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The United States concluded free trade negotiations with Korea on April 1,
2007. The U.S.-Korea Free Trade Agreement (KORUS FTA) is the most commercially
significant free trade agreement the United States has negotiated in nearly 20
years.
The KORUS FTA provides immediate elimination of duties on more than 60
percent of current U.S. exports and gives U.S. exporters improved access to the
Korean market for many of the products that have been highly protected. The U.S.
International Trade Commission estimates that annual U.S. agricultural exports
to Korea will increase by a minimum of $1.9 billion upon full implementation of
the agreement.
The agreement eliminates tariffs and other barriers on most agricultural
products, increasing export opportunities for a range of Maryland’s agricultural
products, including poultry, dairy, and feed grains. Maryland’s agricultural
exports to all countries, estimated at $358 million in 2007, supported about
3,815 jobs, on and off the farm. These export sales
make an important contribution to the Maryland farm economy, which had total
cash receipts of $1.9 billion in 2007.
Poultry and Egg Products. Broilers are Maryland’s leading agricultural
export and top source of farm cash receipts with the latter estimated at $732
million in 2007. Maryland’s poultry producers and processors will benefit from
this FTA.
Korea’s tariffs of 18 to 27 percent on frozen
leg quarters, frozen breasts and wings, and frozen turkey cuts, will be
phased out in 7 to 12 years.
As the number 2 market for U.S. egg products,
Korea’s tariffs of 27 percent on egg products, including egg yolks, will be
phased out in 12 equal annual reductions.
Dairy. Maryland’s dairy industry accounted for 10 percent of the state’s
farm cash receipts with sales of $207 million in 2007. This industry will
benefit from this agreement.
The FTA will provide immediate duty-free
access for double the current export volume of total dairy products.
Duty-free quotas will be established for cheese, skim/whole milk powder,
food whey, and butter.
Current annual U.S. feed whey exports of $8
million will gain duty-free access to the Korean market immediately upon
implementation.
Feed Grains. In 2007, corn contributed $137 million in farm cash
receipts, and the state’s feed grains and product exports were estimated at $42
million in 2007. Corn growers will gain from this FTA.
U.S. exports of corn for feed will be
duty-free immediately. Korea is currently the fourth largest market for U.S.
corn for feed.
The FTA includes a new 93,774-ton duty-free
quota for corn for processing that grows quickly to 393,849 tons by year 7,
after which quantities will be unrestricted.
Soybeans and Products. In 2007, soybeans and products were Maryland’s
fourth largest agricultural export at $44 million. Maryland’s soybean producers will benefit
from this agreement.
The greatest potential benefit for the
soybean sector is likely to come from improved access to Korea’s 300,000-ton
market for food-quality soybeans. Korea has agreed to immediately eliminate
its 5-percent tariff on food use soybeans.
Korea will establish a duty-free quota
starting at 10,000 tons for identity-preserved soybeans for food use (the
production of soybean curd). This quota will operate outside the current
state trading entity, which has charged a reported $250 per ton markup on
soybean imports supplied to soybean curd processors. (For comparison, based
on trade data, Korea’s average 2006 import price for soybeans used for food
was $330 per ton. This markup brings the price for imported quality beans to
$580.)
Korean tariffs on imports of crude soybean
oil (the majority of Korea’s soybean oil imports) will decline from the
current 5.4-percent tariff over 10 years. Refined oil tariff rates will
decline from the current 5.4 percent in five equal annual reductions.
Korea’s 3-percent tariff on soybean flour and meal will immediately go to
zero.
