Importers, exporters and investors in Southern California learned on Tuesday that they should soon begin to realize benefits from the U.S.-Korea Free Trade Agreement as tariffs on many products are phased out and non-tariff barriers on goods and services are eliminated.
South Korea is the 7th largest trading partner of the U.S. and also the 7th largest market for U.S. exports. The U.S. last year exported $43.5 billion in goods and $17 billion in services to South Korea, said Erik Sohn, international trade specialist, Office of Japan and Korea, at the U.S. Department of Commerce.
More than 95 percent of the trade in consumer and industrial products will be duty-free within five years, including the immediate elimination of Korean tariffs on many machinery manufactures from the U.S., Sohn told the Foreign Trade Association of Southern California.
Korea will also eliminate immediately its tariffs on many computer and electronics products. Those tariffs were as high as 13 percent before the free trade agreement took effect on March 15.
There will also be an immediate elimination of tariffs on many food products from the U.S., with most other food tariffs eliminated within five years.
In summary, Korea’s average duty on all products before the FTA took effect was 13 percent. As of March 15, 80 percent of U.S. exports now enter Korea duty free. Tariffs will be phased out until, by year 10, almost 99 percent of all products will enter Korea duty free.
As a result of these benefits, as well as the elimination of many non-tariff barriers that rankled the U.S. business community, exports to Korea should increase $10 billion to $12 billion a year, Sohn said.
South Korea is still an export-oriented economy, with exports accounting for 52 percent of its gross domestic product, compared to 13.8 percent for the U.S. That can be a benefit to U.S. companies and investors because they can form relationships with Korean businesses that will in turn provide access to global markets, said Won Sok Yun, director general of the Korean Trade and Investment Agency in Los Angeles.
Korean companies are recognized as leaders in industries such as shipbuilding, steel, semi-conductors, chemicals and information technology, and they sell to the world’s largest economies. For example, there are 17 Korean trade offices in China, providing access to the rapidly-growing middle class market there, he said.