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

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.
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