Despite the recent stagnant export, Korea's export to the USA have continuously increased since the Korea-US FTA took effect on March 15, 2012, which has provided South Korea easier access to the world¡¯s largest market that accounts for about 23.3 percent of the world¡¯s total GDP.
With it, tariffs on a whopping 82.1 percent of goods imported from the U.S. are going to be removed, while 80.5 percent of the products that Korea ships to the U.S. will have their tariffs waived. The Korea-US FTA has long been expected to help Korean businesses increase their share of the market there. At the same time, some U.S. agricultural and commercial goods are expected to be cheaper in Korea.
According to a recent report by the Ministry of Strategy and Finance, the FTA with the U.S. will not only increase Korea¡¯s gross domestic product by 5.66 percent, but also create jobs for 350,000 people. Furthermore, it is expected to ramp up exports to the U.S. by nearly $1.3 billion on average every year, with manufacturing production, as a result, growing by 8.8 trillion won ($7.8 billion) on average.
In addition, other primary potential benefits of the Korea-US FTA include:
- Production, employment, international trade and FDI will increase.
- By competing and cooperating with the leader of the global business management, technology trend standards, South Korea can upgrade their economic and social systems.
- Increased access to world¡¯s largest test market which holds a host of globally leading new technologies Regarding the implementation of the Korea-US FTA, however, the reactions have been mixed by industry.
First of all, the Korean auto parts industry is likely to reap the largest benefits from the KORUS deal as tariffs of 2.5 percent to 4 percent on parts have been lifted. Local auto parts makers expect to see rising exports to U.S. automakers.
And, tariffs on U.S.-manufactured automobiles will drop from 8 to 4 percent as soon as the FTA comes into force, with all of the tariffs to disappear after five years. Taxes to be paid by owners of U.S. vehicles will also be revised downward.
The textile industry will be another beneficiary of the Korea-U.S. FTA. Because tariffs on local textile products are up to 17.2 percent, the industry will significantly benefit from the FTA when the tariffs are lifted.
On the other hand, the FTA will deal a serious blow to Korea¡¯s agricultural sector, which is expected to see an average annual trade deficit of $424 million over the next 15 years.
Utilization Rate of Korea-US FTA, Continuously Rising
According to the report entitled ¡°Evaluation of the six month into the Korea-US FTA and tasks¡± where the FTA Trade Support Center(President: Ahn Hyeon-Ho, Vice Chairman of the Korea International Trade Association) carried out analysis based on import clearance statistics by the US International Trade Commission, Korea¡¯s exports to the USA recorded US$30.63 billion, a 2.9% rise year-on-year for the six months after the Korea-US FTA took effect, although Korea's exports to major countries including China and EU have been on the decline. In particular, during the same period, the export increase rate among industries that benefit from the Korea-US FTA such as automobiles (including parts, 20.1%), machineries (10.6%) and petroleum products (25.0%) exceeds Korea's total exports to the USA, leading the increase in Korea's export to the US.
The utilization rate of the Korea-US FTA as of September 2012 is 65.0%, up by 6.7%p from April (58.3%) right after the FTA took effect, which means it has been on the rise for six months in a row. Industries that benefit from the Korea-US FTA, such as automobiles parts (68.0%), textile products(72.7%) and machineries (39.2%), show a high utilization rate above the total utilization rate of 65.0%, while the rate for petroleum products(39.2%) was below the average. Particularly, as automobile parts and textile industries where SMEs take up the large part demonstrate high utilization rates, small- and medium-sized export companies are making the most of the FTA based on the autonomous issuance of certificate of origin. In addition, it seems that the systematic support activities by relevant organizations, including the government and KITA, to enhance SMEs' capacity for FTA utilization played a positive role.
Despite the recent global economic downturn, Korea's exports to the US have continuously increased since the Korea-
US FTA took effect. It is analyzed that the Korea-US FTA is playing a major role in supporting Korea's export to the USA.
[Source: http://www.kita.net/]
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