On June 30, 2007, the U.S. and South Korean governments signed a free trade agreement (FTA) that proponents say is the most comprehensive and U.S. business-friendly FTA ever. However, the agreement does have its detractors and requires ratification by Congress.
So, the FTA’s backers are touring the country, looking to drum up support and raise awareness of what the agreement contains and what it is designed to do. A group of those proponents were in Jackson recently to do just that.
Organized by the U.S.-Korea Business Council, U.S. Chamber of Commerce, TradeRoots and Korea Economic Institute in conjunction with the Mississippi Economic Council, Mississippi Development Authority and Mississippi World Trade Center, the Jackson event began with a panel discussion. The panel consisted of Arrow Augerot, deputy assistant U.S. trade representative to Korea, Doo Young Kim, trade commissioner and director general of the Korea Trade Center in Dallas, and Kevin Lee, a Korean native and COO of New Albany-based Custom Non-woven Inc.
The event wrapped up with a keynote presentation from His Excellency Lee Tae-sik, ambassador of the Republic of Korea to the U.S.
Room to grow
The FTA looks to boost what is already healthy trade numbers between the U.S. and Korea. Korea is the U.S.’s seventh-largest trading partner, and its seventh-largest export market. In 2006, U.S. exports to Korea reached $32.5 billion, and bilateral trade surpassed $78 billion.
While Korea is an important export market for Mississippi-based businesses, the group said there is much room for growth, and the agreement, referred to as “KORUS FTA,” they believe will offer a boost. In 2006, Korea ranked as the state’s 18th-largest importer, and Mississippi businesses exports totaled $51 million.
Mississippi’s Korean exports, year-to-year, have been uneven over the course of the decade. In 2001, Mississippi exported $57.3 million worth of product to Korea. That number swelled to 70.2 million in 2002, the best year of the decade. Korean exports fell to $48.7 million in 2004 and $47.5 million in 2004 before rebounding in 2005 to $60.5 million. Broken into product types, Mississippi’s largest export product to Korea has consistently been chemicals, which, over the decade, have made up nearly half of all exports to Korea. In 2006, of the $51.6 million worth of product exported to Korea, $24.6 million were in chemicals.
Level playing field
The panel referred to the KORUS FTA as a way to level the trade playing field. They contended that this would be especially advantageous to small and medium enterprises (SMEs), which are the major exporters to Korea. In 2004, 88.5% of the total product exported to Korea came from SMEs. Nearly 75% of Mississippi exporters are SMEs.
Kim said one of the stumbling blocks for SMEs in trying to export to Korea or any other foreign country is the red tape and regulations. He said KORUS FTA would eliminate 95% of all Korean consumer and industrial products duties within three years, including chemicals and machinery. That should make exporting to Korea easier by facilitating customs procedures and other regulations and more profitable to all Mississippi businesses, especially SMEs.
He pointed out that Korean tariffs on cotton would be eliminated immediately, as well as duty-free treatment for soybeans for crushing, and most tariffs affecting fabric exporters would eliminated within five years.
Kim added that Korea is not only a large market, but discerning, as well. He referred to Korean shoppers as “conscientious and proactive,” making Korea an excellent retail test market for U.S. producers.
Kim said Korea saw itself in a nutcracker, pressured by such major markets as China and Japan. He said while the agreement would be good for domestic goods-makers, it would also be welcome by the Korean market.
Pushing the plan
Augerot pointed out that the U.S. export market share has declined since 1990, and she believes the FTA could help right that. She was one of the team that negotiated the KORUS FTA, and feels it is the fairest and most business-friendly of all of the FTAs. This includes the best-known FTA – the North American Free Trade Agreement between the U.S. and Canada and Mexico, which remains controversial.
Augerot acknowledged that the KORUS FTA has its detractors, as well. One area of contention is the beef market. Korean closed its market to U.S. beef in the wake of the mad cow epidemic of 2003. Some lawmakers have said they would not approve the plan unless that ban was eliminated.
Yet another area of contention is automobile parts. Augerot said some feel the agreement tips the scale away from U.S. automobile parts makers. She added that work would need to be done there to allay U.S. auto industry fears.
Still, she maintained that the KORUS FTA is a good plan with promising potential for domestic manufacturers as well as service providers. She remains hopeful that the FTA will become law.
Contact MBJ staff writer Wally Northway at firstname.lastname@example.org.