hankyoreh

Democratic Party lawmaker Choo Mi-ae presents a gift of Pyeongchang Olympic mascots

American negotiators are seen as likely to demand the use of more US-made parts in South Korean automobiles for export to the US in revisions to the South Korea-US Free Trade Agreement (KORUS FTA). According to accounts on Nov. 19 from members of a delegation visiting the US with Democratic Party lawmaker Choo Mi-ae, the Trump administration wants more parts procured within US territory for South Korean automakers’ local factories in the US and South Korea production factories. In a Nov. 15 talk with reporters in the US, Choo also shared details from a meeting with White House National Economic Council Director Gary Cohn.

“They [the US] are making unreasonable demands that we procure automobile parts within the US,” she said at the time.

While the KORUS FTA and other FTAs do include regional value content (RVC) ratio requirements mandating procurement of some components of finished cars in the partner country for customs-free exportation between parties, the demand for procurement in one specific partner country is seen as unusual. In its negotiations to amend the North American Free Trade Agreement (NAFTA), the US imposed a number of conditions for the customs-free importation of Mexican- and Canadian-made cars in the US, including 85% or more parts produced in the three countries and the institution of new provisions for procurement of at least 50% US-made parts. Many predict it will call for instituting similar provisions with the KORUS FTA.

According to a US National Highway Traffic Safety Administration report, Hyundai Motors uses only 0–3% US-made parts for models exported from South Korea. It procures a high percentage of US parts (26–51%) only for models made at its local US factories. The addition of a new provision for procurement of US parts would require Hyundai-Kia to import more of the parts for customs-free exports – which stands to negatively impact sales for the domestic companies that currently supply them. Automobile parts rank after automobiles as one of the largest categories for US export (US$6.75 billion in 2016, or 10.2% of total annual exports to the US). Most are supplied to Hyundai-Kia’s local factories in the US.

By Cho Kye-wan, staff reporter

Please direct questions or comments to [english@hani.co.kr]Please direct questions or comments to [english@hani.co.kr]