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

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50 percent, while the vegetable juices rate is 30 percent. Grape juice and apple juice have 45 percent tariff rates. Korean tariffs on vegetable juices would be phased out over 5 years. 279 Beverages in HS chapter 22 such as bottled water, carbonated soft drinks, sports drinks, functional beverages, and iced tea are subject to an 8 percent tariff, while fruit juice drinks (less than 100 percent juice) are subject to a 26.2 percent tariff. These tariffs would be removed upon FTA implementation and should increase the competitiveness of U.S. exports into the Korean market and increase market share. The Korean nonalcoholic beverage market was estimated at $3.8 billion in 2005. 280 The total value of imported nonalcoholic beverages was about $62 million in 2004, representing about 2 percent of the overall market. Carbonated beverages and fruit and vegetable juices each represent about one-third of the Korean nonalcoholic beverage market. The remaining third is made up of mineral water, sports beverages, canned coffee, functional beverages, traditional Korean drinks, and flavored water. In 2006, the total value of U.S. exports of beverage products to Korea was about $44 million. Leading export items, in order of value, were carbonated soft drinks, mixtures of fruit juices, grape juice, and orange juice. U.S. orange juice competes with Brazilian juice in the Korean market, while U.S. grape juice competes with exports from Argentina, Brazil, Chile, and Spain. In 2004, Brazil had about a 77 percent share of the Korean orange juice market, while U.S. juice accounted for about 21 percent. 281 In recent years, Brazil has captured an increasing share of Korea’s orange juice market. The FTA could help the U.S. industry to recapture some of this market share from suppliers in Argentina and Brazil. The largest percentage increase is expected for grape juice and orange juice because the tariff reductions are the greatest, as high as 50 percent. Other beverage exports, such as carbonated soft drinks and bottled waters, would be likely to increase modestly from the liberalization of the 8 percent tariff rate on these beverages. Concerns about safe drinking water have spurred sales of bottled waters in Korea. The Korean shelf life for bottled water is 6 months from the date of manufacture. While Korea had agreed to phase out government-mandated expiration dates on many food products and allow manufacturers to set their own “use-by” dates, Korea continues to maintain government-mandated shelf-life requirements for sterilized milk products and bottled water. 282 This period is shorter than the shelf life in the United States and many other countries, and in the past has been cited by exporters as a nontariff barrier. 283 In addition to establishing a standing committee, the SPS chapter of the agreement reconfirms the commitment of both parties to use sound science in the application of SPS measures and generally refers to the WTO SPS Agreement as establishing the means by which such measures would be applied. 284 Implementation of the FTA’s SPS chapter provisions may, consequently, facilitate increased exports of beverages, such as bottled water, that face relatively low tariff barriers in comparison to NTMs. 279 Ibid. 280 USDA, FAS, “Korea Product Brief, Non-Alcoholic Beverages 2005,” August 26, 2005. 281 Korean Customs Service, Republic of Korea. 282 USDA, ERS, “Briefing Room on South Korea—Issues and Analysis,” April 19, 2006. 283 USTR, National Trade Estimate Report on Foreign Trade Barriers. 284 For additional analysis regarding SPS and other NTMs, see chap. 5 of this report. 3-50
Views of Interested Parties Welch Foods Inc., a Cooperative (Welch’s), in a written submission to the Commission, expressed support for the provisions of the FTA regarding grape juice. Welch’s expects the agreement to have a positive economic effect for Welch’s, other U.S. grape producers, and Korean consumers by immediately eliminating the 45 percent duty on U.S. grape juice exports. Welch’s said that the main trade barrier to selling more grape juice in Korea has been Korea’s 45 percent tariff on grape juice concentrate. 285 Welch’s noted that, in 2002 and 2003, total U.S. exports of grape juice to Korea were valued at over $9 million, but then fell to $6.5 million in 2006 as Argentinian grape juice took a larger share of the Korean grape juice market. The Wine Institute and the California Association of Winegrape Growers, in a written submission to the Commission, reported that it “applauds” the FTA, noting the benefit of immediate duty-free market access for grape juice concentrates. 286 It added that the FTA “will greatly enhance the competitive position” of the industry, especially with respect to Chile, which it noted had substantially increased exports of grape juice concentrates to Korea after implementation of the Chile-Korea FTA in 2004. Florida Citrus Mutual, a Florida cooperative representing nearly 10,000 Florida citrus growers and processors, stated in a media release that it supports the FTA. The release said that the agreement would phase out the 30 to 54 percent tariff on U.S. orange juice, and would be beneficial to the Florida citrus industry. 287 In its report, the ATAC for Trade in Processed Foods stated that it takes no position on the agreement. The committee noted in its report, however, that it strongly endorses the fundamental U.S. goal of opening markets, and since being formed in 2003, has firmly supported all comprehensive free trade agreements and trade promotion agreements. The committee also expressed concern that benefits from tariff reductions could be nullified by continuing TBTs not addressed in the FTA. Textiles and Apparel 288 Assessment The U.S.