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Case Number: 2009-0528-F
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the Clinton Presidential
Library Staff.
Folder Title:
Korea, Auto Agreement, 1997 [4]
Staff Office-Individual:
National Economic Council-Lee, Malcolm
Original OA/ID Number:
CF 1184
Row:
Section:
Shelf:
Position:
Stack:
23
5
8
2
V
Withdrawal/Redaction Sheet
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001. email
To Jeffery Bader, James Gagnon, Sandra Kristoff et al from SitRoom
09/19/1997
P1/b(1)
at 7:40 am. Subject: Auto Dispute: Next Steps. (3 pages)
002. email
To Jeffery Bader, James Gagnon, Sandra Kristoff et al from SitRoom
09/19/1997
P1/b(1)
at 9:31 pm. Subject: Auto talks: Talking Points. (2 pages)
003. memo
For Don Phillips from David Marchick. Subject: State Department
08/27/1997
P1/b(1)
Views on Korea Auto Import Issue. (3 pages)
004. report
U.S.-Korea Automotive Memorandum of Understanding Status
08/07/1997
P1/b(1)
Report. (10 pages)
005. paper
Super 301: Korean Auto Market Access. (4 pages)
09/1997
P1/b(1)
COLLECTION:
Clinton Presidential Records
National Economic Council
Malcolm Lee
OA/Box Number: CF 1184
FOLDER TITLE:
Korea, Auto Agreement, 1997 [4]
2009-0528-F
vz1407
RESTRICTION CODES
Presidential Records Act - |44 U.S.C. 2204(a)]
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information |(a)(1) of the PRA|
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office |(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute |(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute |(b)(3) of the FOIA]
financial information |(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors (a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRAJ
b(7) Release would disclose information compiled for law enforcement
purposes |(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions |(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
STATE
A
MERICAN
PHOTOCOPY
A
UTOMOBILE
ANUFACTURERS
SSOCIATION
What America drives, drives America
American Automobile Manufacturers Association
CHRYSLER
CORPORATION
General Motors
September 9, 1997
The President
The Whire House
Washington, D.C. 20500
Dear Mr. President:
The American Automobile Manufacture Association (AAMA) and its member communies -
Chrysler Corporation, Ford Motor Company, and General Motors Corporation - wish in express
our growing frustration with the Republic of Korea's failure to honor its market-opening commit-
ments under Korea's 1995 automotive trade agreement with the United States. Closed domestic
markets are troubling under any circumstances. But the situation is particularly unacceptible when
it is combined, as is the case in Korea, with government-directed policies to promote an entraordi-
nary expansion of excess automobile capacity for export to open markets in the U.S. and around
the world. We urge the Administration to respond to Korea's trade-distorting practices with serious
and meaningful action.
In 1995. after almost two years of negotiations, the Administration achieved the U.S. Corez
Automorive Memorandum of Understanding D Increase Market Access for Foreign Passer THE
Vehicles in the Republic of Korea (MOU). W: welcomed the agreement as a modest effo: DV the
Korean government to begin reversing its standing policy of excluding imports from auto-
mobile market. On the basis of that 1995 agreement, AAMA's member companies substai oally
expanded their investments in Korea with a view to increasing U.S. exports to that countr
Howe ver, despite a promising beginning under this new trade agreement, Korea bas 1: lived
up to its market-opening commitments. Import sales remain far below expectations. In air of 1996,
Chrysler. Ford and General Motors imported less than 3900 vehicles into a total Korean market of
1.6 million vehicles. During 1997, the Korean government has not taken any positive acti to
promote imports. Instead, there has been a host of continuing violations of the 1995 MOT
AAME believes that the Korean government's maintenance of a sunctuary automobile marker
is directly fueling the Korean auto industry's aggressive international expansion. In the face of
mounting global overcapacity in automotive production and despite the precarious financial posi-
tion of the Korean manufacturers, Korean producers have continued in add capacity - re. hing
over 3.6 million units in 1996 - and have announced plans to increas: production to ove: mil-
lion units annually by 2000. Allowing Korea in maintain a closed market while building Page alito
