Good resource for data on tires:
https://www.utires.com/articles/tires-made-usa-american-foreign-brands/
Revisions to the US-Korea Free Trade Agreement (KORUS FTA):
https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/march/new-us-trade-policy-and-national
New U.S. Trade Policy and National Security Outcomes with the Republic of Korea
“The improved KORUS agreement reflects the President’s leadership in delivering more reciprocal trade outcomes benefiting U.S. workers, exporters, and businesses. The United States and Korea have strengthened an important economic relationship by agreeing to substantial improvements to KORUS that will help rebalance our trade, reduce our trade deficit, and expand U.S. export opportunities.” – U.S. Trade Representative Robert Lighthizer
President Trump continues to fulfill one of his key promises to the American people: to secure free, fair and reciprocal trade deals for the American worker.
The Republic of Korea is an important ally and key trading partner. Improving KORUS by rebalancing our trade and reducing the trade deficit will strengthen our national security relationship.
Since the United States – Korea Free Trade Agreement (KORUS) went into effect in 2012, the U.S. trade deficit in goods with Korea increased by over 73 percent from $13.2 billion to $22.9 billion (2017), while the overall deficit increased by 70 percent from $6.3 billion to $10.7 billion (2017).
Through negotiations to improve KORUS, the U.S. Trade Representative has secured changes that will reduce the trade deficit and ensure that KORUS is a good deal for U.S. workers and businesses.
PROCESS FOR KORUS AMENDMENTS AND MODIFICATIONS
As directed by the President and with authority provided under the terms of KORUS, the U.S. Trade Representative has worked to resolve issues through the Joint Committee process under the Agreement.
In July 2017, Ambassador Lighthizer initiated trade discussions with Korea, leading to special sessions of the KORUS Joint Committee in 2017 and further negotiations for KORUS amendments and modifications in 2018.
Once completed, the amendments and modifications to KORUS will undergo the United States’ and Korea’s respective domestic review procedures. For the United States, modifications to the U.S. tariff schedule will undergo consultation and layover procedures provided under the implementing act for the KORUS Agreement, which include a 60-day consultation period with Congress.
2. KEY NEW KORUS FTA OUTCOMES
In these discussions, the United States achieved steps to improve the large trade deficit in industrial goods and to address KORUS implementation concerns that have hindered U.S. export growth.
U.S. Truck Tariffs: Korea will extend the phase out of the 25% U.S. tariff on trucks until 2041, or a total of 30 years following the implementation of the KORUS FTA in 2012. (currently scheduled to phase out by 2021).
Growing U.S. Auto Exports: Exports of U.S. motor vehicles to Korea will be improved through the following steps:
Greater Access for U.S. Exports: Korea will double the number of U.S. automobile exports, to 50,000 cars per manufacturer per year, that can meet U.S. safety standards (in lieu of Korean standards) and enter the Korean market without further modification.
Harmonization of Testing Requirements: U.S. gasoline engine vehicle exports will be able to show compliance with Korea’s emission standards using the same tests they conduct to show compliance with U.S. regulations, without additional or duplicative testing for the Korean market.
Recognition of U.S. Standards for Auto Parts: Korea will recognize U.S. standards for auto parts necessary to service U.S. vehicles, and reduce labeling burdens for parts.
Improvements to CAFE Standards: Korea will expand the amount of “eco-credits” available to help meet fuel economy and greenhouse gas requirements under the regulations currently in force, while also ensuring that fuel economy targets in future regulations will be set taking U.S. regulations into account and will continue to include more lenient targets for small volume manufacturers.
Customs Improvement: Korea will address long-standing concerns with onerous and costly verification procedures through agreement on principles for conducting verification of origin of exports under KORUS and establish a working group to monitor and address future issues that arise.
Pharmaceutical Reimbursements: Within 2018, Korea will amend its Premium Pricing Policy for Global Innovative Drugs to make it consistent with Korea’s commitments under KORUS to ensure non-discriminatory and fair treatment for U.S. pharmaceutical exports.
3. CURRENCY AGREEMENT
The U.S. Department of the Treasury is leading discussions on currency with Korea’s Ministry of Strategy and Finance.
An agreement (memorandum of understanding) is being finalized on robust provisions to prohibit competitive devaluation and exchange rate manipulation in order to promote a level playing field for trade and investment. Strong commitments on transparency and accountability are included in the provisions.
