Even after the friendly telephone conversation last week between South Korean President Lee Myung-bak and US President-elect Barack Obama, in which they stressed the importance of the two nations' alliance, officials here are concerned about the next US administration's trade policy. The focus of their concerns is Obama's known objection to the Korea-US trade agreement, and its provisions on the automobile trade in particular.

During his campaign, Obama made it clear that he believed the KORUS FTA was flawed, in that it would deprive Americans of their jobs. Shortly before the US presidential election, Obama's Korean issues advisor Frank Januzzi, speaking in a Washington symposium, reiterated the need to renegotiate the bilateral FTA, which has yet to be ratified by either country.

Januzzi again cited the same figures Obama had quoted to highlight the auto trade imbalance between the two countries: South Korea exports 700,000 automobiles to the United States a year while importing 5,000 from the US (Updated figures are 772,482 exported and 6,235 imported in 2007.)

Under the Korea-US FTA signed in June 2006 after a year of tough negotiations, the current US tariff of 2.5 per cent (25 per cent on pickup trucks) will be lifted immediately on smaller vehicles with engine displacement of less than 3,000cc, and over the next three years for larger cars. For its part, Korea will drop its 8 per cent tariff on US vehicles.

It is our understanding that the US president-elect's ideas about the FTA with Korea must have been formulated primarily by the handy figures of the present trade imbalance rather than through any close scrutiny of the provisions of the agreement. Januzzi complained of the absence in the pact of "proper safeguards" or "trade adjustment assistance" for the employees of the ailing US auto industry.

Yet, "safeguards" such as extended unemployment insurance, healthcare and job retraining are something that should be provided by US welfare policies, not by specific clauses in an FTA. As for Korea, the government is painstakingly working on remedial measures to soften the impact of the FTA on the nation's 8 million farmers.

It is expected that President-elect Obama and members of his new administration will be able to gain broader perspective on trade issues when they actually begin governance. They will then understand the value to the United States of the FTA which economists estimate would increase US exports to Korea by up to US$12 billion a year, strengthen the age-old alliance, and set a good model for US trade relations with other Asian nations.

It is also hoped that they will be able to look into the complicated nature of the auto trade. Koreans in recent years have done away with their once-prevalent prejudice against foreign cars and foreign luxury goods in general; imports of foreign vehicles have tripled since 2003. The market share of US cars among imports, however, has declined from 16 per cent to 11 per cent, while European and Japanese imports have strengthened rapidly.

Americans have pointed to the Korean taxation system, with heavier taxes on large cars as a formidable barrier to US exports. The progressive auto tax, which started at the time of the first oil shock in the 1970s as an austerity and energy conservation measure, is still justified by the global efforts to reduce carbon emissions.

Essential is the competitiveness of the industry, not the provisions of the FTA, which only concerns free trade. In terms of auto industry competitiveness, Korea is by no means the world's best and the United States should challenge the Korean market with more diversified products using advanced technology.