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South Korea Trade Agreement Moves Closer To Reality

Dec 17, 2010

The U.S. and South Korea announced last week that the two countries had reached a deal on revisions to the draft of a free trade agreement that was signed in 2007 but never ratified. The new provisions are focused specifically on automobile imports. The agreement would have the United States ending its 2.5 percent tariff on Korean cars for five years. In return, South Korea will cut its 8 percent tariff on U.S. cars to 4 percent immediately. U.S. tariffs on Korean trucks will remain at 25 percent for eight years instead of dropping off immediately. Additionally, each year Ford Motor Co., General Motors Co., and Chrysler Group would be able to send to South Korea 25,000 cars that meet U.S. safety standards. These vehicles would be exempt from in-country standards. Within five years of ratification, the deal will eliminate tariffs on 95 percent of the countries’ trade in goods, and it also clears the way for greater trade in services by opening Korea’s banking industry. President Obama said the agreement will boost U.S. exports by as much as $11 billion and support at least 70,000 U.S. jobs. The U.S. Congress and the South Korean Parliament will need to approve the free-trade pact before it can go into effect. Republicans in the House of Representatives reportedly want to work with President Obama to pass the long-delayed free-trade agreement with South Korea, in addition to agreements with Colombia and Panama, in the first six months of 2011.