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

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Grain (Wheat, Corn, and Other Feed Grains) 5 Assessment The U.S.-Korea FTA would likely have a negligible impact on U.S. grain exports to Korea as a result of the increased market access afforded through tariff removal. Based on current export patterns and trends, about 80 percent of the expected additional U.S. grain exports to Korea would likely consist of yellow corn, with the remainder being wheat and barley. Estimates from the Commission’s economy-wide analysis of the long-term effects of tariff and TRQ liberalization indicates that cereal grains exports, which include corn and other feed grains, would likely increase by approximately $7 million (2.2 percent), and U.S. wheat exports would likely increase by approximately $2 million (1.0 percent). 6 These increases depend substantially on the estimated increases in U.S. exports of meat products to Korea, as significant expansion in the meat sector could cause U.S. exports of cereal grains and wheat to Korea to decline. Such a decline would result from the effect of supply or demand changes in other upstream or downstream sectors. For example, on the U.S. supply side, the anticipated expansion in exports of beef and other food products increases demand for upstream agricultural products that may compete with wheat and cereal grains for resources, which may induce the reorientation of production for U.S. meat that will ultimately be exported to Korea, or may encourage switching to other crops or activities. On the Korean demand side, a substantial increase in shipment of bovine meat products to Korea would reduce Korean cattlemen’s demand for wheat and corn for feed, dampening Korean demand for grain despite the removal of the tariff. 7 Table 3.1 outlines the first full year of market access for U.S. grain exports to Korea under the FTA. The 2006 Korean tariff treatment for U.S. products is shown under the column, “Applied rate, 2006.” U.S. wheat and yellow corn exports to Korea would attain immediate duty-free treatment upon implementation of the agreement. TRQs established are for barley and popcorn, although the United States has not exported significant amounts of these grains to Korea during 2002–06. The first-year quota levels for barley and popcorn are well above U.S. exports in 2006. 5 Includes Harmonized Tariff Schedule of the United States (HTS) headings 1001 through 1008, except rice (HTS subheading 1006). The grain sector as described in this section of the report focuses on corn and wheat, although the FTA also addresses sorghum, and barley, whose trade is negligible with Korea. Corn is destined for livestock feed in Korea, processing into corn byproducts, and direct food use. The products covered in this assessment represent 100 percent of U.S. exports to Korea in the GTAP “cereal grains” and “wheat” sectors, and represent 100 percent of U.S. imports from Korea in the GTAP “cereal grains” sector, for 2006. 6 These estimated increases in exports of corn and other feed grains ($7 million), and wheat ($2 million) represent mean values of the range estimates provided by the economy-wide analysis, relative to an estimated 2008 base. Cereal grains exports could decrease by up to $4 million (-1.5 percent) or increase by up to $18 million (6.1 percent); and wheat exports could decrease by up to $5 million (-2.9 percent) or increase by up to $9 million (4.9 percent). As a result, the economy-wide analysis estimated that output and employment changes in the wheat and cereal grains sectors could range from -0.7 percent to 0.0 percent. See chap. 2 of this report for additional information regarding the economy-wide analysis. 7 Given that the model assumes a fixed quantity of resources, it is possible for exports to decrease despite reduction in Korean tariffs as a result of the reallocation of resources in the United States to other more liberalized sectors. See chap. 2 of this report for additional information on the economy-wide general equilibrium analysis of tariff and TRQ liberalizations under the FTA. 3-2
