Five Years into Effect
The free trade agreement (FTA) between South Korea and the United States has been a win-win for both countries since its enactment five years earlier. The pact has brought about increases in an import market share in each other’s countries.
According to a report titled “Evaluations and Implications for Five Years after Effectuation of Korea-US FTA” released by the Korea International Trade Association on March 9, trade between South Korea and the U.S. grew 1.7 percent a year on average over the last five years since the Korea-FTA took effect on March 15, 2012. During the same period, global trade sank at an average 2 percent annually over the last five years, and South Korea's overall trade also slipped by an average 3.5 percent per year.
However, South Korea’s exports to the U.S. increased 3.4 percent a year on average from US$56.21 billion (65.21 trillion won) in 2011 to US$66.46 billion (77.12 trillion won) in 2016. Over the same period, U.S.’ imports showed an average 0.6 percent decrease from US$44.57 billion (51.71 trillion won) to US$43.22 billion (50.14 trillion won).
Thanks to such trade expansion, South Korea and the U.S. saw their import market shares in each other’s countries grow together. The combined market share of South Korean goods in the U.S.’ import market came to 3.19 percent in 2016, up 0.62 percentage point from 2.57 percent in 2011. The combined share of American products in South Korea’s import market also increased by 2.14 percentage point from 8.5 percent in 2011 to 10.64 percent in 2016, hitting a 10-year high since 2006.
In terms of trade balance, South Korea saw both trade surplus in goods to the U.S. and trade deficit in services rose by US$11.61 billion (13.46 trillion won) and US$3.12 billion (3.62 trillion won) over the last five years.
In addition, South Korean companies made an aggressive investment in the U.S. South Korea’s investments in the U.S. from 2012 to last year stood at US$51.18 billion (59.29 trillion won), US$31.02 billion (35.93 trillion won) higher than the U.S.’ investments in South Korea during the same period. With the expansion of the nation’s investments in the U.S., South Korean companies in the U.S. increased the number of employees from 36,200 in 2011 to 47,000 in 2014.
The U.S. also think that the Korea-U.S. FTA had a positive effect on its economy. On June 29 last year, the U.S. International Trade Commission (USITC) said the U.S. trade deficit with South Korea was US$28.3 billion (32.78 trillion won) in 2015 but would have been US$44 billion (50.97 trillion won) without the FTA. It said the Korea-U.S. FTA helped ease the U.S.’ trade deficit.