Press Briefing by Deputy U.S. Trade Representative Richard Fisher

The Briefing Room

1:10 P.M. EDT

MS. WEISS: Good afternoon. Today, we have Richard Fisher, who is the Deputy U.S. Trade Representative for the United States. He led the negotiations to conclude the U.S.-Korea auto agreement. The negotiations lasted eight days, and the last four days they went around the clock. They concluded last night around 6:00 p.m. And Mr. Fisher is here today to talk about the agreement, and after that you'll have Joe Lockhart.

AMBASSADOR FISHER: Mr. Fisher is here, barely awake, today to describe the agreement. Yesterday, we successfully resolved the Super 301 action which we had taken one year ago to secure a meaningful opening of the Korean market and, particularly, meaningful access to U.S. manufacturers of motor vehicles.

The results of our negotiations with the government of Korea are the following. First, they will broaden the scope of coverage in our understanding with them under current actions and previous actions, to include minivans and also sports utility vehicles, as well as the kind of cars -- large engine displacement cars -- that the U.S. has a particular comparative advantage in.

Secondly, they will address burdensome standards and certification procedures which have heretofore acted as non-tariff barriers to the entry of our U.S.-made automobiles into the Canadian market and, in particular, will allow a self-certification methodology which is only done heretofore in the United States and in Canada, so that Korea becomes the third nation to undertake this self-certification procedure.

Third, they will reduce the tax burden on U.S. manufactured cars, both at the point of purchase and also over the life of ownership of the car. Fourth, they have bound their tariffs at 8 percent; the old bound rate was 80 percent. And at this juncture, now having bound their tariffs at 8 percent, Korea's tariff rate is lower than that of the European Union and also lower of that than Canada.

Fifth, they will put in a place a system for financing the purchase of automobiles in Korea. This is a unique system that they did not have up to this point. It allows for the possession of cars, in the case of default and, of course, affects all automobile sales in Korea. Again, this wasn't in place before.

They will undertake, sixthly, actions to improve the perception of U.S. automobiles and foreign-made cars in the Korean marketplace. This has been a substantial non-tariff barrier that's existed. It was almost considered unpatriotic to buy a non-Korean-made car. And Korean government will undertake actions which will improve the perception and the acceptability of foreign-made cars in the Korean market.

And then, lastly, in a side letter that my counter-negotiator provided to us in the form of a letter to Ambassador Barshefsky -- forbids the government of Korea to direct any financial institutions to lend money to the auto sector -- what is so-called directed lending -- and to refrain from market-distorting subsidies on behalf of, say, for example, Hyundai and their acquisition and conduct of business of Kia.

That, in summary, is the results of our negotiation. Let me just say that this comes at an interesting time in terms of Korean economic activity. As you know, per capita GDP in Korea last year and -- this year, rather, 1998 -- is down some 27 percent. Korea is in very difficult straits. Their auto market has imploded in terms of sales. And we applaud the government of Korea for undertaking such a broad reaching reform of their auto sector at this time.

Korea is the 11th largest economy in the world. It's important to us that as Korea comes off that bottom and out of the trough at which they're currently experiencing on the economy, that our automobiles and our motor vehicles have access to the market as it once again grows and becomes an important economy both in Asia and the world at large.

So that is a summary of agreement. And I'd be happy to take any questions you have on this or other trade matters.

Q: What actions has the United States agreed to in return for this? Are there any stipulations of actions that we have to take relevant to this?

AMBASSADOR FISHER: This is to resolve a suit, as it were, the potential for trade -- retaliatory measures that the United States could have taken under out Super 301 action that we instituted a year ago. This was Korea's activity and action, and that's what we negotiated.

Q: The U.S. sold about 98 cars -- or U.S. automakers have sold about 98 cars in Korea so far this year. What's the expectation that this new liberalization would help U.S. automakers for the rest of this year and looking forward?