assembly capacity potentially will result in the permanent loss of billions of dollars in U.S. entomo-
tive exports
TEADQUARTE
DETROIT OFFICE
1401 a Street J.W. Suite 900. dusnington, IC. 20005
1430 Second Avenue, Saite 100. Detroit, MI 48202
202-326-5500 FAX 202-325-5567
313-472-4311 FAX 313-872-5400
The President
Septembe: 9, 1997
Page 2
This trrational buildup of excess capacity has led to Korean companies engaging in basiness
arrangements which violate international trade rules. The United States government has now
joined the European Community and Japan at the World Trade Organization in objectin 10 a dis-
criminatory national car program in Indonesia that benefits a single Korean auto compan
Chrysier, Ford and General Motors are not alone in expressing growing exasperation with
Korea's behavior as a trading partner. Korea's unfair auto trade practices have also been which criti-
cized by other nations at recent meetings of the Organization for Economic Cooperation and
Development and in a joint visit to Seoul in July with representatives of the European Au mobile
Manufacturers Association. All efforts to have the Korean government honor its cominits cats to
fair, open trade practices - not only with the U.S. but with other trading partners as wei. - have
been met with complete intransigence.
We believe that the Korean government's actions unquestionably deserve to be identified as
priority practices that unfairly limit U.S. market access under Super 301. Failure bv the
Administration to insist that Korea adopt responsible and fair automorive trade policies W. make
it more difficult to expand access for U.S. automobiles in that market and will encourage Curea to
continue a pattern of irresponsible trade practives.
We look forward to working with the Administration to increase marker opportunities for
auto exports to Korea and to other markets around the world.
Sincerely,
My Mmar
Robert J. Enton
Alex Trounan
Chairman de CEO
Chairman & CEO
Chrysler Corporation
Ford Motor Company
Juch
AndrewHere
John F. Smith. Jr.
Andrew 1. Card, Jr.
Chairman. insident, & CEO
President & CEO
General Minus Corporation
American Automobile
Manufaccurers Association
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001. email
To Jeffery Bader, James Gagnon, Sandra Kristoff et al from SitRoom
09/19/1997
P1/b(1)
at 7:40 am. Subject: Auto Dispute: Next Steps. (3 pages)
COLLECTION:
Clinton Presidential Records
National Economic Council
Malcolm Lee
OA/Box Number: CF 1184
FOLDER TITLE:
Korea, Auto Agreement, 1997 [4]
2009-0528-F
vz1407
RESTRICTION CODES
Presidential Records Act - 144 U.S.C. 2204(a)]
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute |(a)(3) of the PRA]
an agency |(b)(2) of the FOIA|
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute |(b)(3) of the FOIA]
financial information |(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information |(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA
h(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy |(b)(6) of the FOIA]
personal privacy |(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes |(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions [(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
002. email
To Jeffery Bader, James Gagnon, Sandra Kristoff et al from SitRoom
09/19/1997
Pl/b(1)
at 9:31 pm. Subject: Auto talks: Talking Points. (2 pages)
COLLECTION:
Clinton Presidential Records
National Economic Council
Malcolm Lee
OA/Box Number: CF 1184
FOLDER TITLE:
Korea, Auto Agreement, 1997 [4]
2009-0528-F
vz1407
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA|
h(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute |(a)(3) of the PRA]
an agency [(b)(2) of the FOIA)
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute |(b)(3) of the FOIA]
financial information |(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information |(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy |(b)(6) of the FOIA]
personal privacy |(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes |(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions [(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells [(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
FROM DEPARTMENT OF STATE 4A
(THJ) 8.28'97 9:05/ST. 9:04/NO. 3760637394 F 1
WASHFAX RECEIPT
DEPARTMENT OF STATE
97 AUE 28 ABI
S/S #
MESSAGE NO. 00168
CLASSIFICATION Confidential
No. Pages 3
FROM: David Marchuh
EB/TPP
+72532
3831 A
(Officer name)
(Office symbol)
(Extension)
(Room number)
MESSAGE
DESCRIPTION Memo : State Department Views a Koren Auto Import
Issue
TO: (Agency)
DELIVER TO:
Extension
Room No.