-Korea FTA would likely result in a significant increase in bilateral U.S.-Korea trade in textiles and apparel, particularly U.S. imports from Korea. 289 The expected increase in imports from Korea will likely be concentrated in goods for which Korea is a competitive, 285 Walther (counsel), “U.S.-Korea Free Trade Agreement: Potential Economy-Wide and Selected Sectoral Effects,” written submission to the USITC on behalf of Welch Foods, June 14, 2007. 286 Clawson and Gore, “Comments to the U.S. International Trade Commission,” written submission to the USITC on behalf of the Wine Institute and the California Assoc. of Winegrape Growers, June 27, 2007. 287 Florida Citrus Mutual, “U.S.-Korea Free Trade Agreement Could Prove Beneficial for Florida Citrus (April 9, 2007).” 288 The products covered in this assessment represent 100 percent of U.S. exports to Korea in the GTAP “textiles” and “wearing apparel” sectors, and represent 100 percent of U.S. imports from Korea in the GTAP “textiles” and “wearing apparel” sectors, for 2006. 289 A trade report also noted that experts in the Korean textile and apparel industry agree that the Korean industry would benefit substantially under the FTA. KOFOTI, “Forecast: Impact of FTA,” March 2007, 46. 3-51
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U.S. International Trade Commission
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This report was prepared principall
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CONTENTS-Continued Chapter 3. Secto
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CONTENTS—Continued Chapter 5. Imp
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CONTENTS-Continued Chapter 7. Liter
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CONTENTS-Continued Tables—Continu
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Abbreviations and Acronyms 3G third
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Abbreviations and Acronyms—Contin
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Abbreviations and Acronyms—Contin
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vehicles) would likely be diverted
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Sector-specific Assessments The U.S
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total increased fish imports from K
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Korea would likely limit the impact
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Intellectual property rights (IPR):
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sector barriers. 5 These merchandis
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Table 1.1 U.S.-Korea FTA: Location
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Table 1.2 Korean tariff rates on im
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Table 1.4 U.S.-Korea FTA: Summary o
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observed GDP for model regions). Th
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Box 2.1 Interpreting the model resu
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Table 2.1 U.S.-Korea FTA: Simulated
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2-8 This page has been updated to r
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Figure 2.2 U.S-Korea FTA: Simulated
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As shown in figure 2.2, the largest
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2-14 This page has been updated to
Page 54 and 55: Economy-wide Impact of Implementing
Page 56 and 57: Grain (Wheat, Corn, and Other Feed
Page 58 and 59: Korea imported 3.8 million mt of wh
Page 60 and 61: U.S. oilseed product exports to Kor
Page 62 and 63: Table 3.2 U.S. oilseed product expo
Page 64 and 65: Table 3.3 Animal feed exports to Ko
Page 66 and 67: consumed domestically by the U.S. l
Page 68 and 69: ates. For corn starch, the United S
Page 70 and 71: quota rates have been effectively e
Page 72 and 73: Noncitrus Fruit 87 Views of Interes
Page 74 and 75: 3-20 Table 3.9 U.S.-Korea trade and
Page 76 and 77: Korean grapes are much more costly
Page 78 and 79: Potato Products 122 Assessment The
Page 80 and 81: ate is 304 percent ad valorem. 141
Page 82 and 83: Other Vegetables 162 Assessment The
Page 84 and 85: U.S. exports of other fresh and pro
Page 86 and 87: tariff concessions that could accru
Page 88 and 89: Dairy Products 215 Similarly, the p
Page 90 and 91: TRQ for food whey, 223 based on cur
Page 92 and 93: potential changes in trade based so
Page 94 and 95: Figure Figure 3.1 Korea: Beef and v
Page 96 and 97: Views of Interested Parties The inc
Page 98 and 99: are subject to the same food safety
Page 100 and 101: enefit under the provisions of this
Page 102 and 103: Box 3.2 Potential price and quantit
Page 106 and 107: and major supplier, and U.S. tariff
Page 108 and 109: textiles and apparel through 2005.
Page 110 and 111: U.S. Exports The impact of the FTA
Page 112 and 113: passage. NCTO indicated that, even
Page 114 and 115: In its report, the ITAC on Distribu
Page 116 and 117: of the U.S. footwear market, with C
Page 118 and 119: of these producers. 362 RPFMA noted
Page 120 and 121: prohibit improper inducements by ph
Page 122 and 123: Machinery, Electronics, and Transpo
Page 124 and 125: U.S. exports of auto parts would be
Page 126 and 127: imports from and exports to Korea.
