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

Market access in Korea for several U.S. noncitrus fruit products has been hampered by SPS
issues as well. 96 SPS issues, including alleged pests and diseases, such as codling moth and
fire blight, have effectively halted U.S. apple exports to Korea. 97 Exports of fresh peaches
have been halted as a result of specific SPS concerns, primarily fumigation protocols. U.S.
exports of fresh pears have also been prohibited from entering the Korean market because
of SPS issues that are naturally endemic to the Northwest pear growing industry. The
proposed FTA would establish a Committee on Sanitary and Phytosanitary Matters in order
to resolve SPS issues through science and risk-based assessments. If these SPS issues are
resolved, then the industry predicts that the market has tremendous potential for U.S.
exporters. An industry representative also stated that the resolution of these issues, along
with the phasing out of tariffs, could lead to potential apple exports of between $500,000 and
$1 million in the first year following the resolution of these issues. 98 The industry notes,
however, that the effect on U.S. peach exports will likely be small if the protocol requires
fumigation using methyl bromide, because U.S. industry is concerned that methyl bromide
detracts from the product’s quality. 99 An industry representative also estimates that if a
science-based protocol is established and can resolve the naturally endemic SPS issues
without exorbitant costs to the fresh pear industry, exports to Korea would increase to
between $500,000 and $680,000 in the first year. 100
Exports of cherries to Korea have grown significantly, averaging year-over-year growth of
over 40 percent per year since 2003. This growth was initially spurred by the fact that, in
2004, all varieties of cherries were permitted for import into Korea. Prior to that only Bing
variety cherries were permitted into the market. 101 In recent years, U.S. cherries have had an
85-percent market share in Korea. 102 U.S. fresh cherry exports would likely benefit from the
immediate elimination of Korea’s 24 percent tariff upon the implementation of the FTA.
According to industry representatives, the immediate elimination of the tariff would equate
to a cost decrease of approximately $0.75 to $0.90 per lb. 103 In total, U.S. cherry exports
would be expected to increase by 30–40 percent or approximately $3.5 million the first year
following the implementation of the FTA. 104
Upon implementation of the FTA, both out-of-season (October 16–April 30) and in-season
(May 1–October 15) fresh grape exports would likely benefit from tariff reductions. Out-ofseason
grapes would benefit from a more accelerated schedule (table 3.9). The majority of
U.S. fresh grapes are imported from October through January 105 and would therefore benefit
from the out-of-season tariff reduction. Korean domestic fresh-grape production is the
primary source of competition for U.S. grapes in Korea. The Korean domestic industry is
significant in size, producing 360,000 mt in 2005. 106 Korean growers generally harvest in late
summer and early fall, similar to when American growers harvest. The California growing
season, however, is slightly longer and extends through the late fall which, along with the
tariff reductions, would allow U.S. grapes to gain market share during the months when
96 According to official statistics of the U.S. Department of Commerce, exports of fresh apples, pears, or
peaches to Korea have not exceeded $100,000 over the past 5 years.
97 Hansen, “Korean Agreement Reduce Fruit Tree Tariffs,” May 15, 2007.
98 Northwest Horticulture Council representative, interview by Commission staff, June 1, 2007.
99 Industry representative, interview by Commission staff, June 11, 2007.
100 Industry representative, interview by Commission staff, June 6, 2007.
101 USDA, FAS, “Korea Product Brief, Fresh Stone Fruit 2005,” February 1, 2005.
102 USDA, FAS, “Republic of Korea Product Brief, Produce Market Brief Update 2005,” October 5, 2005.
103 Powers, written submission to the Trade Policy Staff Committee, Office of the USTR, March 14, 2006.
104 Northwest Horticulture Council representative, interview by Commission staff, June 1, 2007.
105 USDA, FAS, “Republic of Korea Product Brief, Produce Market Brief Update 2005,” October 5, 2005.
106 UN FAO, “Core Production Data,” July 18, 2007.
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