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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 Kentucky’s agricultural
products, including poultry, beef, and feed grains. Kentucky’s agricultural
exports to all countries, estimated at $1 billion in 2006, supported about
12,900 jobs, on and off the farm. These export sales
make an important contribution to the Kentucky farm economy, which had total
cash receipts of $4 billion in 2006.
Poultry and Egg Products. With $604 million in farm cash receipts in
2006, broilers are Kentucky’s third largest agricultural industry and account
for 15 percent of total farm cash receipts. The state’s poultry and product
exports totaled $70 million in 2006. Kentucky’s poultry industry will benefit
from this agreement.
Korea’s tariffs of 18 to 27 percent on frozen
leg quarters, frozen breasts and wings, and frozen turkey cuts, will be
phased out in 7 to 12 years.
As the number 2 market for U.S. egg products,
Korea’s tariffs of 27 percent on egg products, including egg yolks, will be
phased out in 12 equal annual reductions.
Beef. Kentucky’s cattle and calf industry provides the second largest
source of state farm cash receipts. This industry will benefit from this FTA.
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.
Feed Grains. Corn is the state’s fourth largest source of farm revenue,
generating cash receipts of $339 million in 2006. Feed grain growers will
benefit from this FTA.
U.S. exports of corn for feed will be
duty-free 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. Kentucky soybean and product exports were
estimated at $157 million in 2006. Kentucky soybean producers will benefit from
this agreement.
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.
