It seems that almost every discussion about international trade is focused on the U.S. relationship with China. Our enormous and growing trade deficit with China, coupled with recent scares about the safety of products made there, confirms the importance of this relationship.
Getting much less press is the Free Trade Agreement (FTA) between the United States and South Korea, recently signed by both Presidents and awaiting Congressional approval. Perhaps because the U.S.-South Korean trade relationship is so positive for the people in both countries, we read and hear much less about it.
South Korea is no China, but the numbers speak for themselves. South Korea is the world's tenth-largest economy. Bilateral trade between the United States and South Korea reached US$78 billion in 2006. South Korea is the United States' seventh-largest trading partner, seventh-largest export market, and sixth-largest market for agricultural goods. The United States is South Korea's second-largest trading partner and its largest source of foreign direct investment.
And the numbers are going in the right direction. South Korea today is on track to hit US$20,000 in per capita GDP by 2010. It hosted the 1988 Summer Olympic Games and co-hosted the 2002 World Cup. South Korean women dominate the Ladies Professional Golf Association and South Korean men are striking out hitters in Major League Baseball. South Korean firms have built the three tallest skyscrapers in the world, and South Korea can boast of 41 companies in the Forbes 2000. Among the almost 100 countries that became independent following World War II, none of them can come close to this list of achievements. It’s not called the “Korean economic miracle” for nothing.
But what’s in it for us?
The U.S.-South Korea FTA will promote new opportunities for U.S. businesses, investors, farmers, and consumers in the dynamic South Korean market, and further expand and strengthen this important economic relationship. It will also reinforce the strategic security partnership between our two countries and would likely serve to promote further liberalization efforts regionally and globally.
Sound too good to be true? Let’s look at the data. Last year, U.S. agricultural exports to South Korea totaled US$2.85 billion, making it the sixth largest agricultural market for crops grown by American farmers here at home, including Florida. Under this FTA, about two-thirds of the food that South Korea is importing from the United States will become duty-free, lowering the price to South Korean consumers and thus likely increasing demand.
For non-agricultural goods, the United States currently faces an average tariff rate of 7% when trying to compete in South Korea. This FTA will slash these rates and level the playing field for U.S. exporters. According to the U.S. Chamber of Commerce, studies show that U.S. exports to Korea could grow 50% under this FTA.
South Korea now has a US$1 trillion economy and almost 50 million potential consumers willing and able to buy U.S. good and services. That is why the U.S. Chamber of Commerce in Korea supports this FTA and predicts it will:
· expand the already robust trade between the two countries;
· lock in governmental reforms, providing a level playing field in each others markets and increase the competitiveness of industries in both countries;
· further strengthen the relationship between the two countries as we work together to protect peace and prosperity in Northeast Asia;
· ensure that the United States remains an integral part of Asia’s economic integration.
China is the most important country in Asia, and that is unlikely to change anytime soon. The United States knows this. Korea knows this. The Chinese certainly know this. But also unlikely to change anytime soon is Korea’s position as the fourth largest economy in Asia (after China, Japan, and India on a purchasing power parity basis).
The science fiction author Philip K. Dick famously said, “Reality is that which, when you stop believing in it, doesn't go away.” The reality today is America needs to keep all its remaining friends in the world. An FTA with an old friend like South Korea is the right thing for both sides. Hopefully our Congress will agree.