Table 3.1 U.S. grain exports to and market access in Korea Product Wheat: Barley: U.S. exports to Korea Korean market access 2002–06 average 2006 8 Compiled from official statistics of the U.S. Department of Commerce. 9 USDA, FAS, “Korea Grain and Feed Annual 2007,” May 1, 2007, 20. 10 Ibid., 9. 11 Ibid., 23. 12 IP status requires product separation and origin identification of each grain of shipment. USDA, FAS, “Korea Biotechnology Agricultural Biotechnology Report 2006,” July 6, 2006, 5. 3-3 Applied rate, 2006 First year TRQ Over-quota tariff (1,000 metric tons) (Percent AVE) (1,000 metric tons) (Percent AVE) Milling 1,198 1,117 1 None Free Feed 55 15 Free None Free Malting 0 0 20 9 513 Other 0 0 2 or 5 2.5 324–299.7 Corn: Yellow 2,749 6,035 1.8 or 3.0 None 328 Popcorn 2 0 1.8 5 601.2 Source: USTR, “Final - United States - Korea FTA Texts,” 2007, General Notes, Tariff Schedule of Korea, Annex 3-A, and Appendix 2-B-1; official statistics of the U.S. Department of Commerce; USDA, FAS, “Korea Grain and Feed Annual 2007,” May 1, 2007, 18–24; and USDA, FAS, “Fact Sheet U.S.-Korea Free Trade Agreement Benefits for Agriculture,” June 2007, 4–5. U.S. grain exports to Korea in 2006 accounted for 7 percent of total U.S. grain exports to all countries. 8 Approximately 79 percent of grain exports to Korea in 2006 consisted of corn; 21 percent consisted of wheat; and a negligible percentage consisted of grain sorghum, rye, and oats. U.S. corn exports to Korea in 2006 consisted solely of yellow corn. The United States, a highly competitive grain exporter, supplied 63 percent of Korea’s 8.5 million metric tons (mt) of corn imports in marketing year 2005/06; China and Brazil together supplied the remaining 37 percent. 9 In marketing year 2005/06, Korea imported 92 percent of its corn consumption. 10 About three-quarters of Korean corn imports were consumed as animal feed, and most of the remaining one-quarter was consumed by the industrial wet-corn milling processing industry (made into corn oil, high fructose corn syrup, and corn starch). 11 Corn destined for animal feed can include genetically-modified (GM) corn, whereas corn destined for food products in Korea must be identity preserved (IP) and non-GM. 12 The estimated increase in U.S. exports of corn will likely result from increased corn consumption stimulated by a lower domestic price (as the tariff is removed), and by slightly lower Korea corn production. China tends to export low-priced corn and has a substantial freight advantage over the United States.
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U.S. International Trade Commission
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This report was prepared principall
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Page 15 and 16: Abbreviations and Acronyms 3G third
Page 17 and 18: Abbreviations and Acronyms—Contin
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Page 22 and 23: vehicles) would likely be diverted
Page 24 and 25: Sector-specific Assessments The U.S
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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
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Page 44 and 45: Table 2.1 U.S.-Korea FTA: Simulated
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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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Page 54 and 55: Economy-wide Impact of Implementing
Page 58 and 59: Korea imported 3.8 million mt of wh
Page 60 and 61: U.S. oilseed product exports to Kor
Page 62 and 63: Table 3.2 U.S. oilseed product expo
Page 64 and 65: Table 3.3 Animal feed exports to Ko
Page 66 and 67: consumed domestically by the U.S. l
Page 68 and 69: ates. For corn starch, the United S
Page 70 and 71: quota rates have been effectively e
Page 72 and 73: Noncitrus Fruit 87 Views of Interes
Page 74 and 75: 3-20 Table 3.9 U.S.-Korea trade and
Page 76 and 77: Korean grapes are much more costly
Page 78 and 79: Potato Products 122 Assessment The
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Page 82 and 83: Other Vegetables 162 Assessment The
Page 84 and 85: U.S. exports of other fresh and pro
Page 86 and 87: tariff concessions that could accru
Page 88 and 89: Dairy Products 215 Similarly, the p
Page 90 and 91: TRQ for food whey, 223 based on cur
Page 92 and 93: potential changes in trade based so
Page 94 and 95: Figure Figure 3.1 Korea: Beef and v
Page 96 and 97: Views of Interested Parties The inc
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Page 102 and 103: Box 3.2 Potential price and quantit
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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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