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EU-South Korea trade pact marks trouble, Ford says

Reuters | Fri Jul 10, 2009

EU-South Korea trade pact marks trouble, Ford says

DEARBORN, Michigan, July 9 (Reuters) - A proposed trade pact between South Korea and the European Union is one-sided and could threaten automobile manufacturing in Western Europe, a top Ford Motor Co executive said on Thursday.

Automakers now battling an economic crisis must also battle "ill-conceived" trade proposals, Ford Chief Financial Officer Lewis Booth said in an interview.

"Right in the middle of the worst economic crisis for 50 or 70 years, some parts of the European (Commission) are advocating a free trade agreement with Korea that is very, very one sided in favor of Korea," Booth told Reuters.

Booth’s remarks followed a statement on Wednesday by the European automobile industry’s trade association, ACEA, that called on EU governments not to accept a trade deal with South Korea "before a balanced outcome is assured in order to safeguard competitiveness and employment levels in Europe."

The proposals allow South Korean manufacturers to import a higher percentage of parts from neighboring countries and claim the duties back when vehicles are shipped to European markets, effectively opening Europe to cheap imports, ACEA said.

The trade proposals also fail to address non-tariff barriers to improved access to South Korea markets such as securing existing international vehicle standards, it said.

The EU auto industry employs more than 2.3 million workers directly and supports 10 million other jobs indirectly.

The consideration of the trade agreement comes as European economies remain weak in general and motor vehicle demand is weak also despite government programs in some countries that provide incentives to turn in older vehicles, Booth said.

Those so-called scrappage programs have supported sales in Europe, but underlying volumes are still quite weak, he said.

"We think it is completely inappropriate," Booth said of the proposed deal. "It will encourage people to take manufacturing out of Western Europe and take it to places like Korea."

Ford derives a tremendous benefit from free trade everywhere as a global company if it truly is free, he said.

"Non-tariff barriers completely distort any free trade agreement," Booth said. "We are concerned about the future of the industry in Western Europe."

Before becoming CFO last year, Booth headed Ford’s European operations, which have played a key role in the automaker’s product development plans and efforts to restructure outside of bankruptcy.

Ford rival General Motors Corp has announced plans to sell its Swedish luxury brand Saab and is in negotiations to sell control of its European operations centered with Opel.

As such that would leave Ford as the only U.S.-based automaker with a broad business in Europe. Chrysler, now owned by Fiat SpA has only a small percentage of business outside of North America. (Reporting by David Bailey; Editing by Gary Hill)

 source: Reuters