Devoid of FTA Benefits
According to the KORUS FTA, which became effective in 2012, the tariffs imposed on Korean cars exported to the United States has reduced from 2.5 percent to 0 percent. Nevertheless, Korean automakers say that this is unlikely to have a significantly positive effect, because they are already running manufacturing facilities in the U.S., and the cars imported from the U.S. are to benefit from a tariff cut from 4 percent to 0 percent.
The imports of U.S. cars increased from US$380 million to US$970 million between 2011 and 2014 and are expected to have topped US$1 billion for the first time ever last year. During the same period, the export of Korean cars to the U.S. rose from US$9 billion to US$15 billion. Still, this is attributable to the competitiveness of Korean carmakers rather than the FTA in that a tariff rate of 2.5 percent was maintained during the period.
Likewise, the Korea-EU FTA is said to have been far more helpful for European automakers’ business in Korea than their Korean counterparts’ business in Europe. Korea imported 107,214 vehicles from Germany in 2014, but the number rose to 135,371 for the first 11 months of last year. On the contrary, Germany imported 81,345 and 78,104 vehicles from Korea during the respective periods.
When it comes to the FTA between Korea and Australia, a tariff cut from 5 percent to 0 percent was expected to result in an increase in the export of Korean vehicles, but exports for the first 11 months of 2015 ended up showing a decrease of 3.5 percent to US$1.65 billion.