Ron Ph. llips
used
USTR
Don Phillips
395-3430
400
USTR
Sea. Marphy
395-6813
407
NEC
Ma/coln lee'
456-8289
389 0E0B
Commerce
Charles Uthu, /Andra Guil
482-0669
4036
FOR:
CLEARANCE
INFORMATION
X
PER REQUEST
COMMENT
REMARKS:
UNCLASSIFIED UPON REMENTS Date: REMOVAL
S/S Officer:
1/5/2012
$ 209-058-F
FORM
7:17
05.1760
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
003. memo
For Don Phillips from David Marchick. Subject: State Department
08/27/1997
P1/b(1)
Views on Korea Auto Import Issue. (3 pages)
COLLECTION:
Clinton Presidential Records
National Economic Council
Malcolm Lee
OA/Box Number: CF 1184
FOLDER TITLE:
Korea, Auto Agreement, 1997 [4]
2009-0528-F
vz1407
RESTRICTION CODES
Presidential Records Act - |44 U.S.C. 2204(a)]
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information |(a)(1) of the PRA|
b(1) National security classified information |(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office |(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute |(a)(3) of the PRA|
an agency |(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA|
financial information |(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information |(b)(4) of the FOIA]
and his advisors, or between such advisors |a)(5) of the PRAJ
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy |(b)(6) of the FOIA]
personal privacy |(a)(6) of the PRA|
h(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions [(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
Clinton Presidential Records
Digital Records Marker
This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a publication.
Publications have not been scanned in their entirety for the purpose
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visit the Clinton Presidential Library's Research Room.
US Automakers' Full Access
To The Korean Automotive Market
September 1997
KAMA Korea Automobile Manufacturers Association
Yen Presentation
American Automobile
Manufacturers Association
July 1997
The effects of the excessively
weak yen are becoming apparent:
Motor vehicle exports from Japan to the U.S. have
increased significantly since the second half of 1996:
PERIOD
% CHANGE FROM
PREVIOUS QUARTER
First Quarter 1996
-31.79%
Second Quarter 1996
-24.93%
Third Quarter 1996
6.90%
Fourth Quarter 1996
24.13%
First Quarter 1997
28.0%
Motor Vehicle Exports From Japan to the U.S.
(% Change: Over Same Period Previous Year)
28.00%
30.00%
24.13%
20.00%
6.90%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-24.93%
-31.79%
-40.00%
1st
2nd
3rd
4th
1st
Quarter
Quarter
Quarter
Quarter
Quarter
The weak yen is threatening
the viability of U.S.
companies' programs for
exports to Japan:
A TYPICAL VEHICLE SOLD IN JAPAN FOR 2
MILLION YEN GENERATES THE EQUIVALENT U.S.
DOLLARS AT THE FOLLOWING EXCHANGE RATES:
¥80/$
$25,000
¥100/$
$20,000
¥125/$
$16,000
AAMA member company exports
to Japan did not decline until
1997, but exports to Japan from
U.S.-based transplant operations
have fallen precipitously over the
past year:
Japanese-U S Built Vehicle Sales in Japan
AAMA U S.-Built Vehicle Sales in Japan
'97
Jan-May
1st Qtr '97
4th Qtr '96
3rd Qtr '96
96,
2nd Qtr
1st Qtr '96
%09-
HOLD
%0
-40%
-32.50%
-15%
-20%
6.20
%0
20%
28.70%
27.50%
40%
31.20%
%09
50.80%
(% Change From Previous Year)
U.S. Sales In Japan
Last year's improvement in
the bilateral trade
imbalance has reversed:
Improvement in U.S. Trade Balance with Japan
(Versus Same Month Previous Year)
$ Billions
Yen/$
2.5
130
2
125
1.5
120
1
115
0.5
110
0
105
-0.5
-1
100
Jan-96
Feb-96
Mar-96
Apr-96
May-96
Jun-96
Jul-96
Aug-96
Sep-96
Oct-96
Nov-96
Dec-96
Jan-97
Feb-97
Mar-97
Apr-97
May-97
Jun-97
Japan must not be allowed to
export its problems, and its
unemployment to the U.S. Trade
tensions will rise with the trade
deficit, unless Japan takes action
to increase domestic demand,
deregulate, and open its market.
