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

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Table 7.3 Change in output by sector: Selected economic literature on a U.S.-Korea FTA Change in output (percent) Zhuang and Kiyota and Schott, Bradford, Sector USITC Koo Stern and Moll All agriculture, food, and beverages 0.6 0.8 0.2 1.9 b Rice (paddy and processed) 0.0 a -0.8 Wheat 0.2 -5.9 Other grains 1.6 Fruits and vegetables 0.0 a 0.2 -0.9 Oilseeds 1.7 Sugar 0.1 Plant-based fibers 0.0 a Other crops 0.3 Agriculture n.e.c. 1.0 6.9 b Meat products 0.7 0.1 -0.6 Beef -0.6 Other meat -0.7 Dairy 0.5 0.0 a Food and beverages n.e.c. 0.1 0.4 All natural resources 0.0 a -0.3 0.0 a All manufacturing -0.1 0.0 a 0.0 a -0.6 Textiles, apparel, and leather -1.3 -1.5 -0.4 -1.1 Textiles -0.4 -1.3 Wearing apparel -0.5 -0.7 Leather products and footwear -0.1 -1.2 Wood and wood products 0.0 a Chemicals 0.0 a -0.4 Minerals and metals n.e.c. 0.0 a 0.0 a -0.9 Transportation equipment -0.1 -0.5 Motor vehicles -0.4 Other transport -0.6 Machinery and equipment 0.0 a -0.6 Electronic equipment -0.7 Machinery and equipment n.e.c. -0.5 Midtech manufacturing -0.3 High-tech manufacturing 0.6 Manufacturing n.e.c 0.0 a 0.0 a -0.7 All services 0.0 a 0.6 0.0 a 0.1 Trade and transport 0.0 a 0.0 a Business services 0.0 a 0.0 a Other services 0.1 Construction 0.0 a Electricity, gas, and water 0.0 a Government services 0.0 a Sources: USITC, U.S.-Korea FTA: The Economic Impact of Establishing a Free Trade Agreement (FTA) Between the United States and the Republic of Korea, 2001, 5–13; Zhuang and Koo, “Implications of the Korea-U.S. Free Trade Agreement,” 25; Kiyota and Stern, “Economic Effects of a Korea-U.S. Free Trade Agreement,” 2007,” 41; Schott, Bradford, and Moll, “Negotiating the Korea-United States Free Trade Agreement,” June 2006, 27. Some values in aggregated categories are USITC calculations based on authors’ reported values and output shares in GTAP v. 4 and 6 databases. Note: Because of differences in aggregation, studies do not report in all sectors and subsectors. a Less than a 0.05 percent positive or negative change. b This study combined agriculture and natural resource sectors. 7-6
Liberalization generated small increases in all U.S. agricultural sectors in three of these four studies; Schott, Bradford, and Moll estimated that some agricultural sectors would contract. 15 Estimated changes in these sectors were less than 1 percent in the two GTAP-based studies, though the non-GTAP models had a few larger reallocations. Three studies reported changes in food, and all agreed that U.S. food production would increase, by 0.1 to 0.5 percent. Textile and apparel output was uniformly expected to shrink, by 0.4 to 1.5 percent. The estimated effect on manufacturing was mixed, with some sectors increasing and others declining, but estimated output changes did not exceed 1 percent in any manufacturing sector. Zhuang and Koo, which exogenously imposed a 1 percent productivity improvement in high-tech sectors, reported the largest U.S. manufacturing increase, of 0.6 percent, in these sectors. Motor vehicles and transportation sectors were addressed by two studies. Schott, Bradford, and Moll estimated declines of 0.4 percent in motor vehicles and 0.6 percent in other transport; Kiyota and Stern estimated a decline of 0.1 percent in transportation overall. It is likely that this decline reflects increased U.S. imports from Korea. Although neither study reported U.S.-Korea bilateral trade values, Kiyota and Stern estimated that, in these sectors, U.S. imports from the world would increase by $680 million, while exports would increase by only $34 million, in 2007 dollar terms. The estimated change in U.S. service-sector output was small, even in the studies that included service liberalization. USITC and Schott, Bradford, and Moll did not include service liberalizations, and they estimated that nonservices liberalization would have essentially no effect on service-sector output. Although Kiyota and Stern included service liberalization, they also estimated that service-sector output would not change. 16 Lee and Lee estimated that Korean services would increase output; although they did not provide quantitative results for the United States, they reported that U.S. service providers would increase exports to Korea in the long run. Summary of Positions of Interested Parties Government of the Republic of Korea 17 In written and hearing testimony presented to the Commission, Lee Tae-sik, Korea’s ambassador to the United States, expressed support for the U.S.-Korea FTA. Ambassador Lee stated that the U.S.-Korea FTA is a large, comprehensive, high-quality, and wellbalanced FTA that manages to reflect each country’s interests over all sectors. He said that agriculture was the most beneficial area of opportunity for the United States, with almost two-thirds of U.S. farm products to become free of duty immediately; the FTA would eliminate virtually all tariffs within 10 years, increasing competitiveness and efficiency; the U.S. automobile sector would gain immensely from the FTA; most textile and apparel goods would receive reciprocal duty-free access immediately; the FTA would expand market 15 Schott, Bradford, and Moll also generally had the largest estimated output changes, both positive and negative, among all studies. These larger sectoral reallocations were consistent with larger allocative efficiency gains in this model. 16 Their large estimated welfare gains are not inconsistent with small output increases because they also estimated large increases in U.S. service-sector imports and exports. 17 Lee Tae-sik, ambassador to the United States from the Republic of Korea, testimony before the U.S. International Trade Commission, June 20, 2007, and written submission, June 20, 2007. 7-7
