After campaigning in 2008 against the Korea-U.S. Free Trade Agreement (known as the KORUS agreement), President Obama has now discovered it’s true merits. Despite languishing in the White House since 2007, the Administration has concluded its negotiations with South Korea and the agreement will become law if ratified by Congress. KORUS is the largest FTA anywhere in the world since the North American Free Trade Agreement (NAFTA) took effect in 1994 between Canada, Mexico and the U.S.
Why is KORUS such a big deal?
- South Korea has the 14th largest economy in the world
- The U.S. was Korea’s largest trading partner up until 2003 (we are now 4th)
- Two-way trade between the countries was nearly $70 billion last year
- The Obama Administration believes KORUS could increase U.S. sales to Korea by $11 billion
The deal involves a wide assortment of products, notably automobiles, airplanes, technology and industrial equipment. What does this agreement mean for U.S. food, beverage and agricultural processors?
- U.S. food, beverage and agricultural exports this year will total nearly $5 billion
- Korea imported 30% of all its agricultural imports from the U.S. in 2009
- The U.S. is Korea’s leading supplier of a variety of nuts, fruits, juices and wine
- With KORUS, nearly 2/3 of U.S. agricultural products will become duty-free (from a high of 40%)
- Some of the products which will enjoy duty-free access include potatoes, popcorn, honey, & fruit
Despite all these figures and hoopla, the U.S. is well behind other countries in accessing the Korean market. Korea finalized its FTA with the European Union last year (as a result, a lot more BMWs than Ford’s are sold in Korea). Korea also has FTAs with Chile, India and 10 Southeast Asian countries (Chile, a large agricultural exporter, is rapidly gaining market share from U.S. meat and fruit exporters). It is also negotiating additional FTAs with China, Canada, Australia and New Zealand. It is obvious that Korea – and all other countries – now have a plethora of choices from which to buy and sell products and services.
The Obama Administration has touted its new National Export Initiative (NEI) in which they hope to double America’s exports by 2015. However, it is walking a fine line between espousing free trade supported by Big Business, and coddling to the AFL-CIO and other trade unions who want to protect U.S. industries and workers. Still pending on Obama’s desk are the Panama and Columbia FTAs which, like KORUS, will benefit U.S. consumers, businesses and investors.
Since the recent recession, U.S. public support for free trade has waned. It is critical for not only U.S. competitiveness but also the global economy, that the Obama Administration “walk the talk” and make a strong statement that free trade is in the best interest of our country and its workers and businesses.
If the Obama Administration chooses to discontinue our country’s legacy of free trade, then other countries will simply buy and sell from the rest of the world. Let’s hope that Congress ratifies KORUS soon…before it’s too late.