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

In particular, USCIB expressed support for a number of aspects of the investment chapter
of the agreement including establishment of a broad definition of investment; limits on
expropriation; and international dispute settlement between investors and the government.
USCIB expressed reservations, however, regarding a number of investment provisions and
exceptions included in the agreement. These included provisions allowing Korea to impose
limited restrictions on certain capital flows; an exception to national treatment and
performance requirements when a measure is necessary to protect the public order; and the
lack of investor-state arbitration for financial institutions regarding prudential measures.
Welch Foods Inc., a Cooperative 61
Welch Foods Inc., a Cooperative (Welch’s), stated in a written submission to the
Commission that it is the processing and marketing subsidiary of the National Grape
Cooperative Inc. (National), which consists of approximately 1,333 members who grow
Concord and Niagara grapes in the states of New York, Pennsylvania, Ohio, Michigan, and
Washington. Welch’s reported that National has processing plants in New York, Michigan,
Pennsylvania, and Washington state. Welch’s added that its signature product is Concord
purple grape juice, and that it also produces other fruit juices, juice cocktails, jellies, jams,
preserves, juice bars, and fruit-flavored carbonated beverages. Welch’s products are sold in
the United States and about thirty countries throughout the world, and that it exports
primarily Concord grape juice concentrate to Korea. Welch’s sells its white grape/peach 100
percent juice in Korea made from U.S.-origin Thompson grape juice concentrate and U.S.origin
peach concentrate. Welch’s stated that the principal barrier to increasing its exports
to Korea is Korea’s 45 percent tariff on grape juice concentrate.
Welch’s supports the quick implementation of the U.S.-Korea FTA agreement, which will
immediately and completely remove tariffs on U.S. exports of grape juice concentrate. Korea
is a good market for its grape juice exports and that with duty-free access Korea has the
potential to become a more important and profitable market for Welch’s and other U.S. grape
juice producers and exporters. The U.S.-Korea FTA, once implemented, will have a positive
economic effect on its grape growers, Welch’s and other U.S. grape juice producers, Korea’s
grape juice processing and distribution sectors, and Korean consumers. Welch’s also stated
that it is interested in sections of the FTA agreement that deal with strengthening Korea’s
trademark rules to protect U.S. trademarked products such as the Welch’s trademarked name.
Welch’s has exported U.S.-origin Concord grape juice products to Korea for 12 years. From
1995 to 2002, it exported only finished grape juice products manufactured in Welch’s
processing plant in Washington state; since 2003, it has exported bulk Concord grape juice
concentrate to Korea to be manufactured and bottled in Korea under the Welch’s trademark
under an exclusive agreement with its Korean partner, Nong Shim, one of the largest food
companies in Asia. Welch’s reported that all of its products presently sold in Korea are
locally manufactured in Korea by Nong Shim. As a result, between 2002 and 2006, retail
sales in Korea of its finished Concord grape juice increased fourfold from a relatively low
base. This, Welch’s added, was due to the in-country manufacturing of Welch’s concentrate
in Korea, the wide distribution offered by Nong Shim, and the active promotional efforts.
Welch’s noted, however, that total U.S. exports of grape juice to Korea fell from over $9
million in 2002 to about $6.5 million in 2006 as the composition of U.S. exports changed
from higher-valued finished product to lower-valued bulk product. Welch’s noted that
Korea’s grape juice market is almost exclusively supplied by imported product from the
61 Welch Foods Inc., a Cooperative, written submission, June 14, 2007.
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