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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 Tennessee’s
agricultural products, including beef, poultry, and soybeans. Tennessee’s
agricultural exports to all countries, estimated at $924 million in 2006,
supported about 10,900 jobs, on and off the farm.
These export sales make an important contribution to the Tennessee farm economy,
which had total cash receipts of $2.6 billion in 2006.
Beef. The cattle and calf industry is the state’s largest source of farm
cash receipts with earnings of $483 million, or 19 percent of the total farm
earnings in 2006. This industry will benefit from this FTA.
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.
Poultry and Egg Products. Broilers are the state’s second largest source
of farm cash receipts at $414 million in 2006. Tennessee’s poultry industry will
benefit from this agreement.
Korea’s tariffs of 18 to 27 percent on frozen
leg quarters, frozen breasts and wings, 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.
Cotton. Cotton is the state’s third largest source of farm cash receipts
with $335 million in 2006 and also is the state’s largest export crop.
The FTA will lock in the duty-free access
being enjoyed by U.S. cotton exporters. This permanent access allows U.S.
cotton exports to continue to compete on a level playing field with Korea’s
other trading partners.
Soybeans and Products. As the state’s third largest agricultural
exporters and the fifth largest earners of farm cash receipts in 2006, Tennessee
soybean growers 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.
Feed Grains. Corn is the state’s sixth largest source of farm cash
receipts with $152 million in 2006 and the industry will benefit from this
agreement.
U.S. exports of corn for feed are guaranteed
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.
