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

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ates. For corn starch, the United States has a very small market share, as the duty-free access of 12,000 mt provided in Korea’s WTO commitment has been largely filled by China. Under the FTA, up to 10,000 mt of U.S. exports of corn starch would be able to enter Korea free of duty, which would grow at a rate of 3 percent per year until elimination in year 15 of the FTA. Corn starch would also have its base and safeguard tariffs reduced over a 15-year period (table 3.8). Because the FTA would provide immediate country-specific dutyfree access of up to 10,000 mt solely to the United States, with subsequent 3 percent annual growth eventually leading to unlimited access, U.S. access to the Korean market should improve substantially. Given that recent U.S. corn starch exports to Korea have been less than the FTA quota allocations, this improved access would allow U.S. corn starch exports to increase significantly and to gain competitiveness against China, which is the dominant supplier, accounting for 99 percent of Korean imports in 2006. 63 Unlike corn starch, exports of starches manufactured from wheat, potato, cassava (manioc), and other starches would not be expected to increase substantially in the short term because of limited quota allocations. Therefore, the near-term improvement in market access afforded by the FTA would only be minimal for U.S. exports of these starches. Table 3.8 U.S. starch exports to and market access in Korea 2006 U.S. exports metric tons 2006 base tariff percent FTA tariff staging 63 Global Trade Information Services, World Trade Atlas Database. 64 Includes products in HS 3505.10. Modified starches are starches from corn, potatoes, or other agricultures products that are chemically treated to break the starch into smaller molecules (dextrins) or to attach additional chemical groups. Modified starches are often used in prepared foods to enhance texture or viscosity. 65 APAC for Trade, Agricultural Policy Advisory Committee for Trade Report, April 27, 2007, 2. 66 Industry officials, telephone interviews by Commission staff, May 25–28 and June 26, 2007. 3-14 First year TRQ or safeguard metric tons First year safeguard tariff percent Corn 373 226.0 15-year 10,000 221.2 Starch, nesoi 243 800.3 15-year 53 783.2 Wheat 401 50.9 10-year None N/A Potato 79 455.0 15-year 239 445.3 Sweet potato 0 241.2 15-year 202 236.1 Cassava (manioc) 0 455.0 15-year 433 445.3 Sources: Official statistics of the U.S. Department of Commerce; and USTR, “Final - United States - Korea FTA Texts,” 2007, Agricultural Tariff Schedule for the Republic of Korea, and Annex 3-A Agricultural Safeguard Measures, Schedule of Korea. Note: Includes HS 110811, 110812, 110813, 110814, and 110819. N/A= not applicable. Modified Starches Dextrins and other modified starches 64 could benefit from the expanded access to the Korean market, 65 and exports of these products would increase slightly. 66 This increase would result from the eventual elimination of tariffs that currently range from 8 percent ad valorem for dextrins to 385.7 percent for various modified starches. Complete elimination of tariffs, however, would not occur until year 13. Korea has a sophisticated prepared foods industry
Citrus Fruit 73 that uses modified starches; however, because the Korean market is relatively small, it is not as attractive to U.S. companies as other overseas Asian markets such as China and Indonesia, which have larger populations than Korea. 67 Modified starches produced in the United States tend to be “high-tech,” high-unit-value products that may not be available from Korean producers, as they currently do not have the same level of technical sophistication as U.S. producers. 68 Two Korean tariff lines covering pregelatinised or swelling starches and etherified or esterified starches would be subject to TRQs and over-quota duties in excess of 375 percent ad valorem in year 1. 69 Quantities of these modified starches below the safeguard quota would be free of duty. In 2006, U.S. exports of dextrins and modified starches to Korea were $3.0 million and accounted for 4.2 percent of total Korean imports of these products. 70 For the Korean tariff lines subject to TRQs and safeguards, the U.S. exported a total of $1.7 million and 785 mt to Korea, 71 well below the quantity that would trigger the safeguard. Given the typically high unit values for U.S.-produced modified starches, the low volumes for the quotas would still allow a moderately high value for U.S. exports. Views of Interested Parties The Corn Refiners Association (CRA), 72 a national trade association representing much of the corn refining industry in the United States, indicated that it supports the FTA as it will create new market access for corn starch and modified starches. While noting that the duty phaseouts for corn starch and modified starch last several years, the CRA stated that it was pleased that the United States was able to obtain country-specific TRQs or safeguards that will facilitate the export of U.S. corn starch, dextrin, and modified starches. The CRA also notes that despite the relatively modest amounts of duty-free access provided in the TRQs for corn and modified starch, the CRA expects that the higher-value specialty starches for the food, pharmaceutical, and paper industries will fill these TRQs. The CRA estimates the value of this new market access at approximately $50 million. Assessment U.S. exports of citrus fruit to Korea would likely increase, primarily as a result of tariff reductions, quota removal, and the reduction of NTMs under the FTA. Korea has maintained a tariff-rate quota on U.S. oranges since 1997, although since 2004, the in-quota and over- 67 Industry official, telephone interview by Commission staff, June 26, 2007. 68 Industry official, telephone interview by Commission staff, June 26, 2007. 69 The safeguard measures are based on quantity rather than price. The safeguard quotas are equal to the TRQs except that the safeguards apply until year 13, one year longer than the TRQs. 70 Global Trade Information Services, World Trade Atlas Database. 71 Ibid. 72 Erickson, “Re: Investigation No. TA-2104-24: U.S.-Korea Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects,” written submission to the USITC, June 21, 2007. 73 The products covered in this assessment represent approximately 50 percent of U.S. exports to Korea in the GTAP “fruits, vegetables, nuts” sector, for 2006. 3-15
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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
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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Page 54 and 55: Economy-wide Impact of Implementing
Page 56 and 57: Grain (Wheat, Corn, and Other Feed
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 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
Page 80 and 81: ate is 304 percent ad valorem. 141
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
Page 98 and 99: are subject to the same food safety
Page 100 and 101: enefit under the provisions of this
Page 102 and 103: Box 3.2 Potential price and quantit
Page 104 and 105: 50 percent, while the vegetable jui
Page 106 and 107: and major supplier, and U.S. tariff
Page 108 and 109: textiles and apparel through 2005.
Page 110 and 111: U.S. Exports The impact of the FTA
Page 112 and 113: passage. NCTO indicated that, even
Page 114 and 115: In its report, the ITAC on Distribu
Page 116 and 117: 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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