The United States and South Korea last week announced reaching an agreement in principle on the general terms of amendments and modifications to the U.S.-Republic of Korea Free Trade Agreement (KORUS FTA).
“This represents important progress in improving U.S.-Korea trade and economic relations, based on their strong and enduring security relationship,” said U.S. Trade Representative Ambassador Robert Lighthizer.
According to the Office of the U.S. Trade Representative (USTR), the nations have also agreed on terms for a country exemption for the Republic of Korea from tariffs imposed on steel imports.
Negotiators are finalizing the terms of the KORUS FTA, which are subject to domestic procedures in both nations before provisions can be brought into force. The revised agreement addresses issues related to investment, tariffs, trade in automobiles, and trade remedies. Additional progress was made in the areas of pharmaceuticals, customs and textiles to smoothly implement the KORUS FTA.
The arrangement on steel imports is expected to take effect on May 1, 2018.
Background
At the direction of President Donald J. Trump, in July 2017 Ambassador Lighthizer initiated talks to consider matters affecting the operation of the KORUS FTA, including amendments and modifications to resolve several problems regarding market access in Korea for U.S. exports and, most important, to address the significant trade imbalance.
The United States and Korea convened two special sessions of the KORUS Joint Committee—on August 22, 2017 and October 4, 2017.
U.S.-Korea Agreement
March 15, 2017 marked the five-year anniversary of the entry into force of the California Chamber of Commerce-supported U.S.-Korea Free Trade Agreement. These past five-plus years have been a period of growth and resurgence for the U.S. economy. Overall, U.S.-Korea goods and services trade has risen from $126.5 billion in 2011 to nearly $144.6 billion in 2016.
Since the agreement entered into force in 2012, the United States and Korea have carried out five rounds of tariff cuts and eliminations, creating significant new market access opportunities for U.S. exporters.
Trade Overview
Korea is a $1.41 trillion economy and its commercial relationship with the United States is largely complementary. In 2017, two-way trade between the two countries exceeded $119.44 billion. In 2017, U.S. goods exports to Korea were $48.27 billion.
Korea is a significant market for U.S. small and medium-sized companies, which make up a majority of U.S. businesses exporting to Korea. Similarly, the United States is one of Korea’s larger exporting markets, importing 12% of Korea’s worldwide exported goods (CIA World Factbook).
Korea is California’s sixth largest export destination. California is one of the top exporting states to Korea, making up nearly 20% of U.S. exports. In 2017, California exported more than $9.6 billion to Korea. Top products from California to Korea included nonelectrical machinery, computers and electronics, food manufactures, and agricultural products.
According to the most recent figures, U.S. foreign direct investment (FDI) in Korea totaled roughly $39 billion and was concentrated largely in the manufacturing, banking, and wholesale trade sectors. Korean FDI to the United States reached $40.9 billion in 2016, supporting 51,900 jobs. In 2015, Korea invested $1 billion into research and development, and invested another $14.2 billion to expanding U.S. exports. The top industry sectors for Korean FDI in 2016 were: auto components, industrial machinery, software and information technology services, auto OEM, consumer electronics, and metals (Select USA).
More than 1 million Korean Americans live in the United States, with over 30% living in California. Los Angeles County alone is home to more than 154,000 residents of Korean origin, according to the Migration Policy Institute. There also is a large population of Korean students studying at higher education institutions across the United States. Korean visitors enter the United States via the U.S. Visa Waiver Program.
CalChamber Position
The CalChamber reaffirmed support for the KORUS FTA in a letter sent September 5, 2017 to members of the Trump administration, including the Secretary of Commerce and the U.S. Trade Representative.
In keeping with long-standing policy, the CalChamber enthusiastically supports free trade worldwide, expansion of international trade and investment, fair and equitable market access for California products abroad and elimination of disincentives that impede the international competitiveness of California business. New multilateral, sectoral and regional trade agreements ensure that the United States may continue to gain access to world markets, resulting in an improved economy and additional employment of Americans.
The KORUS FTA sends a strong signal that the United States intends to remain heavily engaged in the region for a long time to come in business, economics, security and international politics.
The FTA strengthens the 65-year-old alliance between the United States and South Korea, while reinforcing the economic and political reforms South Korea continues to make.
More Information
For more information, visit the CalChamber trading partner portal for South Korea at www.calchamber.com/korea.
