Core Reasons for Opposition: Why Do American Industries Oppose to Withdrawal from KORUS FTA? | BusinessKorea

Tuesday, October 17, 2017

U.S. Chamber of Commerce issued a statement strongly opposing the withdrawal of the KORUS FTA on September 5 (local time).
U.S. Chamber of Commerce issued a statement strongly opposing the withdrawal of the KORUS FTA on September 5 (local time).
SEOUL,KOREA
8 September 2017 - 3:15pm
Jung Suk-yee

President Donald Trump reduced his pressure on the KORUS FTA and the South Korean government after U.S. industries expressed their opposition to his pressure. According to industry experts, their opposition is because they might lose the import market of South Korea, which ranks 13th in the world in terms of GDP, and new tariff barriers can lead to an increase in consumer prices in the structure of trade in which they produce finished products by importing intermediate goods from South Korea.

According to the United States International Trade Commission, the tariffs the U.S. imposed on South Korean petrochemical products last year had an average rate of 0.6%. According to the Korea Institute for Industrial Economics & Trade, the average rate would have amounted to 3.2% without the KORUS FTA and the rate would have tripled to 0.6% without the KORUS FTA when it comes to steel products. This implies the free trade agreement contributed to the cost competitiveness of American companies supplying their products based on intermediate goods imported from South Korea.

According to the Korea Automobile Manufacturers Association, GM Korea’s annual exports to the U.S. stood at 18,000 cars in 2011 and 28,000 in 2012 but jumped to 162,000 last year. In other words, its annual exports to the U.S. increased approximately 800% through the implementation of the KORUS FTA. During the same period, Hyundai Motor Company and Kia Motors increased their exports to the U.S. by merely 21% and 13%, respectively.

When the KORUS FTA took effect six years ago, the car exports from the U.S. to South Korea totaled only US$381 million. However, the volume amounted to US$1.739 billion last year and the average growth rate amounted to 35.5% between the two years. During the period, the car exports from South Korea to the United States showed an average annual growth of 12.4%.

Last year, the U.S. exported agricultural and livestock products worth a total of US$6.872 billion to South Korea to post a surplus of US$6.166 billion in these primary industry sectors alone. The export volume included US$1.035 billion in beef exports, US$832 million in corn exports, US$615 million in composite food preparations exports and US$393 million in pork exports. Likewise, the U.S. gained a net profit of US$14.1 billion in 2015 in its trade with the service sector of South Korea.

“Withdrawal of the U.S. from the KORUS FTA is likely to result in substantial losses on the part of its agricultural market, legal market and so on as well as American companies procuring intermediate goods from South Korea,” the Korea Institute for International Economic Policy commented, adding, “This is why more and more people in the U.S. itself are warning against it.”

 

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