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

CHAPTER 4
Impact of Market Access Provisions for
Services
This chapter assesses the potential effect of the U.S.-Korea FTA on the services sector and
services trade. The analysis first focuses on cross-border trade in services 1 generally, and
then discusses financial, telecommunications, professional, and audiovisual services
specifically.
FTA Chapter 12—Cross-Border Trade in Services
Assessment
The trade-in-services provisions of the U.S.-Korea FTA would provide U.S. firms levels of
market access, national treatment, and regulatory transparency that exceed those afforded
both by Korea’s commitments under the GATS, the first legally enforceable agreement on
trade in services, and by de facto market conditions for U.S. services firms. 2 The effect of
FTA disciplines on overall bilateral services trade would likely be greater than other recent
FTAs, because Korea’s services market is large (box 4.1). Restrictions in Korea pertaining
to numerous services industries would, however, remain in place after the FTA enters into
force. 3
Overall, the Korean services market is less open to foreign services firms than the U.S.
market. 4 Currently, the Korean market is relatively open to U.S. cross-border services
exports but relatively closed to U.S. services firms operating on a commercial-presence
basis; i.e. selling services through a U.S.-owned affiliate located in Korea. Direct measures
of the competitive position of U.S. services firms relative to foreign country counterparts are
not available, but indirect measures indicate that, on a commercial-presence basis, U.S.
services firms are on roughly equal footing with EU services firms. Korea is the seventhlargest
cross-border export market for U.S. services firms. 5 Relative to its GDP, Korea
consumes a moderate amount of U.S. cross-border exports, importing more U.S. services
1 The term “cross-border trade,” as used in this chapter, indicates that services, service suppliers, or
service consumers have crossed national boundaries to affect trade. The term is intended to differentiate
these modes of delivery from delivery through affiliates located in the country of the consumer.
2 WTO, “General Agreement on Trade in Services, Republic of Korea, Schedule of Specific
Commitments,” April 15, 1994. Prior to the U.S.-Korea FTA, the GATS governed the rights and obligations
that U.S. service providers had in Korea. The Commission, therefore, uses Korea’s GATS commitments as a
baseline from which to measure the benefits of the FTA.
3 It is not possible to establish an overall quantitative measure of the effect of the U.S.-Korea FTA on
trade in services because of the unavailability of necessary data. Using methodology developed by the
Commission, however, a quantitative measure of impediments to banking services is presented in the
financial services assessment in this chapter and in app. H of this report.
4 Reis, testimony before the USITC, June 20, 2007.
5 USDOC, BEA, “International Economic Accounts,” July 16, 2007.
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