Kirk And Lee Discuss US-Korea FTA

by Mike Godfrey, Tax-News.com, Washington

18 June 2009

US Trade Representative Ron Kirk has met with President Lee Myung-bak of South Korea to discuss the signed but unratified free trade agreement between the two countries, described as America's most "commercially significant" trade deal for almost two decades.

According to a brief statement by the Office of the US Trade Representative, both Kirk and President Lee emphasized the importance of the US-Korea economic relationship and recognized that the US-Korea Free Trade Agreement could further strengthen this relationship. Kirk reiterated his commitment to work together with his counterpart, Trade Minister Kim Jong-hoon, to address key concerns that have been raised and chart a way forward.

The United States-Korea Free Trade Agreement (KORUS FTA) was signed during the George W. Bush administration on June 30, 2007. If approved, the agreement would be the United States' most commercially significant free trade agreement in more than 16 years.

The US International Trade Commission estimates that the reduction of Korean tariffs and tariff-rate quotas on goods alone would add USD10bn to USD12bn to annual US Gross Domestic Product and around USD10bn to annual merchandise exports to Korea.

Under the FTA, nearly 95% of bilateral trade in consumer and industrial products would become duty free within three years of the date the FTA enters into force, and most remaining tariffs would be eliminated within 10 years.

For agricultural products, the FTA would immediately eliminate or phase out tariffs and quotas on a broad range of products, with almost two-thirds (by value) of Korea's agriculture imports from the United States becoming duty free upon entry into force.

For services, the FTA would provide meaningful market access commitments that extend across virtually all major service sectors, including greater and more secure access for international delivery services and the opening up of the Korean market for foreign legal consulting services.

In the area of financial services, the FTA would increase access to the Korean market and ensure greater transparency and fair treatment for US suppliers of financial services. The FTA would address non-tariff barriers in a wide range of sectors and includes strong provisions on competition policy, labor and environment, and transparency and regulatory due process.

The KORUS FTA would represent the first such agreement between the United States and a North Asian economy, and the Obama administrations says that the pact could serve as a “model” for trade agreements for the rest of the region.

“The Obama Administration will seek to promptly and effectively address the issues surrounding the KORUS FTA, including concerns that have been expressed regarding automotive trade,” says the USTR office.

Despite the predicted benefits to both economies that the trade agreement could bring, the United States Congress has been reluctant to approve the pact, largely over concerns that it could harm the US car industry. These concerns have been shared by the Obama administration, but recent statements by Kirk have indicated a thawing in the new President’s attitudes to free trade, and the USTR signalled in a recent speech to the US Chamber of Commerce that Washington is ready to engage with Asia on the issue of free trade.

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