S. Korea's auto body concerned about trade deal with China, Japan

SEOUL (REUTERS) - South Korea's auto industry expressed fears of an influx of car imports as Seoul kicked off trilateral talks on Tuesday with Japan and China to allow free trade between over 1.5 billion consumers in the three Asian nations.

Mr Kim Tae Nyen, executive director at the Korea Automobile Manufacturers Association, called on South Korea to maintain import tariffs on autos for a certain period even after a deal takes effect, so domestic automakers have time to adjust.

"We are gravely concerned about the trilateral deal, which will pose a threat to South Korean automakers," Mr Kim said in an interview with Reuters.

"There is (only) a slim chance that South Korea's exports to those countries will rise significantly after the deal," said Mr Kim, in charge of trade issues at the association.

South Korean automakers struggled to penetrate the Japanese market, he said, partly because of consumer preferences there for homegrown brands and non-tariff barriers.

Exports to China comprised only a fraction of Korean vehicles manufactured and sold on the mainland.

Even beyond autos, experts say it would be difficult for the three nations to strike a free trade deal given conflicting interests in various fields. Fears of Chinese food imports flooding the market are especially worrying for South Korean farmers.

South Korea's auto industry has been viewed as one of the biggest beneficiaries of free trade deals with Europe and the United States, but its lobby group is now concerned that a similar pact with Japan and China will be harmful.

The industry body said the pact could ultimately lead to an influx of car imports from these neighbouring countries and hurt Korean automakers such as Hyundai Motor.

Only 546 South Korean automobiles were exported to Japan last year against 19,171 Japanese vehicles shipped into South Korea, the industry group said, citing customs data. South Korea levies an 8 per cent tariff on imports of passenger cars, while Japan has no duty on cars, Mr Kim said.

"We cannot compete in Japan despite the country having a zero tariff on auto imports," he said.

In China, most of the cars sold by Hyundai and Kia Motors are made at their plants on the mainland, so the deal will not affect these vehicles, Kim said.

He said Chinese cars, which were cheaper, were fast catching up in terms of quality and would make inroads into South Korea's domestic market, threatening sales of small cars. The deal could also pave the way for other carmakers to bring their Chinese-made sedans into the South Korean market at more affordable prices, he said.

About 90 per cent of the South Korean automobile market is controlled by those with production bases here. They are Hyundai, Kia, General Motors, Renault Samsung and Ssangyong Motor.

But imported vehicles are gaining growing popularity, partly thanks to South Korea's free trade deals with Europe and the United States. Still, South Korea's exports to the United States and Europe outnumber its imports from those countries.