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

accounted for about 3 percent, Chile about 2 percent, and Australia less than 1 percent. 80
Although the United States is a highly competitive exporter of fresh citrus, it owes much of
its market share in Korea, in part, to the fact that Korea bans products from many other fresh
citrus producers based on SPS concerns.
Among citrus products, the largest percentage export increase is expected to be for fresh
lemons. The 30 percent tariff reduction over 2 years would make lemons relatively less
expensive for Korean consumers, potentially increasing Korean demand and U.S. exports.
It should be noted, however, that Korean tariffs are only a small portion of the cost of
marketing lemons in Korea relative to the relatively high overhead in Korean supermarkets. 81
U.S. grapefruit exports would also be expected to grow significantly over the 5 year
phaseout of the 30 percent tariff, particularly California pomelos, which have sold well in
Korea and are prized for their large size, particularly as gifts or ornaments. Grapefruit
exports to Korea would be enhanced further if the SPS issues with Florida, such as the
Mediterranean fruit fly, could be resolved. The United States dominates world grapefruit
exports with about a 70 percent world share of all fresh grapefruits, and would be expected
to be competitive with those from other suppliers.
Orange exports would be expected to increase, but not as rapidly, as much of the U.S.
harvest season falls in the September through February period in which the seasonal TRQ
remains, although the duty-free in-quota amount increases 3 percent per year. The
agreement, however, would have an immediate and significant effect on exports of lateseason
U.S. oranges that can be shipped to Korea after March 1, when the tariff would
decline from 50 percent to 30 percent in the first year, and 5 percent per year thereafter.
Anticipated increases in U.S. citrus exports, however, may be hampered by the
administration of the remaining TRQs and other NTMs, which are not specifically addressed
by the FTA. Korea does not grow lemons, grapefruit, or large oranges such as navels or
Valencias. Korea has a domestic citrus industry located on Korea’s southernmost island,
Cheju Island, that grows mainly Unshu tangerines for domestic consumption. This citrus is
a Korean and Japanese variety not grown in the United States, but which the Korean
government historically has protected. 82 When Korea first granted an orange quota to U.S.
exporters under the reduced tariff Minimum Market Access quota, the administration of the
quota was given to the Cheju Citrus Grower’s Agricultural Cooperative (CCGAC). CCGAC,
whose members consist solely of domestic producers, has the authority to auction the
quotas. 83 According to USDA/FAS, this composition of the CCGAC led to an appearance
of a conflict of interest in the administration of the quota. 84 For example, in some years, the
quota was not fully filled, even though U.S. oranges entered Korea at the over-quota rates.
80 Global Trade Information Services, World Trade Atlas Database.
81 Mike Wooton (Vice-President of Corporate Affairs, Sunkist Growers), interview by Commission staff,
Sherman Oaks, CA, June 12, 2007.
82 USDA, FAS, “Korea Citrus Annual,” December 1, 2006, 1.
83 The WTO TPRM cites the Jeju Citrus Grower’s Agricultural Cooperative as being an STE whose
products include oranges, mandarins, and tangerines. The WTO TPRM states that the average fill ratio of
tariff quotas is about 70 percent, and that the CCGAC is an STE that either utilized, administered, or
allocated tariff quotas, raising “potential conflicts between their importing interests and those of their farm
constituents.”
84 WTO, Trade Policy Review Body (TPRB), “Minutes of Meeting Held on 31 October,”
October 31, 2000.
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