Report: ‘Termination of KORUS FTA is Likely to Do More Damage to the U.S.’

The Korea Institute for Industrial Economics & Trade said on June 4 that a decline in exports from the United States to South Korea is predicted to exceed a decline in exports from South Korea to the United States in the event of termination of the KORUS FTA.

“Given the industrial export-import structures of both countries of 2015, the latter is estimated at US$1.32 billion and the former is estimated at US$1.58 billion in the case of termination of the free trade agreement between the United States and South Korea,” it explained in its report, adding, “In that case, U.S. companies exporting to South Korea are subject to a higher average tariff rate than South Korean companies exporting to the U.S.”

Once the agreement is terminated, both countries are subject to the Most Favored Nation (MFN) Treatment according to WTO rules. In this case, a tariff rate of at least 4% is applied to U.S. companies exporting to South Korea and a tariff rate of 1.6% is applied to South Korean companies exporting to the U.S.

“A decline in bilateral trade is likely to lead to less consumer benefits and less total production and have a negative impact on both economies, which have trade structures complementary to each other,” it went on to say, continuing, “The trade deficit of the United States, which it is mentioning as a reason for the termination, is because of the complementary trade structures and a decline in the competitiveness of products exported from the United States.”