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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 Virginia’s agricultural
products, including poultry, beef, and dairy. Virginia’s agricultural exports to
all countries, estimated at $588 million in 2006, supported about 7,000
jobs, on and off the farm. These export sales make an important
contribution to the Virginia farm economy, which had total cash receipts of $2.7
billion in 2006.
Poultry. With farm cash receipts of $506 million in 2006, broilers are
Virginia’s leading agricultural industry accounting for 19 percent of total farm
earnings. Turkey production accounted for another 10 percent with cash receipts
of $261 million. The state’s poultry and poultry product exports were estimated
at $102 million in 2007. Virginia’s poultry industry will benefit from this agreement.
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.
Beef. As the second largest source of farm cash receipts with earnings of
$426 million in 2006, and with live animal and meat (excluding poultry) export
sales estimated at $95 in 2007, Virginia’s cattle and calf industry will benefit from
this agreement.
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.
Dairy. The dairy industry is the state’s third largest source of farm
cash receipts, earning $266 million in 2006. This industry stands to gain from
the 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.
Vegetables. The vegetable industry is important to Virginia farmers, with
tomato cash receipts of $99 million in 2006. This industry will benefit from
this agreement.
Tariffs on canned and processed tomatoes will
become duty free immediately.
Soybeans and Products. Virginia soybean producers, with cash receipts of
$86 million in 2006, 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.
