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FACT
SHEET:
U.S.-Korea Free Trade
Agreement -
Indiana Farmers Will Benefit
September 2008
Printer Friendly Version
The United States concluded free trade negotiations with Korea on April 1,
2007. The U.S.-Korea Free Trade Agreement (KORUS FTA) is the most commercially
significant free trade agreement the United States has negotiated in nearly 20
years.
The KORUS FTA provides immediate elimination of duties on more than 60
percent of current U.S. exports and gives U.S. exporters improved access to the
Korean market for many of the products that have been highly protected. The U.S.
International Trade Commission estimates that annual U.S. agricultural exports
to Korea will increase by a minimum of $1.9 billion upon full implementation of
the agreement.
The agreement eliminates tariffs and other barriers on most agricultural
products, increasing export opportunities for a range of Indiana’s agricultural
products, including feed grains, soybeans, and pork. Indiana’s agricultural
exports to all countries, estimated at $2 billion in 2006, supported about
24,205 jobs, on and off the farm. These export sales make an important
contribution to the Indiana farm economy, which had total cash receipts of $6
billion in 2006.
Feed Grains. Indiana farmers earned $1.9 billion from corn in 2006, which
represented the largest source of state farm cash receipts.
U.S. exports of corn for feed are guaranteed to enter at zero duty
immediately. Korea is currently the fourth largest market for U.S. corn for
feed.
The FTA includes a new 93,774-ton duty-free quota for corn for
processing that grows quickly to 393,849 tons by year 7, after which
quantities will be unrestricted.
Soybeans and Products.
Farm cash receipts from soybeans equaled $1.5 billion in 2006, and the state is
the fourth largest exporter of soybeans and products with exports estimated at
$898 million in 2007.
The greatest potential benefit for the soybean sector is likely to come
from improved access to Korea’s 300,000-ton market for food quality
soybeans. Korea has agreed to immediately eliminate its 5-percent tariff on
food-use soybeans.
Korea will establish a duty-free quota starting at 10,000 tons for
identity-preserved soybeans for food use (the production of soybean curd).
This quota will operate outside the current state trading entity, which has
charged a reported $250 per ton markup on soybean imports supplied to
soybean curd processors. (For comparison, based on trade data, Korea’s
average 2006 import price for soybeans used for food was $330 per ton. This
markup brings the price for imported quality beans to $580.)
Korean tariffs on imports of crude soybean oil (the majority of Korea’s
soybean oil imports) will decline from the current 5.4-percent tariff over
10 years. Refined oil tariff rates will decline from the current 5.4 percent
in five equal annual reductions. Korea’s 3-percent tariff on soybean flour
and meal will immediately go to zero.
Pork. With hog production being the state’s third leading source of farm
cash receipts, Indiana pork producers will benefit from this FTA.
Korea’s tariffs on imports of more than 90 percent of U.S. pork products
will become duty free on January 1, 2014. This includes all frozen and
processed pork products.
Date-certain duty-free access allows for U.S. exports to compete on a
level playing field with other Korean free trading partners.
A transparent first-come first-serve safeguard quota for fresh pork
bellies and miscellaneous fresh cuts starts growing at 8,250 tons, nearly
double current trade volume.
Dairy. Dairy is Indiana’s fourth leading source of farm cash receipts,
and this FTA will benefit Indiana’s dairy farmers.
The FTA will provide immediate duty-free access for double the current
export volume of total dairy products. Duty-free quotas will be established
for cheese, skim/whole milk powder, food whey, and butter.
Current annual U.S. feed whey exports of $8 million will gain duty-free
access to the Korean market immediately upon implementation.
Beef. Indiana’s cattle and calf industry generated cash receipts of $213
million in 2006, and cattlemen stand to benefit from this agreement.
For beef muscle meats, the FTA provides a 15-year straight-line tariff
phase out with a safeguard that begins growing from 270,000 tons, a quantity
that is 17 percent larger than our largest historical shipments.
Technical consultations continue toward the goal of allowing imports to
take place consistent with World Organization for Animal Health (OIE)
guidelines.
Following the May 2007 decision by the OIE classifying the United States
as a controlled-risk country, Korea has announced that it will
undertake in a timely manner its regulatory process toward expansion of
market access for beef and beef products.
For questions about the U.S.-Korea Free Trade Agreement and its impact on
U.S. agriculture, please contact FAS Legislative and Public Affairs Office at
(202)720-7115 or
LPA@fas.usda.gov.
For detailed information on how the Agreement benefits specific commodities,
please visit:
http://www.fas.usda.gov/info/factsheets/Korea/us-koreaftafactsheets.asp.
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U.S.–Korea Free Trade
Agreement
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