Korean auto imports to the U.S. have surged by 20 percent in value in January of this year, the first month that the U.S. car tariff was lifted under the U.S.-Korean free trade agreement (KORUS). In December 2015, imports of passenger cars were valued at $1.5 billion and they increased to $1.8 billion in January, an increase of $300 million, according to the Census Bureau.
[Jennifer Leonard| March 18, 2016 |Inside US Trade]
This monthly deficit adds to an already large bilateral deficit in passenger cars, which rose from $8.2 billion in 2011 to $15.9 billion in 2015, according to Census.
The automotive trade deficit is a large part of the total U.S.-Korea trade deficit in goods, which more than doubled from $13.2 billion in 2011 to $28.3 billion in 2015, according to Census.
In 2011 and 2015, total U.S. goods exports to Korea were roughly at the same level of $43.5 billion and increased to the highest level of $44.5 billion in 2014, according to Census data. They were lowest in 2013, when they dipped to $41.7 billion, the Census said.
In contrast, U.S. imports of Korean goods increased steadily from $56.6 billion in 2011 to $71.8 billion in 2015. The highest increase in total Korean exports to the U.S. occurred between 2013 and 2014 when they rose by approximately $7 billion from $62.4 billion to $69.5 billion.
These numbers are coming to the forefront as the KORUS reaches its fourth anniversary; it entered into force on March 15, 2012. The Office of the U.S. Trade Representative this week touted figures showing an increase in selected U.S. exports to make the case that the KORUS has benefited the U.S. economy. For example, it highlights that U.S. exports of passenger vehicles have grown from $418 million in 2011 to $1.287 billion in 2015.
USTR further said that U.S. auto exports to Korea increased by 208 percent in terms of value between 2011 and 2015, which it said is more than 14 times faster than the increase of U.S. auto exports to the world. USTR said the increase was thanks to Korea’s 50 percent tariff reduction from 8 percent to 4 percent when KORUS entered into force.
At the same time, U.S. imports of passenger cars from Korea have more than doubled from $8.6 billion in 2011 to $17.2 billion in 2015, according to Census data.
The USTR figures do not highlight the items for which exports have decreased while the KORUS has been in effect and do not refer at all to the increased Korean imports, a point made by the Coalition for a Prosperous America (CPA) in a March 15 press release titled “Happy 4th anniversary Korea US Trade Agreement: Thanks For Doubling Our Trade Deficit.”
CPA and other critics of the KORUS and the Trans Pacific Partnership (TPP) cite the increased U.S. trade deficit under KORUS as evidence for how the current free-trade model has caused U.S. job losses and undermined the manufacturing base.
“We now know that the KORUS agreement was a loser, not a winner. The TPP agreement recently signed by the President is based upon the same economic and theoretical template as the Korea deal and will also be a loser,” CPA CEO Michael Stumo said in the March 15 statement.
Public Citizen’s Global Trade Watch criticized the USTR claims for similar reasons. “USTR’s attempt to distract from the debacle on the Korea FTA, which has been a major element in congressional opposition to the TPP, is the usual gimmicks — focus on only exports not the net trade balance,” Lori Wallach, director of Public Citizen’s Global Trade Watch, told Inside U.S. Trade in a March 15 email.
Both USTR and CPA used Census data from January 2011 through December 2015, and compared full-year data. Even though KORUS did not enter into force until March 15, 2012, they used 2011 numbers because it was the last full year the two countries conducted trade before the FTA was in effect.
CPA whose members represent manufacturing, labor and family farmers, criticized USTR for presenting numbers that it says convey a false impression about the benefits of the KORUS. It charged that USTR has been “cherry picking” trade data by focusing on items that have shown increased exports to Korea while leaving out data on items whose exports have declined.
But the USTR press release on the KORUS does acknowledge a 2.8 percent decline in goods exports to Korea in 2015 without specifying which items caused that decline.
Among the trade categories where exports declined in 2015 were corn, which dropped from $1.8 billion in 2011 to $663.7 million in 2015, according to Census data. They also include agricultural machinery, which dropped from $39.2 million to $29.5 million in the same time period. Petroleum products, which dropped from $1.5 billion to $505.8 million, and fuel oil for which exports dropped from $115 million to $13.8 million, according to the Census.
The USTR press release compares the decline with the decrease in other countries’ imports to Korea, which it says was significantly sharper than the decline in U.S. exports. For example, imports of goods from Japan that year were down 14.7 percent, according to Korean statistics cited by USTR.
USTR also highlighted other export increases, with pharmaceuticals up from $630 million to $934 million, and machinery, from $6.1 billion to $6.9 billion, from 2011 to 2015, respectively. USTR did not mention that imports of pharmaceuticals from Korea have increased more than five times from $54.9 million to $284.6 million in the same time frame, according to Census data.
The report further listed export increases for certain agricultural products like beef, lemons, shelled almonds, fresh cheese, cherries, and wine and beer. — Jennifer Leonard
