The U.S. and South Korea have reached a deal on a permanent free trade agreement between the two countries that could see Korean-built pickup trucks imported into the U.S. without being subject to a 25 percent tax levied on most foreign-made pickups.
The so-called "chicken tax" originated in the early '60s during a trade dispute between the U.S. and Europe over U.S.-imported chickens, which were slapped with a special tax to protect West German farmers. The U.S. responded by slapping a 25 percent tariff on trucks imported from Europe.
Later, the tax became a way for U.S. automakers and the United Auto Workers union to keep pickups assembled in other countries out of the U.S., particularly low-cost compact trucks popular in the rest of the world.
The chicken tax on Korean-built pickups would remain at 25 percent for seven years after the agreement is signed but would be phased out in the eighth, ninth and 10th years, according to the trade pact. South Korea would have to eliminate a similar 10 percent tax on U.S. trucks imported into that country immediately.
Without the burdensome tax, South Korean auto manufacturers Kia and Hyundai could be encouraged to finally produce a pickup for U.S. buyers. The two brands have previously stated their desire to sell pickups here.
In 2007, when the Korean Free Trade Agreement was proposed, Kia Motors President Cho Nam-hong said, "Isn't it time for Kia Motors to make inroads into the (U.S.) pickup truck market?"
Kia also showed a pickup truck concept, called the Mojave (pictured above), at the 2004 Chicago Auto Show.
As part of the negotiated agreement, the U.S. would also remove a 2.5 percent import tariff on South Korean cars within four years, while South Korea would cut its current 8 percent tariff on U.S.-built cars immediately and phase it out within four years.
South Korea also agreed to allow the U.S. to export up to 25,000 cars a year that don't meet its tougher safety requirements.
The South Korean legislature and U.S. Congress have yet to approve the agreement.