AMBASSADOR FISHER: Let me correct that number, by the way. Through July -- I don't want you to exaggerate the case -- we sold 321 cars into the Korean market. That's versus 4,496 in 1997. We have less than one percent of that market, and in fact, this year the market could be as low as 0.46 percent of that market. We have no market penetration in Korea. We have very able and, in our opinion, superb auto manufacturers in this country. We want access to that market. That number which you just mentioned, or 321, is ridiculously low.

Now, that auto market is down some 25 percent in terms of total sales, including domestic sales, this year. Again, as they come off this bottom, we fully expect to have a significant market share. The Koreans have about 3 percent of our market here, and it's very important to us to have access to those consumers. Korea is a significant economy and we want to see significant sales in that market.

Q: When might U.S. automakers reach that 3 percent penetration -- is there any projection from the U.S. --

AMBASSADOR FISHER: Well, we'd like to see that as soon as possible. The important thing -- and we don't want to see it limited. We just want an open playing field and the ability to compete in that important market.

Q: What do you think of the potential for U.S. car sales in Korea and how does it help Korea's economy to recover to hit it with this kind of a trade opening measure at this juncture?

AMBASSADOR FISHER: I think it helps it significantly. First, very importantly, there is a perception matter. This President, a very brave and unique leader that Korea has elected to office, has to show to the world economy that his commitment to a more open market-driven economy is sound and meaningful. And I think this action makes it very clear in a very important sector. Korea is the fifth largest auto manufacturer in the world. They are an economy that needs to continue to draw in capital. They're an economy that has the potential to become a powerful force in all of Asia. They are indeed coming out of this trough, as I mentioned earlier, and I think what they do is very, very important here. This sends a signal to the marketplace that they are committed in the most sensitive sector of their manufacturing economy.

I also think it's very important, let me just add parenthetically, in terms of perception here in the United States. There is concern about Korean steel exports, for example, to the United States. And we think it's very important that the government of Korea show that they're willing to undertake fundamental reforms. This agreement is an underscoring of those fundamental reforms, and very, very importantly, the side letter provided by Minister Han confirms that they are committed to a market-driven economy and getting away from financial distortions in other subsidies that we have complained about politically and certainly are meaningful on Capitol Hill.

Q: And the potential?

AMBASSADOR FISHER: Well, the potential is large. Again, the 11th largest economy in the world. Certainly the potential is greater than 321 cars.

Q: Since you're relatively new on the job, is this the most significant thing that's happened since you've been in --

AMBASSADOR FISHER: Well, I wouldn't say the most significant. I think what we've done in terms of our deregulation issue with Japan is very, very significant. I had the pleasure of negotiating that last year and through the year and culminating in the Birmingham Summit.

We are at a very important juncture historically. We have financial turmoil in the world at large. Free trade, more trade, market access, greater democratization of markets, as it were, the embracing of global capitalism through trading markets are not the cause of this financial turmoil that we see abroad. We do not want to become its victim. And it's very important that we continue to press the envelope of trade liberalization around the world. And I think what we've done in our deregulation with Japan are important; I think this auto agreement is important; and I especially think it's important what Ambassador Barshefsky has been doing over the last six years in the position that I have and also as USTR.

Q: Speaking of steel, what progress have you made toward the allegations that Korean suppliers are dumping?

AMBASSADOR FISHER: As you know, a suit has been filed. That suit has been accepted by the Commerce Department. The clock is now ticking. This wasn't initiated by the U.S. government, it was initiated by the steel sector -- both the workers and the companies themselves. I think this is very, very important in terms of a basic principle. As Ambassador Barshefsky says, we're not only the market of last resort in this country, we're the market of first resort. This is a massive, growing, consuming market here in the United States, and it's very important that people realize that they can't dump products in our market at below market value.

Steel is a fascinating case. Again, this is out of our hands. This is now a legal matter, a legal clock is running. As you know, Russians are able to produce steel at about -- or sell steel -- we're not sure of their cost of production, about $195 a ton for hot, rolled, coil steel. Our most efficient producer in the United States is Nucor, it cannot sell for a deliverable cost at less than $220 a ton. And so we are worried that Japan and other countries are leading a race to the bottom. But again, on that case, I can't comment on it because I have nothing to do with it.