4. OUTCOMES FOR SECTION 232 EXEMPTION FOR KOREA
The President’s action under Section 232 of the Trade Expansion Act of 1962, as amended, is designed to protect U.S. national security given the massive and persistent global excess capacity for steel and aluminum and the threatened impairment of U.S. national security from imports of such products.
As the President’s proclamations state, the United States is willing to work with any country with which we have a security relationship to find alternative ways to address the threatened impairment of the national security caused by imports of steel and aluminum. The United States has a strong and enduring security relationship with Korea.
U.S. negotiations with Korea have resulted in a satisfactory alternative for addressing U.S. national security concerns with respect to steel imports.
Korean imports of steel products into the United States will be subject to a product-specific quota equivalent to 70% of the average annual import volume of such products during the period of 2015-17. This will result in a significant reduction in Korean steel shipments to the United States.
Korean news sources if you feel so inclined:
http://www.koreatimes.co.kr/www/biz/2018/03/367_246213.html
http://www.koreatimes.co.kr/www/biz/2018/03/367_246238.html
The key outcomes on autos may not appear to be significant to anyone not familiar with how South Korea discriminates against imported autos (both European and US) through nontariff barriers. Ford VP of International Government Affairs testified before the Senate and detailed the barriers US auto companies faced even after the 2012 KORUS was enacted. Here is the link:
https://www.finance.senate.gov/imo/media/doc/Ford%20Testimony%20for%20U%20S%20%20Senate%20Hearing%20on%20KORUS.pdf
So this revision addresses some of those concerns.
The large tariff on Korean light/mid-sized trucks may appear to be a nonissue. The fact that no truck is currently imported from Korea doesn't mean that Korean auto companies were not only considering it, the Hydunai Santa Cruz had been greenlighted for the US market (imported). It is difficult for trucks like the Dodge Dakota, Chevy Colorado and GMC Canyon and the 2019 Ford Ranger to be viable and profitable as evidenced by their discontinuation and in some cases reemergence. Keeping the punitively high tariff in effect until 2041 (instead of 2021 from the prior agreement) gives them more breathing room (as it does for Japanese autos). News reports have Hyundai's Korean labor union is rather upset at this change. Hyundai could build this truck here however with US labor if they so chose.
Additionally, South Korea had not named a currency manipulator, however they have been on the watch-list. Further transparency on this issue will allow the US to file any potential grievances if necessary in the future.
With US beef and pork exporters viewing South Korea as a critical market, no changes were made from prior KORUS FTA. The US is the #1 supplier for beef in S Korea and #2 in pork. S Korean farmers have been known to protest over US beef imports. While no new access or favorable changes were made to US Ag, they did not lose any ground either.
Perhaps most importantly related to recent news is the aluminum and steel tariff issue. South Korean steel will be capped at 70% tons of average and face a tariff schedule after that. The aluminum tariff will remain in effect. This is concerning as Chinese steel has been shipped via S Korea in order to avoid one of the many existing direct tariffs on Chinese steel. While this may limit some of what China can dump in the US via S Korea, it certainly doesn't stop it. A tariff is better than a quota. But a quota/cap is better than nothing and more acceptable to corporations and trading partners - so I suppose it is a compromise. And I'm unsure the US would've gotten the concessions in the auto category without a concession of our own on steel. Interesting that while this idea had been floated last year, the tariffs on aluminum and steel, that the announcement came towards the end of the KORUS renegotiation. A wild card perhaps. Atleast we got something. I just hope it doesn't undermine the what the commerce department was trying to do in curtailing Chinese overcapacity and dumping.
Looks like we have a good old fashioned trade war going on. China hitting back at the US where it will hurt the most, agricultural goods, airplanes, cars. Not sure who is going to win this trade war, but investors don't seem to like it. I'm guessing American workers won't be benefiting as much as the president thinks as well.
Looks like we have a good old fashioned trade war going on. China hitting back at the US where it will hurt the most, agricultural goods, airplanes, cars. Not sure who is going to win this trade war, but investors don't seem to like it. I'm guessing American workers won't be benefiting as much as the president thinks as well.
I laughed a little this morning because China is the bad actor here. They are the one that steals intellectual property. We punish them for it and then they want to punish us back. We are the ones retaliating to their action first.
This seems like it is bound for either a WTO ruling or some new US-China trade negotiations.
