A month after the U.S.-South Korea free trade agreement took effect, U.S. pork producers, cattle ranchers and fresh fruit and vegetable growers are ecstatic.
U.S. producers and exporters see massive potential in South Korea, which already is a major and growing market for a number of high-value food products, and are doing whatever they can to win over Korean consumers.
Exporters believe South Korean consumers will increase their purchases of U.S. food as import tariffs decline sharply or disappear, making U.S. goods more affordable and competitive. “We see a great growth in demand from Korea as the import duties there are eliminated or reduced,” said Peter Friedmann, executive director of the Agriculture Transportation Coalition, a group representing U.S. exporters.
The U.S. Meat Export Federation has long promoted sales of U.S. beef and pork in South Korea, sending chefs to demonstrate new dishes at upscale supermarkets or restaurants.
The California Raisin Marketing Board decided to go with a bit more soul to win over new fans in Seoul: It resurrected the dancing, singing California Raisins cartoon characters from the 1980s TV ads. Now, actors wearing raisin costumes are making the rounds in South Korean schools singing the Marvin Gaye classic, “I Heard It Through the Grapevine.”
Just about every other commodity group sees an opening in South Korea, as well. Vintners in Washington and California are predicting rapid market growth as the 15 percent import tariff was eliminated when the FTA took effect.
South Koreans drank about $11 million worth of California wine in 2011, a level Wine Institute officials expect to jump 25 percent over the next few years. Wine makers in Washington have a smaller market there, but they expect to see exports increase 40 to 50 percent this year.
Agriculture Secretary Tom Vilsack said the trade agreement would mean at least $1.9 billion in additional agriculture trade with South Korea annually, much of it in bulk grains.
But some industry representatives say it’s difficult to predict the effect lower tariffs will have because South Korea has been such a growing market for the last few years.
“We’ve had nice business there in recent years, and we don’t see anything really changing because of the FTA,” said Lee Doud, senior vice president of Paramount Exports, a San Francisco-based company that trades fresh fruits and vegetables globally. “It is a very good market for us, but we don’t see any major change yet. Maybe there will be, but there are more factors involved than the free trade agreement at this point.”
Reinforcing the South Korean food-buying binge, the U.S. exported $1.9 billion in fresh vegetables in January, three times as much as the $647,000 worth shipped in January 2011.
Meat exporters have had notable success over the last decade, and the U.S. Meat Export Federation doesn’t see the market growth stopping. In 2001, South Korea purchased $390 million worth of U.S. beef. But the discovery of a case of mad cow disease in 2003 kept U.S. beef out of the market for several years; U.S. beef exports had to start from scratch. By 2011, U.S. sales totaled $686 million, 32 percent above 2010 numbers. U.S. beef producers still face substantial, although lower, tariffs in South Korea.
“South Korea’s 40 percent duty on imported beef will be phased out over 15 years for imports from the United States,” USMEF Economist Erin Borror said. The duty rate dropped to 37.3 percent on March 15, and will decline 2.7 percent each year until 2026. “This may be a rather slow tariff reduction schedule, but the U.S. is the only major beef supplier to have reached such an agreement with Korea, so the U.S. beef industry’s competitive advantage will increase over time.”
Borror said the advantage of being able to sell duty free was on display last year in South Korea with U.S. pork shipments.
A 2010 outbreak of hoof and mouth disease hit domestic South Korean pork producers hard. Some 3.3 million hogs, about a third of the herd, had to be killed. The government set a tariff-free quota for pork imports to meet the domestic demand.
The South Korean market was worth just $25 million to U.S. pork producers in 2001. By 2010 it was $190 million, but climbed 162 percent in 2011 to $497 million.
With the FTA in place, U.S. pork producers again have tariffs, but they will be reduced gradually and eliminated by 2016. “That will give the U.S. an advantage over most competitors and eventually put the U.S. industry back on a level playing field with Chilean pork, which currently faces the lowest duty rates in the Korean market,” Borror said.
Ports and carriers are also taking note of the potential. “It is definitely our expectation that we will see a lot more business with Korea, especially for California producers,” said Lawrence Dunnigan, marketing director for the Port of Oakland.
In anticipation of the FTA, the port last year hosted a seminar on exporting to South Korea. “We had key U.S. Commercial Service folks come in to speak to the opportunities that would be created and how to enter that market,” Dunnigan said.
Hanjin Shipping in March added a service linking South Korea and other Asian points with the ports of Los Angeles and Oakland. After ships in the 11-vessel string sail from the West Coast, they will stop in Busan, Shanghai, Ningbo, Yantian and Singapore.
Contact Stephanie Nall at email@example.com.