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

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device pricing, reimbursement, and regulatory policies, the FTA should lessen the opportunities and incentives for engaging in unethical business practices. 537 An analysis of international price and quantity data comparing Korean imports to other comparable countries indicates that the potential effect of NTMs on Korean imports may be to restrict the quantity of imports or raise the price of imports for medical devices. As box 3.5 suggests, U.S. exports of ultrasound scanning apparatuses may be affected not only by tariffs, but by NTMs as well. Implementation of the NTM-related provisions of the FTA will likely be critical for U.S. exporters to fully realize the gains in market access for medical devices. Views of Interested Parties Three industry associations, the Advanced Medical Technology Association (AdvaMed), the Pharmaceutical Research Manufacturers of America (PhRMA), and the National Electrical Manufacturers Association (NEMA), each provided information regarding the U.S.-Korea Free Trade Agreement in various news releases and statements. In a news release, AdvaMed states that the FTA demonstrates Korea’s commitment to increasing access for its citizens to innovative medical technologies and that it supports the establishment of the Medicines and Medical Devices Committee. 538 Further, AdvaMed added that Korea is an important market for U.S. medical technology companies, where U.S. manufacturers exported more than $670 million worth of medical technology products to Korea. 539 In addition, PhRMA, along with several U.S. industry officials, stated that, to achieve the FTA’s goals, it recommends that the U.S. government closely monitor the full and effective implementation of Korea’s FTA commitments and continue to work with Korea regarding its reimbursement system. 540 Lastly, in an issue brief, the National Electrical Manufacturers Association (NEMA), which represents medical imaging and other electrical manufacturers, reports that the FTA’s market access provisions will improve sales opportunities in Korea for its members. 541 In its report on the FTA, the ITAC for Chemicals, Pharmaceuticals, and Health/Science Products & Services (ITAC 3), which represents a wide range of U.S. health-care manufacturers, states that it is pleased that remaining tariffs will be removed on medical equipment. 542 The report states that committee members believe that the pharmaceuticals and medical devices chapter contains a number of important improvements to Korea’s regulatory 537 Reis, testimony before the USITC, June 20, 2007, 28; and USTR, 2007 National Trade Estimate Report on Foreign Trade Barriers, April 2007, 370. 538 AdvaMed, “AdvaMed Welcomes U.S./Korea Free Trade Agreement (April 3, 2007),” 1. 539 Ibid. 540 U.S. industry officials, interview by Commission staff, May 16, 2007; and PhRMA, “PhRMA Statement on the U.S.-Korea Free Trade Agreement (April 3, 2007),” 1. 541 NEMA, “Issue Brief: US-South Korea Free Trade Agreement,” April 2007, 1. 542 ITAC (3) on Chemicals, Pharmaceuticals, Health/Science Products and Services, Advisory Committee Report, April 24, 2007, 13. 3-94
Box 3.5 Potential price and quantity effects of NTMs on ultrasound scanning apparatus (HS 901812) Firms seeking to export to Korea have identified a variety of NTMs that may have impeded their access to the market for medical equipment, including opaque pricing and reimbursement policies, overly complex and costly regulatory requirements, and unethical business practices (see text). These measures may restrict the quantity of imports into the Korean market, raise the price of imports, or both. Korean imports of this product, in quantity terms, are substantially lower than imports of the same product into most other economies, relative to the size of the Korean economy. Korea's import unit value for imported ultrasonic scanning apparatus is substantially higher than the import unit value for most other countries. Existing tariffs of 8 percent ad valorem appear to be too low to account by themselves for either the relatively low quantity of imports or the relatively high price of imports. This relatively low quantity and relatively high price of imports may be reflective of the effects of NTMs, but could also be influenced by such factors as market structure, product differentiation, and consumer preferences. Korean imports of ultrasonic scanning apparatus in 2003–05 were 0.0028 units per million $ GDP, as compared to a median of 0.012 units among 23 comparable countries. Korea ranks twenty-second out of the 23 comparable countries in imports relative to the size of its economy, with only Thailand ranking lower. The number of comparison countries is limited because some countries measure imports in kilograms or other units. The Korean average import price from the United States during 2004–06, was $31,733 per ultrasonic scanner, which is 48 percent higher than the U.S. export price to the world of $21,450. The Pharmaceuticals and Medical Devices and TBT chapters of the FTA are intended to address some of these NTMs (see chapter 5 of this report for additional information on TBT provisions and appendix D for a summary of the FTA chapter on Pharmaceuticals and Medical Devices). 