Injection Moulding Asia Automotive Industry
Asian FTAs: balancing the pros and cons for the automotive industry Asia is at the forefront of Free Trade Agreement (FTA)
FTAs in the Asia-Pacific region
activities. There are more than 500 FTAs in the region, some of which are in effect and the rest are in the midst of being implemented. The FTAs are meant to give equal benefits to signatory parties, or are they, asks Angelica Buan in this report, highlighting FTAs in ASEAN and other Asian countries.
FTAs with South Korea anada and South Korea’s nearly decade-long talks for a free trade agreement (CKFTA) have finally been settled to an affirmative conclusion. South Korea, the world’s 15th largest economy, is expected to boost Canada’s exports to Asia by at least 32% and vice versa. As for tariffs, the Foreign Affairs, Trade and Development Canada organisation details that South Korea’s 8% tariff on vehicles will be eliminated immediately upon the agreement’s implementation while Canada’s lower 6.1% tariff on imports of South Korean passenger vehicles will be phased out in three annual cuts. Nevertheless, the pact has been opposed by a few private sector groups led by Unifor, Canada’s 39,000-strong automotive workers union. Ford Motor (Canada) has also slammed the said CKFTA and warned of its adverse impact on the local automotive sector. The said sector is also reeling from competition with Mexican production since the North American Free Trade Agreement (NAFTA) between the US, Mexico and Canada came into effect in 1994. Observers opine that Canada’s large vehicles, including vans, sedans, and SUVs, do not appeal to South Korean consumers and that the CKFTA is unlikely to encourage more vehicles being shipped into the Asian country. However, other automotive makers with plants in Canada, including Toyota Motor, Honda Canada and GM Canada, have expressed their support for the deal. Meanwhile, South Korea’s own automotive sector is wary of an impending FTA with China, which if implemented would unlatch the door for China’s low to mid-priced cars, as well as foreign cars from the likes of Volkswagen, Benz, and BMW that are manufactured in China.
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The two countries recently held the tenth round of negotiations on the bilateral FTA since 2012. In earlier talks, China had hinted that it would close its local car market, and classify it as highly sensitive sector. South Korea also has an FTA with the US. Signed in 2007, the KORUS-FTA is expected to generate more jobs and stimulate exports of American-made cars. However, like in Canada, a number of US car giants including Ford and Chrysler, and the United Auto Worker (UAW) union were against the KORUS-FTA, but it was eventually revised to gain the consent of automotive OEMs and workers groups. Australia is also securing FTAs with its three largest export markets, including South Korea and China, as well as a pact with Japan. Nevertheless, Australia has also observed a trade imbalance with its South Korean FTA. Since Australia will eliminate duties on South Korean imports of vehicle, including tyres, once the FTA comes into force; while levies on automotive parts will be cut in phases of three to five years, local cars are likely to compete in sales against South Korean cars. Correspondingly, South Korea will immediately scrap the 8% tariff on automotive part imports from Australia. Against this backdrop, General Motors Holden and Toyota Australia are planning to close their Australian manufacturing operations by 2017. 6
MARCH / APRIL 2014
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