Obama Aims to Allay Auto Lobby Concern on Korea Trade

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President Barack Obama said he is committed to pushing through a free trade agreement with South Korea that has been stalled by the U.S. auto lobby and unions, who argue it doesn’t do enough to open up Korean markets.

Obama’s joint press conference in Seoul today with South Korean counterpart Lee Myung Bak was a last chance on his four- nation Asia trip to show he opposes protectionism. The accord has been held up in Congress, where lawmakers are demanding wider access for Chrysler Group LLC, Ford Motor Co. and General Motors Co. Lee said today he is willing to reopen talks on the auto industry.

The U.S. Chamber of Commerce estimates that failure to enact the accord means the loss of $35 billion in exports and 345,000 jobs. South Korea signed a rival agreement with the European Union last month that calls for 99 percent of commerce to be duty-free within five years.

“Team Obama talked the talk, now we’ll see if they walk the walk,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington. “Possibly in Seoul the president will achieve another breakthrough” with a commitment to seek ratification of the U.S.-South Korea pact.

U.S. automakers sold 6,980 vehicles in South Korea last year, or 0.72 percent of the passenger car market, according to the Korea Automobile Importers & Distributors Association. Those figures exclude GM’s local Daewoo unit, which captured 7 percent of the market in the first nine months of this year.

Hyundai Motor Co., Korea’s biggest carmaker, accounted for almost half of all sales at home. Through October this year, Hyundai raised its U.S. sales 4.1 percent to 373,222 vehicles.The U.S. market share for Hyundai and its Kia Motors Corp. affiliate was 7.3 percent in October. Hyundai says about a quarter of the cars the group sells in the U.S. are made there.

Trade Imbalances

Obama said he would work to address the issues in the U.S. that were holding up the free trade agreement.

“There is obviously also a concern within the United States around the incredible trade imbalances that have grown over the last several decades,” Obama said. While that imbalance was not so marked with South Korea, “there has been a tendency I think to lump all of Asia together when Congress votes on trade agreements.”

While in Asia, Obama has been called on by regional leaders, including Malaysian Prime Minister Najib Razak and Chinese President Hu Jintao, to demonstrate the U.S. will work to reduce trade barriers. At the Asia-Pacific Economic Cooperation summit in Singapore, Obama expressed interest in joining and expanding a regional free-trade group that so far includes Chile, New Zealand, Singapore and Brunei.

Forging an agreement that would ensure passage of the Korea trade accord will be “politically tough back in the U.S.,” Hufbauer said.

Tax Hurdle

Democrats, who have majorities in the House and Senate, are holding up a vote on the agreement. Representative Sander Levin, a Michigan Democrat and chairman of the House Ways and Means Committee’s trade panel, said South Korea first must remove tax and regulatory obstacles to sales of U.S. autos, refrigerators and other manufactured goods.

Lee’s comments appear to mark an about-face. Yesterday, Ahn Ho Young, South Korea’s deputy minister for trade, said there would be “no re-negotiation.”

South Korea is the seventh-biggest U.S. trading partner. Last year, two-way trade totaled $82.9 billion, according to the Commerce Department.

China, the second-biggest U.S. trading partner after Canada, has been subjected to a series of trade sanctions by the Obama administration on tires and steel pipe in the months leading up to the president’s Asia trip. China called the pipe tariffs “discriminatory” and said it would start its own anti-dumping probe of American cars.

Keeping Quiet

Obama didn’t mention trade during a joint appearance with Hu Nov. 17 at Beijing’s Great Hall of the People. Hu urged Obama to “oppose and reject protectionism in all its manifestations in an even stronger stand.”

Still, U.S. companies used the president’s visit to help cement business ties in China. Tempe, Arizona-based First Solar Inc. advanced its plan to build the world’s biggest plant directly converting sunlight to electricity in Inner Mongolia, signing an agreement in Beijing Nov. 17 with U.S. Energy Secretary Steven Chu and Chinese Vice Premier Li Keqiang in attendance.

China is the third-biggest export market for the U.S., with outbound shipments last year amounting to $71.5 billion, an increase of 9.5 percent from 2007. The U.S. imported $337.8 billion from China last year, more than from any other country, according to the Commerce Department.

North Korea

Obama and Lee reiterated their commitment to bringing North Korea back to multilateral talks on ending its nuclear weapons program. China is host to six-party negotiations that include the two Koreas, Japan, Russia and the U.S. The talks were broken off after North Korea launched a rocket in April in violation of a United Nations resolution.

Obama said he and Lee “both agree on the need to break a pattern that has existed in the past in which North Korea behaves in a provocative fashion; it then is willing to return to talks; it talks for a while, and then it leaves the talks seeking further exceptions and is never actually making progress on the core issues.”