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

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.
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