ORION (WWJ/AP) – President Barack Obama and South Korea’s President Lee Myung-bak are promoting a new trade deal by visiting an auto plant in Michigan, a state battered by Asian car imports, in a rare joint appearance outside of Washington by a U.S. president and a visiting head of state.
In choosing General Motors Co.’s Orion assembly plant for a post-state dinner tour Friday, the two leaders will draw attention to an aspect of a U.S.-South Korea trade agreement that had been among the most difficult to negotiate. Congress approved the deal Wednesday after negotiators overcame U.S. auto industry complaints that previous efforts at a deal failed to do enough to lift South Korea’s barriers to U.S.-made cars.
Brian Dietz, Deputy Director of the National Economic Council, said the trade deal with South Korea has far-reaching ramifications.
“The Sonic that is being built right now at Lake Orion is a result of technology exchange, where technologies there were developed in Korea were brought back here to the United States,” he said.
Dietz said the long-awaited agreement could expand U.S. exports by $11 billion, and Detroit’s auto companies will reap some of the rewards.
“That’s associated with about 70,000 jobs here in the United States and so, what the president will be talking about and the reason for his visit is to reinforce the importance of taking steps like this for American workers in Michigan and across the country.”
Obama is taking Lee to the heart of the region that has been hardest hit by foreign car competition, especially the influx of vehicles like South Korea’s Hyundai. But for Obama, the trip is also an opportunity to highlight the auto industry’s resurgence after he engineered an $80 billion government bailout for GM and Chrysler in 2009.
The Orion plant, about 30 miles north of Detroit, had been shuttered before the federal government stepped in and helped usher the two carmakers through bankruptcy protection. The plant now is producing the subcompact Chevrolet Sonic and will start production of the compact Buick Verano soon.
The Sonic, the only subcompact sold in the U.S. that is assembled in the U.S., is being built with Korean parts. GM began building the Sonic last year following an agreement with the United Autoworkers that allowed the company to pay some workers lower wages that are more competitive with those in GM’s foreign plants. The Sonic’s predecessor, the Chevrolet Aveo, was built in South Korea.
AutoPacific Analyst Dave Sullivan said the union’s move allowed GM to build the sub-compact Chevy Sonic in America and make money.
“It’s never been profitable before to make vehicles the size of the Sonic in the United States,” Sullivan said.
All in all, Obama could profit from calling attention to policies aimed at benefitting Michigan, a state that has the third highest unemployment rate in the country at 11.2 percent and which represents an important battleground in his bid for re-election. Obama won the state by a 57-41 margin in 2008, but could face difficulties in the state, especially if his general election opponent is Mitt Romney, whose father was Michigan governor.
The trip also serves as an opportunity to illustrate his special relationship with the South Korean leader. Inviting Lee to the U.S. heartland is an unusual addition to the itinerary of a high-profile state visit. The two men were expected to fly separately to Michigan; once at the plant, both men planned to make remarks.
Lee’s is the fifth state visit during Obama’s presidency, but the first that has included added travel beyond Washington D.C.
President George W. Bush was more predisposed to travel outside the capital Beltway with foreign leaders. In 2006, he invited Japanese Prime Minister Junichiro Koizumi, an unabashed Elvis Presley fan, to Graceland. In 2001, Bush took Mexican President Vicente Fox to Toledo, Ohio, where the two addressed Hispanic voters the day after their state visit at the White House. The following year, then-Polish President Aleksander Kwasniewski accompanied Bush to a Polish cultural center in the Detroit suburbs.
In addition to the South Korea agreement, Congress approved free trade deals Wednesday with Colombia and Panama. The South Korea deal, which would be the largest since the North American Free Trade Agreement with Canada and Mexico, still must be approved by South Korea’s National Assembly – a vote that Lee said he was confident would succeed.
The South Korea deal alone could expand U.S. exports by $11 billion and support 70,000 jobs, according to the White House. The agreements would lower or eliminate tariffs that American exporters face in the three countries. They also take steps to better protect intellectual property and improve access for American investors in those countries. The last free trade agreement completed was with Peru in 2007.
Many labor groups opposed the deals, but the agreements won wide bipartisan support in part because their passage was linked to legislation to extend aid to workers displaced by foreign competition. Obama had demanded that the worker aid bill be part of the trade package.
Standing with Lee at his side during a press conference Thursday, Obama declared the trade deal “a win for both our countries,” adding that he was “very pleased that it’ll help level the playing field for American automakers.”
Still, five of the six House Democrats from Michigan voted against the trade deal, including Rep. Gary Peters, whose district includes GM’s Orion plant. Peters said Obama had helped make the deal fairer to U.S. carmakers, but said he believed the deal would cost jobs in Michigan.
The trade agreement comes as South Korea’s Hyundai Motor Co. and Kia Motors Corp. are on track to set U.S. sales records this year. Both companies build car and light truck models in the United States, but also export vehicles to the U.S. market.
Last year, the Ford Motor Co. ran an aggressive ad campaign to improve the trade deal by pointing out that for every 52 cars South Korea exported to the U.S., the U.S. only exported one to South Korea. “We believe in free trade, and this isn’t it,” Ford said in ads that ran in newspapers across the country.
On Friday, Ford President and CEO Alan Mulally praised the deal, saying it would “open new opportunities for Ford to reach even more Korean customers.”
The Associated Press contributed to this report.