South Korea Deals With America
United States-Korea Free Trade Agreement Beefs Up Exports & Imports
After 14 months of tough negotiations, George Bush and Roh Moo-hyun sign a free trade treaty that loosens trade restrictions from automobiles to beef to Hollywood movies.
Expected to eventually remove the vast majority of trade restrictions, the Korea Free Trade Agreement (KFTA) is subject to approval by U.S. Congress and the South Korean National Assembly.
With the world's tenth-largest economy and a population of 49 million, South Korea is seventh among America's top trading partners. According to the Central Intelligence Agency's World Factbook, two-way merchandise trade between the two nations was about US$85 billion in 2006.
Top Countries For South Korean Exports (2006)
The following list shows the top four customers for South Korean exports, which totalled an estimated US$326 billion in 2006.
- China ... US$71 billion (21.8% of total South Korean exports)
- United States ... US$48 billion (14.6%)
- Japan ... $28 billion (8.5%)
- Hong Kong ... $18 billion (5.5%)
Korean exports include computers, motor vehicles, petrochemicals, semiconductors, ships, steel and wireless telecommunications equipment.
Top Countries From Which South Korea Imports (2006)
South Korea imported some US$309 billion worth of commodities in 2006. Korean imports are principally electronics and electronic equipment, machinery, oil, organic chemicals, plastics and steel.
- Japan ... US$57 billion (18.5% of total South Korean imports)
- China ... $46 billion (14.8%)
- United States ... $37 billion (11.8%)
- Saudi Arabia ... $19 billion (6.2%)
America's trade deficit with South Korea is about $11 billion, a statistic that the U.S. hopes to reduce through a 20% increase in exports under the new free trade treaty.
The KFTA is Washington's biggest free trade deal since the North American Free Trade Agreement (NAFTA) was signed in 1993. The treaty is expected to eliminate duties on more than 90% of U.S. exports to South Korea within three years.
American & Korean Trade Issues
Critics say that U.S. Congress will not pass the KFTA without substantial changes. For example, the Automotive Trade Policy Council, a lobby group for the North American automotive industry, objects that the deal does not eliminate South Korea's 8% duty on new vehicles.
And, although the KFTA eliminates South Korea's 40% tariffs on American beef, Seoul continues to restrict U.S. beef imports since the "mad cow disease" scare in late 2003. Technically, South Korea has opened its markets to import U.S. boneless beef from cattle less than 30-months old. Recently, however, Korean inspectors rejected three large shipments of U.S. beef because they contained small bone fragments. The U.S. cattle industry demands that the KFTA be amended to allow the U.S. to ship both boneless and bone-in beef to South Korea regardless of the cattle's age.
Strong & Dynamic Trade Partnership
Both the U.S. and South Korea are committed to open trade relationships. America leads the world with some US$30 billion directly invested in South Korea and over 3,000 U.S. companies operating there.
For its part, South Korea continues to demonstrate progress in removing barriers to U.S. exports. For example, Seoul has announced a reduction in quotas that require Korean cinemas to show domestic movies for a minimum period. This expands U.S. filmmakers' access to Korean moviegoers.
Free trade with South Korea positions America as an alternative to China's growing economic influence in Northeast Asia. A Korean Free Trade treaty will also bear witness to America's resolve in overcoming trade barriers, thus providing a case study that may inspire the World Trade Organization to enact similar strategic solutions.
Sources For This Article
This article presents independent calculations and insights based on data drawn from source material in the CIA's World Factbook. This article also bases some trade examples on those found in the January 23, 2006 analysis entitled "Time to Put a U.S.-South Korea Free Trade Agreement on the Fast-Track Agenda" by Anthony B. Kim & Daniella Markheim.
