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

ate is 304 percent ad valorem. 141 Although seed potatoes are excluded from the TRQ on
fresh potatoes, according to a company representative, these exports are not considered an
important trade item. 142
Currently, only 5 percent of total Korean fresh-potato production is of potatoes for chipping.
Korean chipping-potato production is limited to one variety of chipping potatoes, and then
only if there is a contract with a potato-chip processor for the sale of such production. 143
Thus, supplies of locally produced potatoes for chipping are erratic. U.S. exports currently
account for about 5 percent of the total chipping market. 144 Prices for U.S. chipping potatoes
are believed to be more competitive than, and the quality better than, potatoes from
Australia, the other major foreign supplier to the Korean chipping market. 145 Increased sales
of U.S. chipping potatoes resulting from the FTA could increase U.S. market share in Korea.
In addition to chipping potatoes, an industry trade association states that Korea is also an
excellent market for expanded sales of potato chips. 146 One industry source indicated that
exports of semifinished chips could increase, especially in larger containers, as they are more
easily shipped than finished chips. 147 The industry source stated that U.S. exports of finished
potato chips are generally not economically feasible, because margins on foreign-market
sales of such chips are small and finished chips have a somewhat limited shelf life. 148
Views of Interested Parties
In its submission to the Commission, the National Potato Council (NPC) stated that the “U.S.
potato industry strongly supports the implementation of the U.S.-Korea Free Trade
Agreement.” 149 It noted that Korea is “an important and growing market for both dehydrated
and fresh potato exports,” and that the FTA “will guarantee market share for U.S. potato
products against our primary international competitors, Canada, New Zealand, Australia and
the European Union.” The NPC added that “the potato industry saw major achievements for
each of its priority products,” which are frozen fries, dehydrated potatoes, and fresh potatoes.
The NPC concluded its submission stating that the “U.S. potato industry stands to benefit
greatly from the U.S.-Korea Free Trade Agreement.”
The American Potato Trade Alliance (APTA) in a submission to the House Committee in
April 2007 stated that it supports an FTA and that tariff reductions will create jobs in the
U.S. potato industry. 150 ATPA added that the FTA will allow for U.S. exports to maintain
their dominant market share in an export market that is very competitive and price sensitive.
APTA also stated that an FTA may provide an excellent opportunity for expanded exports
of potato chips. The Snack Food Association (SFA) commented that it supports any efforts
141 There is no negotiated phaseout period after which the TRQ would expire.
142 U.S. industry official, telephone interview by Commission staff, May 30, 2007.
143 USDA, FAS, “Korean Fresh Potato Update 2007,” January 12, 2007.
144 James McCarthy (President & CEO, Snack Food Association), e-mail message to Commission staff,
May 30, 2007.
145 USDA, FAS, “Republic of Korea Product Brief, Produce Market Brief Update 2005,”
October 5, 2005, 4.
146 APTA, written submission to the House Committee on Ways and Means, April 4, 2007.
147 U.S. industry official, telephone interview by Commission staff, May 30, 2007.
148 U.S. industry official, telephone interview by Commission staff, May 30, 2007.
149 National Potato Council, written submission to the USITC, June 19, 2007.
150 APTA, written submission to the House Committee on Ways and Means, April 4, 2007.
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