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
004. report
U.S.-Korea Automotive Memorandum of Understanding Status
08/07/1997
P1/b(1)
Report. (10 pages)
COLLECTION:
Clinton Presidential Records
National Economic Council
Malcolm Lee
OA/Box Number: CF 1184
FOLDER TITLE:
Korea, Auto Agreement, 1997 [4]
2009-0528-F
vz1407
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information |(a)(1) of the PRA]
b(1) National security classified information |(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRAJ
an agency |(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute |(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information |(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA|
personal privacy [(a)(6) of the PRA|
b(7) Release would disclose information compiled for law enforcement
purposes |(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions |(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
005. paper
Super 301: Korean Auto Market Access. (4 pages)
09/1997
P1/b(1)
COLLECTION:
Clinton Presidential Records
National Economic Council
Malcolm Lee
OA/Box Number: CF 1184
FOLDER TITLE:
Korea, Auto Agreement, 1997 [4]
2009-0528-F
vz1407
RESTRICTION CODES
Presidential Records Act - |44 U.S.C. 2204(a)]
Freedom of Information Act - 15 U.S.C. 552(b)|
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information |(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute |(b)(3) of the FOIA]
financial information [(a)(4) of the PRAJ
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information |(b)(4) of the FOIA]
and his advisors, or between such advisors |a)(5) of the PRAJ
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy |(b)(6) of the FOIA]
personal privacy |(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
h(8) Release would disclose information concerning the regulation of
of gift.
financial institutions |(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
American Automobile Manufacturers Association
CHRYSLER
CORPORATION
Ford
General Motors
August 13, 1997
To:
Sean Murphy, USTR
Charles Uthus, Department of Commerce
cc:
Donald Phillips, USTR
Henry Misisco, Department of Commerce
Malcolm Lee, National Economic Council
David Marchick, Department of State
From: Steve Collins
Director, Economics and International Affairs
American Automobile Manufacturers Association
This memo is a response to your request for clarification and further direction concerning
AAMA and its member companies' views on the status of U.S.-Korean automotive trade
issues. In several recent meetings, AAMA and USTR/DOC have reached a somewhat
closer understanding of our current mutual perspectives and objectives concerning Korea,
but it is critical that we maintain a close ongoing dialogue over the coming weeks as the
Administration reviews its policies and options regarding Korea's automotive trade
practices.
You have specifically requested additional direction concerning AAMA's views on issues
which will be raised during the forthcoming consultations with the Korean Government
on the implementation of the 1995 MOU. We have discussed these issues with Chrysler,
Ford and GM and are passing on to you the joint recommendations for positions and
talking points on each of the major MOU issues.
In an effort to reaffirm and clarify our current views concerning trade with Korea, I want
to take the opportunity to restate AAMA's overall position on Korea's automotive trade
practices, following the filing of our 301 petition on July 10, and the joint AAMA/ACEA
July 14-16 visit to Seoul.
1. Request for USG designation of Korean government actions as priority foreign
country practices under Section 301.
As you know, on July 10, AAMA officially petitioned the Administration to designate
Korea's auto trade practices as "priority foreign country practices" under Super 301. I
want to emphasize that this was not a decision which was made frivolously, or without an
understanding at the highest levels of our companies of the seriousness of the action.
However, the deteriorating situation for auto importers in Korea's domestic market.
combined with Korea's illogical, aggressive, disruptive and legally questionable global
automotive investment and export expansion, requires dramatic action.