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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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are subject to the same food safety
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enefit under the provisions of this
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Box 3.2 Potential price and quantit
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50 percent, while the vegetable jui
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and major supplier, and U.S. tariff
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textiles and apparel through 2005.
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U.S. Exports The impact of the FTA
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passage. NCTO indicated that, even
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In its report, the ITAC on Distribu
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of the U.S. footwear market, with C
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of these producers. 362 RPFMA noted
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prohibit improper inducements by ph
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Machinery, Electronics, and Transpo
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U.S. exports of auto parts would be
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imports from and exports to Korea.
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Passenger Vehicles 433 Assessment U
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Table 3.16 Korean passenger vehicle
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import activities have continued
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Box 3.4 Automotive-related FTA Prov
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access. The FTA affirms the parties
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gaining U.S. market share regardles
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keep the products out.” 492 Mr. B
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these vehicles to Korea. The commit
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Brown expressed concern about the r
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goods; and high-technology medical,
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device pricing, reimbursement, and
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CHAPTER 4 Impact of Market Access P
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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
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
Page 198 and 199: in the FTA. The awards made by any
Page 200 and 201: Table 6.1 U.S.-Korea FTA: Industry
Page 202 and 203: (ITAC 5) report cited as particular
Page 204 and 205: Section C of Chapter 11 and the lac
Page 206 and 207: practices, and violations of consum
Page 208 and 209: FTA Chapter 17—Government Procure
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Page 212 and 213: 8) 87 also expressed support for th
Page 214 and 215: Box 6.2 Recent conditions of IPR pr
Page 216 and 217: protection to life of the author pl
Page 218 and 219: Views of Interested Parties A numbe
Page 220 and 221: GPHA stated in testimony before the
Page 222 and 223: Box 6.3 Labor market conditions in
Page 224 and 225: FTA Chapter 20—Environment 131 As
Page 226 and 227: trade measures are the least disrup
Page 228 and 229: FTA Chapter 22-Institutional Provis
Page 230 and 231: Views of Interested Parties The Ind
Page 233 and 234: CHAPTER 7 Literature Review and Sum
Page 235 and 236: 7-3 Table 7.1 Model, liberalization
Page 237: terms. Much of the increase in U.S.
Page 241 and 242: Sander Levin, Member of the U.S. Ho
Page 243 and 244: Regarding footwear and travel goods
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Page 247 and 248: The California Table Grape Commissi
Page 249 and 250: order activity, and facilitate expa
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Page 253 and 254: Information Technology Industry Cou
Page 255 and 256: With respect to tariff and nontarif
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Page 259 and 260: PhRMA identified what it views as t
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Page 263 and 264: access to the market. The Council a
Page 265 and 266: United States, Spain, Chile, Brazil
Page 267 and 268: Bibliography Advanced Medical Techn
Page 269 and 270: AT&T. “AT&T Reaction to Free Trad
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Page 273 and 274: ______. “Country Finance: South K
Page 275 and 276: Global Trade Information Services I
Page 277 and 278: International Labor Organization (I
Page 279 and 280: Jones, Laura E. Executive Director.
Page 281 and 282: Lee, Hyunok, and Daniel A. Sumner.
Page 283 and 284: Nam, In-Soo. “Helio's Losses To W
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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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