(September 14, 2009) The California Chamber of Commerce recently voiced strong support for approval of the pending U.S.-Korea Free Trade Agreement (FTA).
In a letter responding to a request for comments by the Office of the U.S. Trade Representative, the CalChamber said it supports the FTA because opening markets and promoting fair trade rules are critical for California’s economy.
The CalChamber is supportive of agreements like the proposed US- Korea FTA to ensure that the United States will continue to gain access to world markets, which will result in an improved economy and additional employment of Americans. The CalChamber also sent a letter supporting the passage of the U.S.-Colombia FTA.
After a year-and-a-half of negotiations, the U.S.-Korea FTA was signed on June 30, 2007. A successful FTA would be the biggest free trade pact the United States has reached since it entered into the North American Free Trade Agreement (NAFTA) more than a decade ago. Supporters remain hopeful that this comprehensive agreement will be brought up for consideration before the 111th Congress adjourns later this year.
Benefits
Passage of the U.S.-Korea FTA will eliminate tariffs and other barriers to trade in goods and services, promote economic growth, and enhance trade between the United States and Korea.
Korea is a $1 trillion economy and is the United States' eighth largest goods trading partner. Korea's commercial relationship with the United States is largely complementary. In 2008, two-way trade between the two countries topped $82 billion. In 2008, U.S. goods exports to Korea were $34.8 billion, a steady increase over the previous five years.
In 2005, U.S. foreign direct investment in Korea totaled roughly $18.8 billion and was concentrated largely in the manufacturing, banking and wholesale trade sectors. Korea currently enjoys broad access to the U.S. market and the United States is Korea's second largest market, importing 17 percent of Korea's worldwide exported goods.
Korea is California's fifth largest exporting partner. In 2008, California exported $7.7 billion to Korea.
The U.S.-Korea FTA will greatly expand market access in Korea for U.S. farmers, manufacturers, service providers, and financial services firms.
Tariff and Duty Free
Under the FTA, more than half of current U.S. agricultural exports to Korea—with a value of $1.6 billion—will become duty-free immediately, including high-value agricultural products such as almonds, pistachios, wine and cherries. For many other key agricultural goods, such as pork and citrus products, the FTA will provide unparalleled access to the South Korean market and its prosperous consumer base.
Almost 95 percent of all bilateral trade in consumer and industrial products will become duty-free within three years under the agreement, and virtually all remaining tariffs on consumer and industrial goods will be eliminated in 10 years.
Moreover, this agreement will eliminate significant non-tariff market access barriers in Korea to U.S. goods, services, and investment. Consumers in both countries stand to gain from the broad benefits of this agreement.
U.S. interests are protected under this agreement through robust provisions on transparency, intellectual property rights, competition, investment, and other rules, particularly in the area of services. The agreement also has important implications beyond bilateral trade and investment. By giving U.S. exporters and investors a preferential position in the world's 11th-largest economy, an FTA with Korea will enhance U.S. businesses' ability to compete in the dynamic Northeast Asia regional economy. From a strategic vantage point, the FTA will reinforce the critical partnership and alliance between the two countries.
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.
For California, the FTA would be a big win. According to the International Trade Administration in the U.S. Department of Commerce, computer and electronic products accounted for $1.8 billion of California's merchandise exports to Korea in 2008. With immediate removal of many of these related tariffs, exports will become more competitive and affordable to Koreans. California's exports of machinery also will benefit from U.S.-Korea FTA reductions as machinery manufactures accounted for $1.2 billion of the state's merchandise exports to Korea in 2008. Transportation equipment accounted for $665 million of the state's export sales to Korea in 2008 and most of these duties also would be eliminated immediately. In addition, tariffs and other barriers would be eliminated on most agricultural products produced in California.
Action Needed
The CalChamber is urging members of the business community to send their comments and support letters to the Office of the U.S. Trade Representative by the September 15 deadline. For a sample letter, visit the international section on our website.
For more information on the U.S.-Korea FTA visit CalChamber’s trading partner portal page.
Staff Contact: Susanne Stirling