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

U.S. exports of auto parts would be expected to increase with the implementation of the FTA
as a result of the immediate elimination of Korea’s 8 percent duty as well as provisions that
ensure the equivalent treatment of remanufactured and used goods, such as auto parts. 403
However, such export growth would likely be mitigated, in part, by the strong relationships
between Korean producers and their local supplier networks, the limited interchangeability
of original equipment parts, and the relatively small role of U.S. automakers (and their
U.S.-made vehicles) in the Korean market. Moreover, although the equivalent treatment of
remanufactured goods may provide additional market access opportunities, 404 reused and
remanufactured auto parts account for only 0.5 percent ($250 million) of the estimated value
($48 billion) of the total Korean auto parts market. 405
U.S. suppliers of electronics would likely benefit from the FTA. The Commission’s
economy-wide analysis of the long-term effects of tariff and TRQ liberalization estimates
that U.S. exports of electronic equipment to Korea would be likely to increase by
$212–231 million (3.8–4.2 percent). 406 Despite the fact that many electronics products are
duty-free under the ITA, FTA provisions provide general duty-free access to non-ITA goods
such as CE. CE are estimated to account for less than 5 percent of total U.S. exports of
electronics and are expected to benefit from FTA tariff liberalizations. Nontariff provisions,
such as those in the intellectual property and TBT chapters of the FTA, are expected to
improve U.S. electronics firms’ competitiveness in the Korea market. 407 For example, U.S.
industry representatives express the view that the FTA provides strong protection for
intellectual property rights. 408 Furthermore, U.S. manufacturers are leading suppliers of many
electronics products, and the current Korean market demand for sector products such as
wireless broadband equipment is expected to benefit U.S. firms. 409 Korea’s high rate of
Internet usage and broadband penetration—the U.S. Commercial Service estimated it to be
approximately 90 percent of Korean’s 15 million households in 2006—along with the
development of new wireless Internet technologies, has provided opportunities for highly
innovative and specialized U.S. telecommunications equipment firms. 410
Wireless technological innovation and broadband access in Korea has also increased demand
for computer software in the market. Because computer software currently receives duty-free
access to the Korean market under the ITA, the sector is expected to benefit primarily from
FTA provisions addressing NTMs. Industry groups, such as the International Intellectual
Property Alliance (IIPA), indicate that the FTA’s intellectual property provisions would have
403 Other industries that may benefit from Korea’s agreement to accept remanufactured goods include
machinery and medical goods. USTR fact sheet “Free Trade with Korea, Brief Summary of the Agreement.”
Korea currently allows imports of remanufactured goods, with requirements on certain goods, particularly
medical devices. There is no known prohibition, however, on imported remanufactured goods. U.S.
government official, e-mail message to Commission staff, July 5, 2007.
404 The concept of remanufactured goods is relatively new in Korea. A law relating to domesticallyremanufactured
goods was enacted in December 2005 to foster environmentally friendly industries, including
remanufactured goods. U.S. government official, e-mail message to Commission staff, July 13, 2007.
405 U.S. government official, e-mail message to Commission staff, July 13, 2007.
406 Impact relative to an estimated 2008 base. See chap. 2 of this report for additional information
regarding the economy-wide analysis.
407 For additional analysis regarding TBTs and other NTMs, see chap. 5 of this report.
408 ITAC (15) on Intellectual Property Rights, Advisory Committee Report, April 27, 2007, 6; and ITAC
(8) for Information and Communications Technologies, Services and Electronic Commerce, Report,
April 27, 2007, 4.
409 USFCS, “Doing Business in Korea: A Country Commercial Guide for U.S. Companies,” 2007.
410 Ibid.
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