U.S. warns S. Korea on trade barriers

By JONG-HEON LEE, UPI Correspondent

SEOUL, Jan. 23 (UPI) -- South Korea, under growing international pressure over trade barriers, has been given the strongest warning yet by senior U.S. trade officials who called for drastic measures to open its markets.

Deputy U.S. Trade Representative Jon Huntsman, in South Korea this week, warned that Seoul's refusal to tear down trade barriers would damage the country's export-driven economy and reduce benefits from globalization.


South Korea has "remained in some cases a reluctant importer, making its integration into the world economy somewhat incomplete," Huntsman told South Korean officials and business leaders.

"Korea had somehow become a dynamic exporter without becoming an equally dynamic importer, dampening the competition companies need to keep their edge in the global marketplace," he said. "Although there has been some progress, shorter-term sensitivities have made it difficult for Korea to eliminate the array of barriers faced by importers in many sectors."


Huntsman called on South Korea to seek a new growth model that advocates open markets and the elimination of import barriers. He said South Korea might fail to improve competitiveness in key industries, such as information and technology, unless it moves toward globalization.

"Without coming to grips with the reality of globalization and overcoming the remaining trade barriers, it is doubtful that Korea could achieve its major industrial goals," he said.

Huntsman's criticism centered on South Korea's auto market, protected by high tariffs, which he said led to an imbalance in auto sales between the United States and South Korea.

"Korea imports fewer cars than any country in the developed world, and probably fewer than most developing countries as well," he said, citing data that imported cars accounted for less than 1 percent of the total South Korea market last year.

South Korea levies an 8 percent tariff on imported autos, down from the 50 percent level when it opened its market in 1987. But the U.S. official called for Seoul to cut the rate to the U.S. tariff level of 2.5 percent.

"In case Korea's auto import tariff falls to the U.S. level, the foreign share of the local market would increase to 12 percent in five years," Huntsman said.


South Korea held a 5.4 percent share of world auto exports last year, totaling 1.4 million cars including 600,000 to the United States. But overall sales of imported cars in South Korea stood at 7,747 vehicles in 2001, making up 0.7 percent of the domestic market, according to the Korea Automobile Importers and Dealers Association.

"The numbers reveal that Korea's economy, for all its export might, for all the reforms of the past decades, still has a journey ahead before it is fully integrated into the world economy," Huntsman said. "To help further open this market, we have recommended, among other steps, that the Korean government reduce taxes and tariffs."

In a meeting Wednesday, Barbara Weisel, a U.S. trade official, again called for lower tariffs on imported cars.

South Korea's leading automaker, Hyundai Motor Co, which enjoyed a sales boom in the United States last year, said the increased sales are due to U.S. consumers switching to cheaper models during the sharp economic slowdown.

"Because of the economic slump, U.S. consumers are being attracted to low-priced Hyundai cars," a Hyundai official said.

Hyundai Motor said it was considering setting up production plants in the United States to head off mounting pressure over South Korean car imports. In 1998, South Korea and the United States concluded a memorandum of understanding to improve market access to foreign autos.


In reaction to U.S. pressure, South Korean automakers expressed concerns they may further lose their once-monopolistic grips with sharply expanding foreign share of the domestic market.

The sales of 7,747 imported cars in South Korea last year was up 75.5 percent from a year earlier. Industry analysts forecast shipments at 18,000 units this year.

"The outlook for foreign commercial vehicles is bright due to their high fuel efficiency and changing consumer pattern here," an importer said.

South Korea fears the United States may further intensify its market-opening pressure in the wake of a recent ruling by World Trade Organization against the U.S. practice of providing tax breaks to its exporters. Last week's ruling likely will prompt Washington to slap retaliatory tariffs against South Korea's major export items that have been scrutinized for alleged subsidies, analysts said.

"The WTO ruling against the United States in the trade dispute with the EU over subsidies will lead them to look more closely at disputed Korean subsidy abuses," said Park Dae-shik, a researcher at the Federation of Korean Industries, a big-business lobbying group.

To avoid trade disputes, South Korea is pushing for an early conclusion of a Free Trade Agreement with the United States. "An FTA would reduce trade conflicts and increase Korean exports," said Jung In-kyo, a researcher at the state-run Korea Institute for International Economic Policy.


Business leaders from the two countries, who gathered in Hawaii last week for an annual forum, agreed to actively pursue the conclusion of the FTA and a bilateral investment treaty.

Finance and Economy Minister Jin Nyum has promised to make all-out efforts to conclude the agreements within this year.

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