HEADQUARTERS
DETROIT OFFICE
1401 H Street. N.W. Suite 900. Washington, D.C. 20005
7430 Second Avenue. Suite 300, Detroit. MI 48202
202-326-5500 FAX 202-326-5567
313-872-4311 FAX 313-872-5400
AAMA believes that Korean automakers' sanctuary domestic market is directly fueling
its aggressive international expansion. We strongly suspect the expansion may have been
conducted in a manner which violates other U.S. or international trade rules. Finally, that
explosion in global capacity, now projected to reach an estimated 6-7 million units within
four years, much of which will be targeted to the U.S. market and will increasingly harm
](
the interests of the U.S. auto industry and its workers.
But the main reason a Super 301 designation is warranted is that over the past year, the
Korean Government has reneged on its major commitments undertaken in the MOU to:
- "substantially increase market access for foreign passenger vehicles in the ROK"
- "improve consumer perceptions in Korea of foreign passenger vehicles"
- "establish an automotive taxation regime in ROK that is not discriminatory
against foreign vehicles"
- "not take any new measures that directly or indirectly adversely affect market
access for foreign passenger vehicles"
- "promote international harmonization of standards and certification."
And in repeated exchanges between AAMA, its member companies and Korean officials,
it has become clear that the government has completely reversed course in its intentions
concerning market liberalization and is actively resisting even negligible market opening
efforts.
We believe that the government's actions unquestionably deserve the serious and severe
response from the U.S. which designation as a priority country under Super 301 conveys.
In the face of that government's frankly outrageous actions, anything less that such a
severe U.S. response will be calculated to signal the ultimate supremacy of U.S. political
interests over its economic interests and will be fully taken advantage of by the Korean
government and producers. It will also be a signal to other countries that are tempted to
abrogate future trade agreements that the U.S. will not take tough action to enforce
agreements.
In looking back on the announcement of the MOU in September 1995, I noted
Ambassador Kantor's commitment that "although I have not designated Korea's auto
practices as a Priority Foreign Country Practices under Super 301, we will monitor closely
the quantitative and qualitative criteria in the agreement and will examine whether a
WTO case would be appropriate". The USTR announcement of the MOU also noted
"The United States will assess implementation of Korea's commitments and will measure
the actual effects they have on foreign passenger vehicle sales in the Korean market."
Finally, I also want to directly reassure you that AAMA and its member companies
intend to communicate from its senior officers to the White House and members of the
Cabinet, as well as the Congress, their strong belief that USTR should accept the
industry's petition to designate Korea under Super 301.
2. MOU Consultations
As discussed in our meetings, AAMA is very uneasy with the scheduling of this round of
consultations in the middle of the Super 301 decision-making process. Certainly, the
aggressively hostile attitude shown AAMA and ACEA officials last month from all of
Korean Ministries, but particularly MOTIE and MOFA, confirms our belief that the
government is unwilling to seriously address the auto trade issue and will not consider
any major new proposals to encourage market liberalization.
Given this situation you may be taking on an impossible task which could complicate the
decision of whether to proceed with Super 301 designation. The industry's threshold for
adequate and meaningful market-opening measures has substantially increased this year
as a result of the government's violation of its 1995 Commitment to "take all necessary
steps to fully and effectively implement the MOU" and "to not take any new measures
that directly or indirectly adversely affect market access for foreign passenger vehicles".
With the Korean government backsliding in many areas of the MOU, the odds for
obtaining concessions from Seoul which will meet the industry's market opening
threshold is not high.
For all these reasons, the timing of this consultation is problematic. However. we will, of
course, provide you with any assistance and support possible before and during the
meetings. If it would be helpful for an industry representative to accompany you, that can
be arranged. Alternatively. if you wish to arrange meetings with the companies' local
representatives in Seoul, we can also schedule them.
With regard to the U.S. strategic objectives in these consultations, AAMA
respectfully offers the following recommendations:
Overall priority:
Given the political environment in Korea, it's unlikely that USTR will achieve
meaningful progress during this round of consultations. Therefore, AAMA strongly
recommends that the messages conveyed by the USG focus on the big picture and the
serious strains in U.S.-Korean trade relations which are being caused by the Republic of
Korea's actions and attitudes.
