we turn to Marcus Noland. He's the deputy director and a senior fellow at the Peterson Institute for International Economics.
Welcome to the program.
Mr. MARCUS NOLAND (Deputy Director and Senior Fellow, Peterson Institute for International Economics): Thank you very much. My pleasure to be here.
NORRIS: So what is the status of this free trade agreement?
Mr. NOLAND: Well, the free trade agreement was negotiated back in 2006 and 2007, but it has sat in abeyance ever since with neither national legislature in either the United States or in South Korea having ratified the agreement.
NORRIS: Why did this ad run today? What message is Ford trying to send, beyond what's there in the text?
Mr. NOLAND: Well, the big obstacle to passing the KORUS Free Trade Agreement here in the United States has been opposition in the Democratic caucus and the House of Representatives. As we all know, after the election this week, the Democratic caucus is a lot less influential. And as a consequence, the likelihood of KORUS being considered by the Congress and, indeed, passing is much higher now than it was 48 hours ago.
NORRIS: Hmm. And so, can changes be made to the trade pact?
Mr. NOLAND: The agreement itself has been negotiated, and I think both governments are agreed that they don't want to formally reopen and renegotiate the agreement. What is much more likely is that there'll be some side agreements, which can be worked out. And it is likely that there will be at least some kind of side agreement to address some of the lingering concerns of the automobile industry, though I doubt that it will go nearly as far as Ford would like to see.
NORRIS: Now, speaking of the concerns of the auto industry, is this ad or is the contention made in this ad actually correct? Is Ford or are other American auto companies at a disadvantage because of this free trade agreement?
Mr. NOLAND: No, actually not. Historically, the Korean market has been inhospitable to foreign producers. There's no question about that. Though considerable liberalization has occurred in recent years and, indeed, I was just in Korea last week, and I was surprised by how many non-Korean cars I saw on the road.
The other thing is is that GM, the largest American car manufacturer, actually owns a Korean car company, Daewoo. So it doesn't ship cars from the United States to Korea. It simply manufactures them and sells them in Korea. So when Ford points to its inability to literally export cars from here to Korea, this is really more of a Ford issue than an American automobile sector issue.
NORRIS: President Obama is preparing to embark on a foreign trip, and he'll be going through Korea. Will this likely come up?
Mr. NOLAND: Oh, absolutely. Last June at the G-20 Summit in Toronto, Canada, President Obama and President Lee Myung-bak of South Korea stood up and said: We're going to get this agreement done. We're going to get the KORUS Agreement through our two respective legislatures. I would expect that they're going to stand up in public next week in Seoul and say the same thing.
And the upcoming shift in the composition of the U.S. Congress is going to make it more likely that our President Obama can hold up his end of that bargain.
NORRIS: Marcus Noland, thanks for your time.
Mr. NOLAND: Thank you.
NORRIS: Marcus Noland is the deputy director and a senior fellow at the Peterson Institute for International Economics.
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