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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 Michigan’s agricultural
products, including dairy, soybeans, and corn. Michigan’s exports to all
countries, estimated at $1.2 billion in 2007, supported about 12,788 jobs, both
on and off the farm. These export sales make an important contribution to
Michigan’s farm economy, which had total cash receipts of $5.7 billion in 2007.
Dairy. With sales of $1.5 billion in 2007, the dairy industry is the
state’s largest source of farm cash receipts.
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. Feed grains are the state’s second largest export, and corn
is the second largest source of cash receipts at $846 million in 2007.
U.S. exports of corn for feed are guaranteed to enter at zero duty
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. Michigan soybean producers, with the state’s
largest export sales--$290 million in 2007--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.
Beef. The cattle and calf industry is the state’s fifth largest source of
farm cash receipts with sales reaching $343 million in 2007.
For beef muscle meats, the FTA provides a 15-year straight-line tariff
phase out with a safeguard that begins growing from 270,000 tons, a quantity
that is 17 percent larger than our largest historical shipments.
Technical consultations continue toward the goal of allowing imports to
take place consistent with World Organization for Animal Health (OIE)
guidelines.
Following the May 2007 decision by the OIE classifying the United States
as a controlled-risk country, Korea has announced that it will
undertake in a timely manner its regulatory process toward expansion of
market access for beef and beef products.
Vegetables and Pulses. Michigan is the nation’s ninth largest
agricultural exporter of fresh and processed vegetables with estimated sales of
$106 million in 2007.
Tariffs on asparagus, canned and processed tomatoes, frozen potato
fries, and chipping potatoes (during the U.S. potato shipping season) will
become duty free immediately.
A new 3,000-ton duty-free quota for fresh potatoes and a new 5,000-ton
duty-free quota for dehydrated potatoes will bring opportunities for
growers.
The current 27-percent tariff on most pulses (peas, beans, and other
legumes) will be eliminated within 5 years while the tariff for lentils will
be removed within 10 years.
For questions about the U.S.-Korea Free Trade Agreement and its impact on
U.S. agriculture, please contact FAS Legislative and Public Affairs Office at
(202)720-7115 or LPA@fas.usda.gov.
For detailed information on how the Agreement benefits specific commodities,
please visit:
http://www.fas.usda.gov/info/factsheets/Korea/us-koreaftafactsheets.asp.
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U.S.–Korea Free Trade
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