We urge you to emphasize that the U.S. views the Republic of Korea's active violations
of both the spirit and the specific commitments of the MOU as completely unacceptable.
Furthermore, its repeated statements that the government "has no tools" to address the
closed domestic market is indefensible and will induce a severe response in the U.S.
unless Korea takes bold and dramatic efforts to promptly improve market access for
imported autos.
AAMA also recommends that the U.S. set forth clear markers or indications of the scope
of action which it believes necessary if meaningful market opening is to be achieved. We
believe that those markers must be bold and dramatic, and not merely incremental
gestures. While we recognize that it is not reasonable to expect that the government
agree to immediately implement the entire package of major market opening actions, a
direct acknowledgment by the government of the complete inadequacy of the MOU, as
implemented, in achieving its stated objectives is required. Because of its dismal track
record under the MOU, the Republic of Korea must promise a solid and irreversible
commitment to meaningful, comprehensive actions to significantly improve, in a very
short period, market access opportunities for imported vehicles.
Our member companies believe that the U.S. should convey a clear and specific marker
of the pace of market opening to Korean officials so that there is a clear indication of the
level of proactive activity expected by the U.S. over the next several years. AAMA
recommends that the U.S. convey its firm expectation that future actions by the Korean
government will allow foreign auto producers to sell their products in Korea as they do in
any other OECD country will lead to a 5% market share for imported vehicles by the year
2000. Post-2000, we would expect total import share to reach 10% in a reasonable period
of time.
Korean government objectives:
We have asked our companies representatives in Seoul for their assessment, based on
conversations with government officials, of what Korea's expectations of the MOU
consultations are. Their findings about the ROKG's positions are as follows:
1. Satisfy the USG with some marginal improvements in market opening and certification
procedures.
2. Take the USG's requests into account in a positive manner, if they are compelling.
3. Refuse demands if they are extreme such as the revision of the tariff and tax system.
arguing that they are related to internal affairs with impact on local auto companies.
4. ROKG will consider a petition to the WTO if the USG designates Korea as a "priority
foreign country" under Super 301.
5. Arrange a trade-issues related seminar in the U.S. with Korean automakers
participating.
6. Send a formal letter to the USG to address the improvements achieved
7. Emphasize the recent difficulties of the Korean auto industry:
Among Korea's talking points will likely be the following:
1. How can the USG complaint to Korea about a negative trade balance in one industry
sector when the U.S. maintains an overall positive trade balance.
Suggested response: Korea's negative trade balance is not the fault of the U.S. It's
generated by Korea's reliance on U.S. capital goods and its non-competitive Dram chip.
It also reflects the structural problems the Korean economy is currently facing that have
been acknowledged by the ROKG in the press: an excessive amount of bureaucracy in
both industry and government. the double digit escalation of labor costs and local
financing costs in Korea which are several points higher than international levels. All of
these factors have made Korean products less competitive internationally.
2. U.S. automakers have a 50% share of the market for vehicles with 3000cc engine and
above. What the U.S. companies need to do is offer a broader range of products.
Suggested response: The commitment to increase market share for imports was not
confined to the 3000 cc and above. The reason U.S. companies have a high share in the
3000cc and up segment is that the Korean industry is not competitive in that sector. Ford
and Chrysler both have entries in the 2000cc and below segment in which the Korean
companies are competitive locally. But the price sensitivities caused by tariff and
cascading taxes puts imports at the greatest competitive disadvantage in that category.
3. The U.S. maintains a 25% tariff on imported pickup trucks.
Suggested response: Korea is not even a player in this market segment so they are the
wrong government to be in a position to raise the issue.
Presentation by Andrew H. Card
President and CEO
American Automobile Manufacturers Association
U.S.- Korea Business Council
June 9, 1997
Good Morning -
I want to thank Rick Van Nelson for inviting me to participate in this special plenary
session meeting of the US-Korea Business Council on the automotive industry. There
has been considerable tension between the United States and Korea concerning
automotive trade issues over the past several years. And these tensions are growing
rather than diminishing, leading to the possibility of more serious confrontations on
trade issues between our two countries.
