Pending U.S. and EU Free Trade Agreements with South Korea: Possible Implications for Automobile and Other Manufacturing Industries

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[Excerpt] South Korea has negotiated free trade agreements (FTAs) with the United States and the European Union (EU), but neither agreement has yet been approved. The U.S. Congress must approve the United States and South Korea free trade agreement (KORUS FTA) and the European Parliament must vote on the European Union and South Korea free trade agreement (KOREU FTA) before the FTAs can take effect. If the FTAs are ratified, it is possible there could be a “first mover” advantage for either the United States or the European Union, depending on which FTA is approved first. Some argue that both agreements have shortcomings and should not be approved. This report provides U.S. lawmakers with a comparison of the manufacturing components in the KORUS and KOREU FTAs. Congressional interest in an FTA between the European Union and South Korea mostly centers on those U.S. industries competing with European industrial sectors, especially motor vehicles. The two pending FTAs raise questions about what it could mean for U.S. manufacturers if the United States takes longer, or fails altogether, to implement the KORUS FTA, while the European Union and South Korea possibly move ahead to approve and implement their outstanding FTA. In such a case, the possibility exists that the removal of tariff and nontariff barriers between the European Union and South Korean markets could result in U.S. manufacturers losing South Korean market share to European competitors. On balance, most U.S. and European manufacturing sectors, with some auto manufacturers in particular among notable dissenters, argue that the pending FTAs will be beneficial and are largely supportive. On the other side, labor unions in the United States and the European Union are considerably more skeptical, claiming that South Korean companies could be the biggest beneficiaries, since they could gain even greater access to the significantly larger U.S. and EU markets. Labor union leaders say the FTA will result in further job losses as their respective manufacturing workforces compete for market share with competitive South Korean manufacturers in their own domestic markets.
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South Korea; free trade agreement; FTA; United States; European Union; EU; KORUS; KOREU; trade
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