The U.S.-Korea Free Trade Agreement (KORUS FTA), now awaiting Congressional approval, will provide America’s farmers, ranchers, food processors, and the businesses they support with improved access to the Republic of Korea’s 49 million consumers. If approved, this would be the most economically significant trade agreement for the U.S. agricultural sector since the North American Free Trade Agreement.
The United States is already Korea’s top supplier of a broad variety of agricultural exports at $2.85 billion ($3.4 billion including fish and forest products) in 2006, making Korea the sixth largest export market for U.S. farm products. The new agreement is expected to expand those sales even further. The United States is the No. 1 supplier to Korea of many farm products including almonds, beef, fresh cherries, hides and skins, poultry, soybeans, corn, and wheat. With the agreement, the average agricultural tariff for U.S. goods will fall from the current 52 percent to 4 percent in 15 years. The tariff reductions will help the United States compete against China and Australia, which have increased their presence in Korea’s $12-billion agriculture market. The tariff reductions will help the United States compete against Korea’s other major agriculture suppliers and help keep the United States on a level playing field with Korea’s current free trade partners such as Chile and any future trade partners.
Almost two-thirds of Korean imports of U.S. farm products will become duty free immediately.1
These include wheat, corn, soybeans for crushing, whey for feed use, hides and skins, cotton, herries, pistachios, almonds, orange juice, grape juice, and wine. Other farm products that will benefit from immediate duty-free access within new tariff-rate quotas (TRQs) and safeguards include skim and whole milk powder, whey for food use, cheese, dextrins and modified starches,
barley, popcorn, soybeans for food use, dehydrated and table potatoes, honey, oranges, and hay.
KEY MARKET ACCESS ELEMENTS OF THE AGREEMENT
Liberalization of Korea’s market will occur through a combination of tariff phaseouts, TRQs, and safeguards applied immediately or for a period of up to 23 years. There is no additional market access for rice in the KORUS FTA; however, rice exporters currently benefit from the World Trade Organization (WTO) rice agreement that the United States and other WTO members negotiated with Korea in 2004.
Korea currently applies a complex hierarchy of tariffs on agricultural products. These include most-favored nation (MFN) tariffs, WTO TRQs agreed to during the Uruguay Round, and autonomous TRQs (annual adjustment tariffs and TRQ rates that are less than the WTO-bound rates). After implementation, a fourth tariff type, KORUS FTA TRQs, will be applied to U.S.
products.
Tariff Elimination Under KORUS, nearly all tariffs for U.S. agricultural products will be eliminated. About $1.91 billion, or 64 percent, of Korea’s imports from the United States will be immediately duty free. Virtually all other tariffs will be reduced in equal annual increments over a phaseout period, with the first tariff cut made upon entry-into-force of the agreement.
Tariff-Rate Quotas (TRQs) For some products with tariff phaseouts, immediate duty-free market access will be provided through the creation and annual expansion of TRQs (providing duty-free access for a specified quantity of imports). Annual TRQ growth is on a compound basis. Products subject to TRQs are skim, whole, evaporated, and prepared dry milk; whey for food use; butter; cheese; honey; feed supplements and hay; table potatoes; soybeans for food use; and ginseng. Oranges are subject to a seasonal TRQ.
Safeguards The KORUS FTA safeguards have an annual trigger based on import volume of U.S. products. When the import quantity from the United States reaches the trigger level, the over-safeguard tariff comes into effect. KORUS safeguards for several products include duty-free quantities under the trigger level. Those products are barley, malt and malting barley, corn
starch, dextrins, beans, sweet potatoes, dehydrated potatoes, popcorn, buckwheat, corn for industrial use, cereal and groats, and miscellaneous starches. Generally, the duty-free volumes and the safeguard trigger levels increase over time. The over-safeguard duty decreases over time.
Grapes, Raisins, Grape Juice, and Wine Korean tariffs on U.S. table grapes during the out-of-season period (October 16 - April 30) will be reduced from 45 to 24 percent immediately and will be eliminated in four equal annual reductions. The out-of-season tariff reduction benefits an stimated 70 percent of current U.S. table grape exports to Korea. In addition, the in-season
(May 1 – October 15) tariff covering the remaining 30 percent of U.S. fresh table grape exports will be phased out in 17 years in equal annual installments. Korean import tariffs on raisins, grape juice, and wine will be eliminated immediately from their current 21, 45, and 15 percent levels, respectively.
- These amounts and all others following are an average of U.S. exports to Korea from 2004-2006. [↩]
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