One Year After: US-Korea FTA
Trade pact’s just not all that; EU edges out US: by Bill Armbruster.
I wish I could report that the US-Korea Free Trade Agreement, which took effect on March 15, 2012, provided an immediate shot of adrenalin to US exports. But that’s not the case. In fact, US goods exports to South Korea last year actually fell by 2.5%, from $43.4 billion in 2011 to $42.3 billion.
Exports of US manufactured goods, however, rose 1.5% last year, according to Francisco Sanchez, the Commerce Department’s under secretary for international trade. Excluding exports of corn and coal, two volatile commodities, exports to Korea last year were up 2.5%, he added.
But that’s small potatoes, and US exports to Korea have slipped again this year, dropping $26 million from January 2012, according to US Census Bureau statistics. I agree with Sanchez when he cautions against paying too much attention to one year of trade data, but those same Census figures show that US goods imports from Korea were up $2.2 billion in 2012 and another $674 million in January.
In contrast to the lackluster US performance, exports by the 27 members of the European Union jumped by $5 billion in the first three quarters of last year to $35.6 billion, according to EU statistics, a stunning 16.3% increase.
European exporters gained a significant edge when an EU-Korea FTA took effect on July 1, 2011 – eight and a half months before the US FTA. That gave European companies a chance to forge new ties in Korea while US negotiators were still trying to forge a final pact. President George W. Bush signed the FTA with Korea in 2007, but political wrangling in Washington, combined with objections from some US sectors, as well as Seoul’s refusal to compromise on key issues, delayed ratification and implementation for years.
When I asked Tami Overby, vice president, Asia, at the US Chamber of Commerce, to what extent the time gap between the US and EU FTAs affected US exports, she responded in an e-mail: “US goods and services are highly competitive and remain in high demand in Korea, regardless of the EU-Korea FTA. Many US exporters have long-standing relationships with their Korean importers and distributors, and these relationships have sustained while Korea actively expands its trade network with other countries.”
But for now at least, it appears that US exporters are paying the price for Washington’s dawdling. That said, the FTA offers significant benefits for US companies, including the immediate elimination of Korean tariffs on most US manufactured and agricultural exports and the phasing out of duties on most other goods.
Moreover, as a rich nation with the world’s 15th largest economy, Korea is a major market, with a long affinity for the US, and the Commerce Department offers significant resources, particularly for small and medium exporters. Seize the opportunity!
Bill Armbruster and Undersecretary Sanchez discussed South Korean market opportunities and resources for US exporters in an extended interview conducted via email. We’ll be sharing the highlights in installments on the Datamyne blog, starting with Part 1 on the benefits the trade pact creates for US companies.
Bill Armbruster, the anchor for the Datamyne Blog has covered shipping and trade for 30 years as a reporter and editor with The Journal of Commerce and Shipping Digest. “I’ll be blogging on headline news and current issues in oceangoing commerce, trying to shed some light on the backstories and, wherever I can, supply some sound advice for shippers.” Write Bill care of [email protected]
The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.
Date posted: April 19, 2013