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. and reimbursement systems concerning access to innovation, imposition of an independent appeals process, increased transparency and accountability, and maintenance of ethical business practices to ensure a level playing field. 543 The report, however, says that the committee believes that substantial work remains to ensure full implementation of the FTA’s provisions to address the challenges that innovative medical device and pharmaceutical firms face in gaining fair access to the Korean market. In its report, the ITAC on Small and Minority Business (ITAC 11) states that it believes the chapter on pharmaceuticals and medical devices will expand opportunities for small businesses in the medical device industry. 544 Finally, the Intergovernmental Policy Advisory Committee noted that it is pleased that state-level Medicaid programs are excluded from coverage of the chapter on pharmaceuticals and medical devices, which applies only to central-level government health-care programs. 545 543 Ibid., 16. 544 ITAC (11) on Small and Minority Business, Advisory Committee Report, April 26, 2007, 4. 545 IGPAC, Advisory Committee Report, April 24, 2007, 23. 3-95
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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
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Economy-wide Impact of Implementing
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Grain (Wheat, Corn, and Other Feed
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Korea imported 3.8 million mt of wh
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U.S. oilseed product exports to Kor
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Table 3.2 U.S. oilseed product expo
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Table 3.3 Animal feed exports to Ko
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consumed domestically by the U.S. l
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ates. For corn starch, the United S
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quota rates have been effectively e
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Noncitrus Fruit 87 Views of Interes
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3-20 Table 3.9 U.S.-Korea trade and
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Korean grapes are much more costly
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Potato Products 122 Assessment The
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ate is 304 percent ad valorem. 141
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Other Vegetables 162 Assessment The
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U.S. exports of other fresh and pro
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tariff concessions that could accru
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Dairy Products 215 Similarly, the p
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TRQ for food whey, 223 based on cur
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potential changes in trade based so
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Figure Figure 3.1 Korea: Beef and v
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Views of Interested Parties The inc
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Page 102 and 103: Box 3.2 Potential price and quantit
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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 151 and 152: CHAPTER 4 Impact of Market Access P
Page 153 and 154: elative to GDP than do China, Japan
Page 155 and 156: services as a substantial improveme
Page 157 and 158: Box 4.2 Financial services: Competi
Page 159 and 160: Summary of Provisions Chapter 13 of
Page 161 and 162: national treatment, full establishm
Page 163 and 164: Box 4.4 Competitive conditions in t
Page 165 and 166: and cross-connect links 70 are more
Page 167 and 168: Box 4.5 U.S. legal services trade w
Page 169 and 170: establish offices in Korea to provi
Page 171 and 172: Box 4.6 Competitive conditions in t
Page 173 and 174: equirements and foreign ownership r
Page 175 and 176: CHAPTER 5 Impact of Trade Facilitat
Page 177 and 178: publication and administration of t
Page 179 and 180: Views of Interested Parties In its
Page 181 and 182: Summary of Provisions This chapter
Page 183 and 184: use of TBTs to protect Korea’s au
Page 185 and 186: conformity assessment procedures el
Page 187 and 188: FTA Chapter 15-Electronic Commerce
Page 189: Views of Interested Parties The U.S
Page 192 and 193: quantities as to be a substantial c
Page 194 and 195: that such transshipment could imped
Page 196 and 197: 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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