The reasons for this growing confrontation is captured in these two charts They tell the
whole story.
The first chart tracks the growth in Korea automobile and truck production over the
twenty year period between 1980 and what is projected for the year 2001. You can see the
dramatic growth in Korean auto production -- just passing the one million unit level in
about 1990, and projected to reach between five and six million units worldwide little
more than a decade later. That is a phenomenal and unprecedented level of growth in this
business.
What has attracted particular attention in the global auto community is the second set of
bars in this chart, showing the level of Korea's domestic sales. What it demonstrates is
both good news and bad news from the US perspective The good news is that Korea has
become a vibrant and rapidly growing market for automobiles and truck sales, which is
close to hitting the two million figure for annual sales. Putting that into a North
American context -- last year total car and truck sales in Korea were greater than total
sales in our two NAFTA partners, Canada and Mexico, combined.
But the bad news is quite clearly represented in this chart. which shows the total
automotive import penetration level in Korea. Imported cars and trucks from every region
in the world -- North America, Europe, Japan, even Korea's partners in WTO-illegal
arrangements like Indonesia -- total .4% of the huge Korea market.
And it is the disparity shown in these two charts -- Korean automakers explosive and
aggressive investment in auto capacity all over the world, while maintaining a
hermetically sealed domestic market -- that has been the cause of growing frustration and
irritation among governments and industry leaders in many nations.
In an attempt to ease some of these tensions, in 1995 the United States sought and
entered into a special bilateral automotive trade agreement with Korea. The official title
of this agreement summarized its clear objective: It was "The US-Korea Memorandum
of Understanding (MOU) to Increase Market Access For Foreign Passenger Vehicles In
The Republic of Korea".
The then U S Trade Representative Mickey Kantor acknowledged at the time that
this agreement was only a first step in creating a more competitive environment in Korea
for US and other imported cars. He added that "the United States will assess the
implementation of Korea's commitments and will measure the actual effects they have on
foreign passenger vehicle sales in the Korean market.".
Now that we are coming upon the two year mark under this market opening agreement,
let's take a look at the results and how the US auto companies assess the effectiveness of
the 1995 agreement in increasing sales opportunities for imports.
The agreement provides for a number of major goals:
The first is "To substantially increase market access for foreign passenger vehicles in the
Korea'.
In 1995, imported vehicle sales in Korea totaled 6,921 units. Last year, in the first
full year of implementation of the MOU that figure rose to 10,315 units. Or in market
share terms, total auto imports increased their market share from 0.4% to 0.6%.
The second stated goal of the 1995 agreement was "to improve consumer
perceptions in Korea of foreign passenger vehicles."
Why was this even necessary? Because Korea has a long history of actively
discouraging consumers from purchasing imported vehicles through practices as
mandatory tax audits of purchasers of imported cars -- which by the way is a very
effective deterrent.
While we believe the Korean government did make some efforts in the early
months of the agreement to signal to its consumers that the government was no longer
actively discouraging the purchase of imports, since late 1995 the situation has been
seriously deteriorating. A national so-called frugality campaign. which was inspired or at
least tolerated by the government for many months, came to be focused squarely in Korea
on imported goods. You suddenly couldn't buy imported liquor. clothes, and cosmetics.
And the impact on imported car sales was also dramatic. The import deep freeze was so
great that our dealers in Korea said that days would go buy without a single customer
walking in the showroom door.
Finally on May 9, under much pressure, the Government issued an official notice
that "the frugality campaign is a movement aimed at transforming the nation's
consumption patterns based on lavishness and extravagance into those on rationality.
Then it is not reasonable to discourage the purchase of foreign goods simply because they
are imported even though such purchase is made on the merits with a view to enhancing
the nation's credibility in the international community, the government will continue to
avert discriminatory treatment, if any, against foreign goods and services and to refrain
from taking measures which ,might contribute impediments to imports"
But the damage has already been done and many of our investments made based on
expectations raised as a result of the 1995 MOU have been severely damaged.
