South Korea Is Newest Member of Free-Trade Club
After nearly a year of negotiations, the United States and South Korea hammered out a free-trade agreement on April 1 that could boost trade between the two countries by as much as $20 billion a year.
“The United States–Korea Free Trade Agreement [KORUS FTA] will provide U.S. farmers, ranchers, manufacturers and service providers exciting new market opportunities in a growing, dynamic country,” said U.S. Trade Representative Susan Schwab in a statement.
The agreement must be approved by the U.S. Congress and the Korean National Assembly, which might not be an easy task.
Two years ago, the House of Representatives barely approved the Dominican Republic– Central American Free Trade Agreement, which squeaked by with a 217–215 vote. The Senate approved the free-trade pact on a 54–45 vote.
This is the most economically significant free-trade agreement established since the North American Free Trade Agreement went into effect in 1994 between Canada, Mexico and the United States. South Korea is the world’s 10th-largest economy, and its gross domestic product totals nearly $1 trillion. Two-way trade between the two countries was $78 billion in 2006, making South Korea the nation’s eighth-largest trading partner.
Nearly 95 percent of trade between the two countries will become duty-free within three years, with almost all remaining tariffs eliminated within 10 years. More than $1 billion in U.S. farm exports to Korea will be duty-free immediately.
In apparel, a yarn-forward rule of origin will give apparel products from South Korea preferential access to the U.S. market while helping U.S. fabric and yarn exports to the Asian country. Both countries will be able to impose a special textile safeguard if imports flood the market.
In addition, the United States will exclude South Korea’s major textile export items, such as men’s shirts and women’s jackets from the yarn-forward rule of origin.
—Deborah Belgum