Here is something interesting, deficit in traded goods with China since 1985. I know it is goods only, we carry a small surplus in services, about $38 billion in 2016. The deficit in goods by contrast was $347 billion. Take a look: https://www.census.gov/foreign-trade/balance/c5700.html
1985 was a long time ago, but we essentially had balanced trade with China, a mere 6 million dollar deficit. In 1995 the deficit had grown to $33.8 billion with exports only growing by 3x, imports grew by 12x. Ten years later in 2005 the deficit stood at $202 billion, 2015 $367 billion deficit. And you look at the growth rate that our exports from 1985 to current: $3.8 billion to 2017 $130,369 billion exports compared to their imports growing from 1985's $3.8 billion to 2017 $505,597 billion.
Markets do what markets will do. They like free flow of capital, free flow of labor, free flow of goods and services. They do not like disruptions and they do not like the unknown. Certainly we shouldn't have investors set our trade agenda. At the very least, we have an administration who is taking on these trade abuses and theft. Other countries are not playing by the rules on trade and commerce. So what do we do? Just roll over like we have for decades? That only leads to more of the behavior as it essentially condones it. Sure China, violate our patents, we won't do anything about it.
[Edited on 4/4/2018 by nebish]
NAFTA 2.0, or now officially U.S. Mexico Canada Agreement (USMCA) was signed at the G20 be leaders of the 3 countries. It must be voted on in Congress.
I think for the doomsdayers that fear Trump is too reckless on these trade deals can breath a sigh of relief. I haven't read or heard anything that is going to be disruptive to business or much of the status quo and at the same time I don't see any significant "America First" type provisions either, looks like more of a win for North America as a whole rather than a US win.
The inclusion of labor and environmental language in the agreement makes this different than NAFTA which had none, they were done in side agreements and never were enforceable. Enforcement mechanisms are not spelled out, but in theory this is an improvement with provisions actually in the text of the agreement.
If Mexican labor rights, wages and benefits expand in the way the new President of Mexico has said, that could have a positive effect in the US, with the overall cost savings being less to locate in Mexico vs the US, it could keep some jobs here instead of going there, or could see more facilities and investment here vs there.
Alot will be said on this in the months to come.
Looks to me the only way to object to it is that it doesn't go far enough or live up to certain ideas or promises. I would say anyone that is satisfied with the current NAFTA would have no trouble supporting this.
Trump has still threatened to cancel NAFTA if this doesn't get passed, which I doubt he would do. There certainly were alot of headwinds and challenges along the way to get to this point. The US trade representatives have certainly been busy.
Here are the biggest changes:
Country of origin rules: Automobiles must have 75 percent of their components manufactured in Mexico, the US, or Canada to qualify for zero tariffs (up from 62.5 percent under NAFTA).
Labor provisions: 40 to 45 percent of automobile parts have to be made by workers who earn at least $16 an hour by 2023. Mexico has also agreed to pass laws giving workers the right to union representation, extending labor protections to migrant workers, and protecting women from discrimination. The countries can also sanction one another for labor violations.
US farmers get more access to the Canadian dairy market: The US got Canada to open up its dairy market to US farmers, which was a big issue for Trump.
Intellectual property and digital trade: The deal extends the terms of copyright to 70 years beyond the life of the author (up from 50). It also extends the period that a pharmaceutical drug can be protected from generic competition, and includes new provisions to deal with the digital economy, including prohibiting duties on things like music and e-books, and protections for internet companies so they’re not liable for content their users produce.
No section 232 tariff protections: Section 232 is a trade loophole that Trump used to impose steel and aluminum tariffs on Canada, Mexico, and the European Union. Canada and Mexico wanted protections from these tariffs as part of the NAFTA negotiations, and the fact that tariffs are still in place remains a sore subject, particularly for Canada. Canada and Mexico did get the US to make a side agreement that shields them from possible auto tariffs under 232.
Sunset clause: The agreement adds a 16-year “sunset” clause — meaning the terms of the agreement expire, or “sunset,” after a set period of time. The deal is also subject to a review every six years, at which point the US, Mexico, and Canada can decide to extend the USMCA.
https://www.vox.com/2018/10/3/17930092/usmca-nafta-trump-trade-deal-explained
Further reading on the Mexican labor issue and the USMCA from a couple months ago, but still applicable:
Will NAFTA 2.0 Really Boost Mexican Wages?
https://www.npr.org/2018/10/17/657806248/will-nafta-2-0-really-boost-mexican-wages
