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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 South Dakota’s
agricultural products, including beef, feed grains, and soybeans. South Dakota’s
agricultural exports to all countries, estimated at $1.2 billion in 2006,
supported about 13,700 jobs, on and off the farm.
These export sales make an important contribution to the South Dakota farm
economy, which had total cash receipts of $4.7 billion in 2006.
Beef. With cash receipts of $1.9 billion in 2006, or 40 percent of the
state’s agricultural total, South Dakota’s cattle and calf 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. Cash receipts from corn for feed totaled $731 million in
2006, or 16 percent of farm earnings for the state. South Dakota feed grain
farmers will benefit from this agreement.
U.S. exports of corn for feed are guaranteed
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. For South Dakota, soybeans are the third largest
source of farm cash receipts at $696 million, and the industry is the nation’s
eighth largest exporter of soybeans and products. South Dakota 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.
Wheat. South Dakota’s wheat producers generated cash receipts of $397
million in 2006. As the nation’s sixth largest exporter of wheat and wheat
products, South Dakota wheat producers will benefit from this agreement.
An unlimited amount of U.S. wheat for milling
can enter Korea duty free upon implementation of the agreement.
Korea’s imports of U.S. wheat will no longer
be subject to Korea’s 1.8-percent tariff or its autonomous tariff-rate quota
(TRQ) of 1 percent.
Although this tariff differential may be
small, it provides a small tariff advantage when competing against Canada
and Australia.
