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October 24, 2018

Revised US-Korea FTA to have limited impact on auto industry

PUBLISHED : October 02, 2018 - 14:52

UPDATED : October 02, 2018 - 14:52

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[THE INVESTOR] A revised trade agreement calling for a 20-year extension of tariffs on Korean pickup trucks that can be sold in the United States will have a limited impact on the local auto industry, Seoul’s Trade Ministry said on Oct. 2.

Last week, Seoul and Washington signed their amended free trade agreement, which includes delays in the elimination of 25 percent duties on Korean-made trucks until 2041. The duties were set to be phased out from 2019 to 2021.

In a report submitted to parliament, the ministry said the extension of tariffs would barely affect the Korean manufacturers, which presently don’t export pickup trucks to the US market.

If local companies produce half of all pickup trucks in American factories and ship half of them from Korea, only 2,960 vehicles can be exported annually from 2021 to 2040 due to high import duties.

The stiff duties won’t affect vehicles made in American factories, it noted.

Seoul’s doubling the 25,000-vehicle unit threshold for US car shipments that do not have to comply with domestic industry regulations would bring about little change to the local market, it noted, based on analysis of past sales records by US carmakers.

Two government think tanks -- Korea Institute for Industrial Economics & Trade and Korea Institute for International Economic Policy -- analyzed the impact of the bilateral trade pact.

The ministry said the new agreement on the investor-state dispute settlement clause and anti-dumping and countervailing duty proceedings would help improve transparency in dispute settlement processes.

While investors could sue countries through international arbitration bodies for alleged discriminatory practices under the present ISDS provision, the two sides added clauses to prevent potential abuse of the arbitration system by multinational companies and to better safeguard the right to regulate in the interest of the public.

By Song Seung-hyun and newswires (ssh@heraldcorp.com)

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