Q: Looking ahead toward the APEC meeting in Kuala Lampur, what kind of advances or achievements do you think the U.S. will implement in that meeting?

AMBASSADOR FISHER: Again, this meeting is very important symbolically. It will be chaired by Mohamad Mahathir, who is the leader of Malaysia. Our President will be a participant, along with the other heads of states who will be convening for that meeting. The major initiative there is what's called the Early Voluntary Sectoral Liberalization Initiative. This is a commitment made by all the APEC nations at the last summit to voluntarily liberalize the tariff regime affecting nine sectors of the economy -- major sectors. And we have some work to do to secure that early voluntary sector liberalization exercise and we expect to be successful.

It's not easy, again, when many of these countries are hemorrhaging economically. But here's the key point: It's important at this time, again, as their economies have gone into the trough, that they make liberalization actions, undertake liberalization actions -- it will, we believe, pull them out quicker and make it easier to recover.

Q: Of the nine sectors, which ones are the most problematic to --

AMBASSADOR FISHER: The most problematic stem largely from, by the way, a very difficult position that Japan has taken in the marketplace. And you can guess, knowing it's Japan, it's fisheries, and also forestry.

Q: Ambassador Fisher, are you concerned that there are going to be other trade cases similar to the steel case, given the imbalance of the strength of the U.S. economy and the rest of the world? For example, semi-conductors, is that another area for a trade case?

AMBASSADOR FISHER: We are concerned about semiconductors in other sectors. We're very, very aware that, again, our deficit is increasing. I think it's very important to bear in mind that as a percentage of GDP, the deficit in goods and services, even under the most dire prediction for next year, I believe I read in The New York Times today an unnamed official looked at the number of possibly $300 billion in deficit. In absolute terms that's a very large number. As a percentage of an economy that produces over $8.5 trillion in output, that's about 2.5 percent. And by the way, that's lower than 1984, 1985, 1986, and 1987. So we have to keep this in perspective.

Having said that, the pressure is coming from -- of course, a large number is coming from China and from Japan, and in certain sectors, and we're just going to have to be vigilant to make sure that we don't have dumping taking place in our market. We will enforce our trade laws; that's our obligation. And those laws, by the way, are very well known and our process is very transparent.

Of course, we are concerned that other countries will embrace protectionist measures, whether it's in our own hemisphere or elsewhere in the world. And again, Ambassador Barshefsky and I and the rest of her team are making an effort to make it very, very clear that we conduct the most forceful diplomacy to prevent this from happening.

Protectionism is a great threat. It's important, however, that other countries understand that we have trade laws and we have very transparent and well-known trade remedies and they can't exploit this market unfairly.

Q: There's been some criticism, people urging that the APEC meeting be moved from Malaysia, in part because of the Prime Minister's action on the currency. What's the administration position on that, and do you think there's any chance of that?

AMBASSADOR FISHER: Well, I'm a trade official; I think that's to be decided by political authorities in our country.

Q: On the China trade deficit, which is ballooning this year to some $70 billion, is China just sort of going to get a bye on this until the economy in the region picks up a bit?

AMBASSADOR FISHER: I would never say that China is going to get a bye on anything. We have been in the midst of -- Ambassador Barshefsky and I and our team have been negotiating Chinese accession to the World Trade Organization. That accession, as has been noted, is stalled, although we keep discussing. There are reforms taking place internally in China which are critical under the leadership of Zhu Rongji -- reforms of state-owned enterprises, et cetera, which I think you're well aware of.

But one thing that's very clear, and we have communicated to the Chinese, is that this large and growing deficit is not politically sustainable in the United States. They must be aware of it. They buy too few goods and services from the United States. We'll sell them about $12 billion in goods this year; we'll buy from them perhaps as much as $90 billion. This grows every year, this gap, and it's not sustainable.

One of the quickest ways that they could deal with this is to undertake basic rules of engagement in the world of commerce. And that's why this overall structure, in terms of driving them towards the WTO, is very, very critical, and the bilateral concessions that are made in that process.

Thank you all very much.

END 1:24 P.M. EDT