(December 7, 2010) On Friday, the United States and South Korea announced the successful resolution of the outstanding issues with the U.S.-Korea Free Trade Agreement (FTA), setting the stage for consideration of the agreement by Congress in the coming months.
In announcing the agreement, President Barack Obama commented, “American manufacturers of cars and trucks will gain more access to the Korean market and a level playing field to take advantage of that access. We are strengthening our ability to create and defend manufacturing jobs in the United States; increasing exports of agricultural products for American farmers and ranchers; and opening Korea's services market to American companies. High standards for the protection of worker's rights and the environment make this a model for future trade agreements, which must be both free and fair.”
The FTA was signed on June 30, 2007, but has yet to be approved by the U.S. Congress. Since that time, South Korea has successfully concluded an FTA with the European Union and is in advanced FTA negotiations with Canada. This increased competition from countries around the world threatens the economic benefit the United States and California stand to gain from exports to the Asian country.
In fact, it is estimated by the Trade Partnership Worldwide, LLC, that the failure to approve the U.S.-Korea FTA will result in a U.S. goods export loss of $35 billion, gross domestic product (GDP) loss of $40 billion and an employment loss of 345,000. The economic damage would be similar in California, with a goods export loss of $2.5 billion, GDP loss of $5.2 billion and an employment loss of nearly 40,000.
According to the U.S. International Trade Commission, implementing the FTA will boost the U.S. GDP by nearly $12 billion and generate nearly $11 billion in U.S. merchandise exports. It would generate an additional boost to U.S. exports to other countries of more than $5 billion.
A recent U.S. Chamber of Commerce study found that 345,000 American workers stand to lose their jobs if the agreement is not implemented while other countries’ FTAs with Korea enter into force.
Benefits
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. Passage of the U.S.-Korea FTA will eliminate tariffs and other barriers to trade in goods and services, promote economic growth, enhance trade between the United States and Korea, and help expand market access in Korea for U.S. farmers, manufacturers, service providers and financial services firms.
In 2009, California exported $5.9 billion to Korea, making it the state’s fifth largest export market. 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 2009, trade between the two countries topped $69 billion. In 2009, U.S. goods exports to Korea were $28.6 billion, a slight decrease from the previous year. Under the FTA, more than half of current U.S. agricultural exports to Korea 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.
CalChamber Position
The CalChamber, in keeping with long-standing policy, 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.
Action Needed
The CalChamber is urging members of the business community to contact California congressional representatives and urge support for the U.S.-Korea FTA.
For further information, visit www.calchamber.com/korea.
Staff Contact: Susanne Stirling