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U.S. Automakers Taking on South Koreans

June 3, 1994

WASHINGTON (AP) _ American automakers are opening a second front in the imported-car wars.

Already frustrated by Japan’s sharp limits on American imports, U.S. automakers are focusing their attention on an even more restricted market - South Korea.

Of an estimated 2 million cars sold in South Korea in 1993, only 1,984 were imported vehicles, 1,463 of them from the United States.

The 0.2 percent market share for imports in South Korea contrasted with imports’ 4 percent to 5 percent share of the automobile market in Japan, said Charles Uthus, international economist at the Commerce Department’s automotive affairs office.

At the same time, South Korea exported 639,000 vehicles last year, 134,764 of them to the United States.

South Korea’s production is expected to grow to up to 5 million in the next few years, far exceeding domestic demand that already is growing by a huge 15 percent annually.

The head of the American automakers’ trade group is traveling to Seoul on June 14 to make clear that Detroit wants access to the growing Korean market.

U.S. automakers have great ″respect for what the Koreans have done to go from a developing nation to a developed nation,″ said Andrew Card, president of the American Automobile Manufacturers Association. ″But this is the next area of responsibility, to participate with free trade as well as in it.″

″They will be taking advantage of free markets around the world and we want to compete in their market,″ said Card, who served as transportation secretary in the Bush administration.

Card said he isn’t delivering any threats. Rather, he said, he wants to emphasize that American free-trade practices have proven more successful and beneficial to consumers than have the policies of Japan.

Several factors have kept foreign automobiles out of South Korea. The country has a 10 percent tariff on imported vehicles. And until the government changed the policy recently, ownership of an imported car was used as a trigger for conducting tax audits.

But ″there is always some lag time between a government statement like that and people really believing it,″ said Sonja Petersen, director of congressional affairs for the Korea Economic Institute of America, a research organization in Washington.

″Korea is making a real effort to open up its economy,″ she said in an interview. ″They recognize that while having a closed economy for many years may have worked for Japan, it won’t work for Korea.

″I wouldn’t say there aren’t obstacles to that, and they may not move as quickly as U.S. automakers would like, but I think the commitment is real and there is real movement,″ Petersen added.

Linda Lim, director of the Southeast Asia business program at the University of Michigan, said part of the problem is that the South Korean auto industry’s goals don’t match the Seoul government’s.

While South Korea, like the United States, has a Big Three among automakers - Hyundai, Kia and Daewoo - huge conglomerates are getting into the car business.

They won’t be able to make money unless they control the market, and that applies pressure on democratically elected politicians to keep trade barriers in place, Lim said.

Korean vehicles are still perceived as less than state-of-the-art, so they haven’t done very well in North American markets yet, Lim said.

South Korea thus is turning to other fast-growing markets nearby, such as Thailand, Indonesia and the Philippines, she said.

General Motors Corp., Ford Motor Co. and Chrysler Corp. might be able to do exceptionally well in South Korea because its biggest competitors, Japanese manufacturers, are banned from the Korean market.

A U.S. trade official, speaking on condition of anonymity, said progress has been made in smoothing the way for American vehicles to clear safety inspections in South Korea. But discussions since October on other major trade obstacles, ranging from taxes and tariffs to advertising and distribution, haven’t been productive.

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