The other goals of the 1995 Agreement concerned taxation, advertising, standards and
certification and finance. Overall, AAMA's assessment is that, there has been some
progress, the system remains hostile to foreign auto imports and the expansion of market
access for imports in the auto sector since the agreement became effective is woefully
inadequate. Clearly, additional action is required.
And this point has been made by senior Administration officials and members of
Congress in the past several months. Among the recent visitors to Seoul who have raised
the issue were:
- Vice President Gore
- Speaker Gingrich
- Rep. John Dingell
- Undersecretary Eisenstadt - May 2, 1997 -- "Korea has one of the toughest
business climates in the world to deal with. We deal with a closed market in the
area of autos and telecommunications".
Given what the Administration characterizes as a "closed domestic market" Korea's
aggressive auto export plans to the US will be viewed with increased alarm.
This chart shows that Korean automakers' exports to the US last year totaled over
200,000 units and their published export plans call for US exports increasing to 450,000
units within three years. In contrast, GM, Ford and Chrysler together shipped 3,900 units
to Korea last year and, in the current unfriendly domestic market environment are not
optimistic about significant increases in the near future.
So what kind of action is needed on the part of the Korean government to improve the
situation in their closed auto market?
Let's start with tariffs and taxes. The total end cost of import cars to the Korean
consumer continues as a severe disadvantage when compared to domestic cars. In the US,
the total tax and tariff differential cost of a Ford Mondeo VS. Hyundai Sonata is $73. The
same two cars selling in Korea, however, results in a price differential of $2600 in favor
of the Hyundai.
Given the import market share well below 1%. we see absolutely no justification for
Korea's auto tariff rate to remain any higher than the US tariff of 2.4%.
In addition, AAMA believes the Korean government should move towards a
nondiscriminatory automotive tax regime.
Regarding standards and certification measure, AAMA recommends that the Korean
Government agree to establish a self-certification system by the year 2000 along with the
adoption of an internationally accepted and recognized set of standards and certification
procedures.
With regard to financing, while there was some initial progress made in beginning to
open the auto financing system in the 1995 agreement, there has been no indication from
the government to expect any further liberalization in the near future. Our companies
continue to face a range of limitations on the services that we can provide in Korea.
During the next round of consultations, AAMA believes the Korean government should
agree to a specific timetable to further liberalize automotive financing regulatory
restrictions.
As you may hear from the presentation by Mr. Lee, there is a persistent disagreement
between Korean and the US on the number of imports sold in the Korea market. Each
side uses different systems and methodologies for collecting and reporting on auto
imports. We should find a way of resolving this problem by settling on a common
system to determine and report on numbers forming the basis for calculating import share
of the Korea market.
Finally, while Korea and the US pursue bilateral automotive negotiations, there is
growing recognition of the need to develop a broader regional perspective in developing
sectional trade agreements based on free market principles. At the recent APEC
Ministerial meeting in Montreal, the automotive sector was proposed to be the subject of
just such a regional sectional initiative. The US government is actively reviewing the
proposal with a view to making a final decision on the matter prior to the November 1997
APEC Summit meeting. AAMA believes that the US-Korea Business Council should
support this initiative and recommend that autos be included in the APEC Action Plan
considered for adoption by the heads of government at the November APEC Summit.
The Korean government should recognize that it is their own interest to be more proactive
and forthcoming in addressing these continuing problems in their auto sector.
In the absence of such a demonstrated commitment by Korea, tension will continue to
escalate until we will face a decision point of considering looking to a trade sanctions
situation. There should be no doubt that US automanufacturers will allow their markets
and investments, both in Korea and around the world to be threatened unfairly.
And I may add that it was a most disturbing sign of the governments' intention that I was
informed by USTR Friday that a new round of consultations on the 1995 MOU between
the two governments which the US had sought for all of this year have now been
postponed by the Korean government from next week until September or later.
These kinds of actions give signals that poison the well of trade relations between our
two countries.