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

U.S. producers with respect to these major competitors and should enable the United States
to maintain or expand its current small market share. 172 In addition, the lowering of tariffs
and the removal of other trade barriers may result in the lowering of Korean market prices
for these products, which in turn may cause demand to rise. 173 Over a longer period,
however, China would be expected to increase exports of many of these same products to
the Korean market and would likely gain an even greater share of the market and any
growth, possibly at the expense of products from both the United States and other foreign
suppliers. 174
Canned tomatoes and tomato products (i.e., processed tomato products) would likely
experience increased exports, especially in the near term. 175 Processed tomato products have
been one of the top ten U.S. agricultural exports to Korea in recent years. 176 The United
States is a global producer and exporter of these products, and is currently a major supplier
of processed tomato products to the Korean market, accounting for 46 percent of the total
Korean market for such products in 2005. 177 U.S. shipments of canned tomatoes and tomato
products to Korea currently face duties of 5 percent and 8 percent, respectively, and, under
the FTA, these duties would be eliminated at the beginning of the third year after
implementation. U.S. processed tomato products’ exports to Korea account for only
5 percent of total U.S. processed-tomato exports, leaving substantial U.S. supplies (both
from increased U.S. production and from trade diversion) from which to draw for greater
exports to Korea in the near future. 178 In addition, U.S. exports are supported by the lack of
a domestic processed-tomato-products industry in Korea. Any projected increase in trade,
however, is not expected to have as great a long-term effect on the U.S. industry, in part
because Korea expects to have an FTA in place in the next year or so with the EU, the other
major global supplier of processed tomato products to Korea. In the event that an EU-Korea
FTA were concluded, a U.S.-Korea FTA would help U.S. exporters maintain market share.
U.S. exports of sweet corn (fresh, frozen, and canned corn) would also likely increase with
an FTA. 179 Korean import duties on fresh or frozen corn and canned corn are high at
27 percent and 17 percent, respectively. The United States has been a global producer and
exporter of this product for many years. Korea, with little or no domestic production but with
a stable consumer preference for U.S. product, has relied on imports from the United States
to satisfy market demand; this is especially true for canned corn because of its ease in
shipping and relatively long shelf life. Increased U.S. exports of fresh and frozen corn,
however, may be hampered by the need for greater care in handling and the attendant higher
shipping costs relative to exports of canned products.
172 APTA, written submission to the House Committee on Ways and Means, April 4, 2007.
173 Lee and Sumner, “The Prospective Free Trade Agreement with Korea,” January 2007.
174 Also, any projected increase in U.S. exports to the Korean market could be negatively affected by
Korean FTAs currently being negotiated with Canada, India, Japan, and Mexico, as well as possibly with
New Zealand and Australia. Lee and Sumner, “The Prospective Free Trade Agreement with Korea,”
January 2007.
175 Included here are tomatoes prepared or preserved otherwise than by vinegar or acetic acid, whole or in
pieces (HTS 2002.10) and tomato paste and other tomato products including puree (2002.90); not included
here are ketchup and other canned tomato-based sauces (2103.20).
176 Lee and Sumner, “The Prospective Free Trade Agreement with Korea,” January 2007.
177 Ibid.
178 Ibid.
179 Included here are fresh sweet corn (HTS 0709.90.45), frozen sweet corn (0710.40), and canned corn
(2005.80).
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