5 years in, US-Korea trade deal paying big dividends

In 2011, I had the privilege of voting for the Korea-U.S. Free Trade Agreement (KORUS FTA). This legislation was the product of many years of negotiations between two different U.S. and Korean administrations with divergent political persuasions.  

As a result of their hard work, the bill passed by overwhelming bipartisan majorities in both the House, Senate and the Korean National Assembly. KORUS came into force on March 15, 2012. 

{mosads}During the debate, many claims were made on both sides regarding the possible effects of the agreement. Now that we are at the five-year mark of its implementation, it is appropriate to reach some preliminary assessments of the agreement, while recognizing it is still premature to offer a conclusive determination.  

President Trump’s trade policy agenda included a section expressing concern over the growing merchandise trade imbalance between the U.S. and South Korea from 2011-2016. 

However, the trade balance in goods is not the entire picture in any international economic relationship. First, the same statistics also revealed that the annual U.S. merchandise trade deficit with Korea decreased for the first time in 2016 since KORUS implementation, with one of the highest level of U.S. goods ever exported to Korea during the final month of the year. 

Second, the U.S. has always had a trade surplus in services with Korea, hitting another record-high for 2016. When service sector exports are included, the bilateral U.S.-Korea trade deficit drops to $17.5 billion, revealing a more accurate picture of the trade relationship. The latest release shows that total exports of both goods and services from the U.S. to Korea increased by $2.1 billion, or 3.2 percent, since 2011.

Third, not every product or service was covered by the KORUS FTA. Some were already provided duty-free treatment prior to the adoption of the agreement. Some products were excluded or subject to longer phase-out periods before the tariff or trade barrier was eliminated.  

Thus, any conclusion about the effectiveness of the KORUS FTA must differentiate between those items that were included in the agreement as opposed to those goods and services that were not included.

According to the Korea Customs Service, U.S. exports of FTA beneficiary goods increased by 18 percent between 2011 and 2015, while exports of non-beneficiary items decreased by 20 percent. One example of a beneficiary items is beef, a sensitive issue in U.S.-Korea trade relations.  

The KORUS FTA requires Korea to gradually lower its 40-percent tariff on beef in increments of 2.7 percent each year down to zero over 15 years. In addition, it also directs Korea to use of sound science in the development of sanitary and phytosanitary standards.  

Already, these changes, along with alterations in preferences of Korean consumers, have produced a remarkable 31-percent growth of U.S. beef exports to Korea over 2015 levels. They now sit at $1.1 billion, which was on top of the 25-percent growth from the previous year.  

As a result, America’s share of Korea’s imported beef market grew to 42 percent in 2016 from 35 percent, while Australia’s share fell from 57 percent to 49 percent. Costco has pledged to sell even more U.S. beef at their stores in Korea. Any effort to alter KORUS will threaten these enhanced market opportunities for U.S. producers.       

Finally, according to the Commerce Department, 358,000 U.S. workers owed their jobs to exports to Korea in 2015, an increase of 87,000 jobs since 2009. The increase was most pronounced for the merchandise export sector, which added 55,000 jobs in the same time period.  

Jobs supported by exports pay, on average, 18 percent more than other jobs. Employees in the “most trade-intensive industries” earn an average compensation package of salary and benefits of nearly $94,000. These jobs are spread throughout the United States.  

The Korea Economic Institute’s unique analysis shows dozens, if not hundreds, of jobs in every congressional district that benefit directly or indirectly from exports to Korea. Ninety percent of congressional districts saw an increase or remained steady in their export level to Korea since congressional passage and implementation of KORUS.

While every agreement can be reviewed every few years to determine if the deal is still accomplishing its original goals, a preliminary assessment shows that the KORUS FTA has benefited both sides and continues to contribute greatly to the strength of the strategic alliance between the U.S. and the Republic of Korea.

Former Congressman Donald Manzullo is former chairman of the Subcommittee on Asia and the Pacific of the House Foreign Affairs Committee and current president of the Korea Economic Institute of America, a not-for-profit, non-lobbying, educational organization, which is registered as a foreign agent of the Korea Institute for International Economic Policy, a public policy research institute funded by the Government of the Republic of Korea. 

The views expressed by contributors are their own and not the views of The Hill.