U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

Box 3.2 Potential price and quantity effects of NTMs on selected processed foods
Firms seeking to export to Korea have identified several TBTs that may impede their access to the market for
processed foods, including restrictive food standards, numerous labeling requirements, and time-consuming customs
procedures (see text). These measures may restrict the quantity of imports into the Korean market, raise the price
of imports, or both.
Unit values of Korean imports of U.S. processed foods selected for this assessment are in many cases significantly
above unit values that U.S. exporters receive in other countries. In addition, Korean imports from the world of some
of these same processed foods are substantially lower than imports of these products in most other comparable
economies. Korea’s MFN tariffs are 8 percent for tomato ketchup, bread, pastry, soups, and broths, and 18 or
45 percent for sauces and condiments. These tariffs appear in most cases to be too low to account by themselves
for either the relatively high unit values of Korean imports or the relatively low import quantities. These relatively high
unit values may be reflective of the effects of NTMs, but could also be influenced by such factors as market structure,
product differentiation, and consumer preferences.
Korea’s imports of tomato ketchup and other tomato sauces (HS 210320) are substantially lower than imports of the
same products into most other comparable economies, relative to the size of the Korean economy. Korean imports
of tomato ketchup and other tomato sauces were 6.1 kg per million $ GDP, or 17.6 percent of the median for 64
comparable countries.
The table below compares Korean unit values on imports from the United States of certain U.S. processed foods
with U.S. export unit values of the same products to the world. For example, the 57.0 premium on bread and pastry
indicates that unit values on Korean imports from the United States, as reported in Korean trade data, are
57.0 percent higher than unit values on U.S. exports to the world, as reported in U.S. trade data.
Unit value for Korean Unit value for U.S.
imports from the exports to the Implied unit value
Product
United States ($/kg) world ($/kg) premium (percent)
Bread, pastry (HS 190591)
Tomato ketchup and other
$3.324 $2.118 57.0
tomato sauces (HS 210320) $1.151 $0.893 28.9
Sauces and condiments
(HS 210390)
$3.185 $1.839 73.2
Soups and broths
(HS 210410)
$2.791 $2.324 20.1
A portion of these higher prices is the result of transportation costs and insurance, since Korean import prices are
on a cost, insurance, and freight (c.i.f.) basis and the U.S. export prices are on a free-on-board (f.o.b.) basis. In most
of these cases, however, the price difference is still relatively large enough to imply the potential impact of NTMs in
restricting trade in these goods. The TBT chapter and the committee established by the SPS chapter of the FTA are
intended to address some of these NTMs (see chapter 5 of this report for additional information on these provisions).
For further information on the calculation and interpretation of the quantity and unit-value information reported
above, see appendix J.
Source: See app. J for data sources; USITC staff analysis.
3-48