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

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This report was prepared principally by Project Leader Nannette Christ nannette.christ@usitc.gov Deputy Project Leader Queena Fan queena.fan@usitc.gov Office of Industries Lisa Ferens Alejandro, Jennifer Baumert, Laura Bloodgood, Joanna Bonarriva, William Chadwick, Roger Corey, Alfred Dennis, Eric Forden, John Fry, Erland Herfindahl, David Ingersoll, Cathy Jabara, Christopher Johnson, Joseph Kowalski, Katherine Linton, Dennis Luther, Brendan Lynch, Timothy McCarty, Deborah McNay, Erick Oh, Joann Peterson, Laura Polly, John Reeder, Mark Simone, Philip Stone, and Robert Wallace Office of Economics Nancy Bryan, Robert Feinberg, Michael Ferrantino, Alan Fox, William Powers, and Edward Wilson Office of Tariff Affairs and Trade Agreements Janis Summers Primary Reviewers Cathy Jabara and James Stamps Office of Investigations, Statistical Services Division Barbara Bryan Administrative Support Monica Reed and Pat Thomas Supporting assistance was provided by: Robert Blakey, Brian Bombassario, Nick Grossman, Dean Gudicello, Gerald Houck, Stacy Ma, and Ioana Mic Under the direction of Arona Butcher Chief, Country and Regional Analysis Division
CONTENTS Abbreviations and Acronyms ............................... xi Executive Summary ............................................ xvii Overview.......................................................... xvii Summary of findings................................................. xix Goods market access ............................................. xix Impact of tariff- and tariff-rate quota-related provisions on the U.S. economy ................................................ xix Sector-specific assessments ........................................ xx Impact of market access provisions for services ........................ xxiii Impact of trade facilitation provisions ................................ xxiv Impact of regulatory provisions ..................................... xxv Literature review ................................................ xxvi Chapter 1. Introduction ....................................... 1-1 Scope and approach of the report ....................................... 1-1 U.S.-Korea FTA overview ............................................ 1-2 U.S.-Korea trade overview ............................................ 1-3 U.S. merchandise exports .......................................... 1-5 U.S. merchandise imports.......................................... 1-6 FTA tariff commitments .............................................. 1-7 Chapter 2. Impact of tariff- and tariff-rate quotarelated provisions on the U.S. economy ........... 2-1 Analytical framework ................................................ 2-1 Simulation results ................................................... 2-5 Estimated changes in trade flows .................................... 2-7 U.S. gross output and employment effects............................. 2-13 Economy-wide impact of implementing the immediate duty-free tariff lines................................................... 2-16 Chapter 3. Sector-specific assessments .................. 3-1 Grain (wheat, corn, and other feed grains) ............................. 3-2 Assessment .................................................. 3-2 Views of interested parties...................................... 3-4 Oilseed products (soybeans and soybean oil) ........................... 3-5 i Page
Page 2 and 3: U.S. International Trade Commission
Page 6 and 7: CONTENTS-Continued Chapter 3. Secto
Page 8 and 9: CONTENTS—Continued Chapter 5. Imp
Page 10 and 11: CONTENTS-Continued Chapter 7. Liter
Page 12 and 13: CONTENTS-Continued Tables—Continu
Page 15 and 16: Abbreviations and Acronyms 3G third
Page 17 and 18: Abbreviations and Acronyms—Contin
Page 19: Abbreviations and Acronyms—Contin
Page 22 and 23: vehicles) would likely be diverted
Page 24 and 25: Sector-specific Assessments The U.S
Page 26 and 27: total increased fish imports from K
Page 28 and 29: Korea would likely limit the impact
Page 30 and 31: Intellectual property rights (IPR):
Page 32 and 33: sector barriers. 5 These merchandis
Page 34 and 35: Table 1.1 U.S.-Korea FTA: Location
Page 36 and 37: Table 1.2 Korean tariff rates on im
Page 38 and 39: Table 1.4 U.S.-Korea FTA: Summary o
Page 40 and 41: observed GDP for model regions). Th
Page 42 and 43: Box 2.1 Interpreting the model resu
Page 44 and 45: Table 2.1 U.S.-Korea FTA: Simulated
Page 46 and 47: 2-8 This page has been updated to r
Page 48 and 49: Figure 2.2 U.S-Korea FTA: Simulated
Page 50 and 51: As shown in figure 2.2, the largest
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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
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FTA Chapter 15-Electronic Commerce
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Views of Interested Parties The U.S
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quantities as to be a substantial c
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that such transshipment could imped
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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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