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New Auto Trade Agreement Between Korea And Europe May Be Detrimental To Ford And Fiat Exports

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On: Wed, Oct 13, 2010 at 4:35PM | By: Sherry Christiansen

New Auto Trade Agreement Between Korea And Europe May Be Detrimental To Ford And Fiat Exports

Ford Motor Company and Fiat are among the automakers that fear the South Korean export agreement with Europe may allow for importing inexpensive imports from Korea into Europe. Ford and Fiat are concerned that the agreement may result in an influx of cheap Korean cars that would compete with compacts made by Ford Motor Company and Fiat.

At the Paris auto show last week, Ford CFO Lewis Booth felt that the agreement is "very one-sided in favor of Korea." Ford reported a profit of over $300 million for its European sales in the 2nd quarter this year.  

On the other hand, Hyundai, Kia, and Chevrolet all claim there will be benefits resulting from the agreement. According to Chevrolet Europe chief Wayne Brannon: "We are optimistic this will help us. It makes building cars in Korea for Europe more affordable." General Motors exports the Chevrolet Aveo and Spark from Korea to Europe and the agreement is projected to double its European sales in the next 6 years.

The European Automakers Association (ACEA) is not necessarily against the agreement, but feels that it gives Korea an unfair advantage in the marketplace, and may set a bad example for future contracts between Europe and other world trading organizations.

In the U.S., a free trade agreement with Korea is currently on hold as the Obama administration addresses reports an “alleged imbalance in car trade,” according to Auto News.com.

Critics of the agreement are saying that in order for all things to be equal, Korea should lift its non-tariff trade barriers that limit Europe from selling its export automobiles in Korea.

Automobiles are the number one export in South Korea. Of the 3 million automobiles produced, 2 million are exported according to ACEA: "The EU is a key target market for Korean manufacturers."

Europe, on the other hand, exported only 33,000 cars to South Korea. "South Korea has the lowest level of import penetration of any developed country,” according to ACEA.

The agreement was signed last week, but is waiting for Parliament approval. European carmakers are hoping that Parliament will add some protective measures to the agreement to give European exports more of an edge than currently offered by adding a tax or placing a limit on how many cars Korea will be allowed to export.


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