Page 128 and 129: Passenger Vehicles 433 Assessment U
Page 130 and 131: Table 3.16 Korean passenger vehicle
Page 132 and 133: import activities have continued
Page 134 and 135: Box 3.4 Automotive-related FTA Prov
Page 136 and 137: access. The FTA affirms the parties
Page 138 and 139: gaining U.S. market share regardles
Page 140 and 141: keep the products out.” 492 Mr. B
Page 142 and 143: these vehicles to Korea. The commit
Page 144 and 145: Brown expressed concern about the r
Page 146 and 147: goods; and high-technology medical,
Page 148 and 149: device pricing, reimbursement, and
Page 151 and 152: CHAPTER 4 Impact of Market Access P
Page 153 and 154: elative to GDP than do China, Japan
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services as a substantial improveme
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Box 4.2 Financial services: Competi
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Summary of Provisions Chapter 13 of
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national treatment, full establishm
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Box 4.4 Competitive conditions in t
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and cross-connect links 70 are more
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Box 4.5 U.S. legal services trade w
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establish offices in Korea to provi
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Box 4.6 Competitive conditions in t
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equirements and foreign ownership r
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CHAPTER 5 Impact of Trade Facilitat
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publication and administration of t
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Views of Interested Parties In its
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Summary of Provisions This chapter
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use of TBTs to protect Korea’s au
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conformity assessment procedures el
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FTA Chapter 15-Electronic Commerce
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Views of Interested Parties The U.S
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quantities as to be a substantial c
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that such transshipment could imped
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Box 6.1 Foreign investment in Korea
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in the FTA. The awards made by any
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Table 6.1 U.S.-Korea FTA: Industry
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(ITAC 5) report cited as particular
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Section C of Chapter 11 and the lac
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practices, and violations of consum
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FTA Chapter 17—Government Procure
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Both the United States and Korea ar
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8) 87 also expressed support for th
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Box 6.2 Recent conditions of IPR pr
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protection to life of the author pl
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Views of Interested Parties A numbe
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GPHA stated in testimony before the
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Box 6.3 Labor market conditions in
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FTA Chapter 20—Environment 131 As
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trade measures are the least disrup
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FTA Chapter 22-Institutional Provis
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Views of Interested Parties The Ind
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CHAPTER 7 Literature Review and Sum
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7-3 Table 7.1 Model, liberalization
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terms. Much of the increase in U.S.
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Liberalization generated small incr
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Sander Levin, Member of the U.S. Ho
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Regarding footwear and travel goods
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Korea’s establishment as a region
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The California Table Grape Commissi
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order activity, and facilitate expa
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At the Commission’s hearing, Mr.
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Information Technology Industry Cou
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With respect to tariff and nontarif
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deterring illegal transshipments. I
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PhRMA identified what it views as t
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the TIA stated that it supports the
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access to the market. The Council a
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United States, Spain, Chile, Brazil
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Bibliography Advanced Medical Techn
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AT&T. “AT&T Reaction to Free Trad
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______. “Korea-U.S. Free Trade Re
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______. “Country Finance: South K
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Global Trade Information Services I
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International Labor Organization (I
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Jones, Laura E. Executive Director.
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Lee, Hyunok, and Daniel A. Sumner.
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Nam, In-Soo. “Helio's Losses To W
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Powers, Mark. Northwest Horticultur
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Smith, Brad. American Council of Li
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U.S.-Korea Business Council (USKBC)
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______. “Korea, Republic of Oilse
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U.S. International Trade Commission
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Ward, David. American Council on Ed
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APPENDIX A Request Letter from USTR
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APPENDIX B Federal Register Notices
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pwalker on PROD1PC71 with NOTICES 2
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APPENDIX C Hearing Participants
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ORGANIZATION AND WITNESS: PANEL 1 (
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APPENDIX D U.S.-Korea FTA: Chapter-
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fees and charges on trade in goods
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determines the tariff classificatio
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The transparency provisions would a
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necessary duties within 1 year of i
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technical regulation or conformity
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procedures), and practices of a par
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aviation, fisheries, or maritime ma
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of standards and criteria and on te
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of the FTA that impose unilateral o
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use of electronic authentication in
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parties’ rights and obligations u
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establishment of Uniform Domain-Nam
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government to take appropriate meas
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environmental laws. 102 In the U.S.
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not limited to, policies on commerc
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Economic indicators 2002 2006 Popul
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Table E.1 Leading U.S. exports to K
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APPENDIX F GTAP Model
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Updating the GTAP Database The curr
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Key Assumptions Agency. 4 The price
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Table F.2 U.S.-Korea FTA benchmark
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Measuring the Impacts of the FTA an
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General Effects of Trade Agreements
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APPENDIX H Tariff Equivalents in Ko
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Previous Literature The method for
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For the purposes of this report, a
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Table H.1 Tariff equivalents in Kor
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APPENDIX I Services Nonconforming M
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Table I.1 U.S.-Korea FTA: Korean se
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APPENDIX J Description of Possible
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are in effect import prices, and th
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APPENDIX K Overview of Agricultural
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Additionally, although current regu
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About This Report The United States
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