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Kangho Park

US-Korea agreement protects jobs

By Kangho Park
August 6, 2011

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FOR THE thousands of American businesses that export goods or services to South Korea, or would like to do so, life just got a little bit harder.

A trade agreement between the European Union and South Korea took effect on July 1, giving German carmakers, French vintners, Italian clothing manufacturers, and European Union businesses of all kinds free and virtually unrestricted access to the booming Korean market.

It is estimated that the EU-Korea Free Trade Agreement will nearly double EU exports to South Korea. In just two weeks after its implementation, EU exports to South Korea jumped 16 percent. Meanwhile, American exporters continue to labor under high tariffs and costly regulatory impediments to doing business there.

South Korea’s import tariffs on manufactured goods average 11.2 percent and are 49 percent on agricultural products. Since the US-Korea Free Trade Agreement was signed in 2007, those tariffs have cost American businesses more than $13.2 billion. But if Congress approves a new trade agreement when it returns from recess, about 80 percent of South Korea’s tariffs on US imports will disappear immediately. More than 95 percent will be gone within five years.

The Obama administration estimates that the US-Korea trade agreement will create or support 70,000 American jobs in manufacturing and almost 30,000 American jobs in agriculture. The Senate Finance Subcommittee on Trade has claimed that it could create 280,000 US jobs.

In addition, US exports to South Korea may increase by as much as $11 billion upon full implementation, and US GDP by as much as $12 billion, according to the US International Trade Commission.

New England’s textile and apparel industry will share in that growth. In fact, it has already benefited handsomely from South Korea’s growing consumer market. Textile and apparel exports from Massachusetts companies to Korea more than tripled in value between 2006 and 2010 - from $5 million to $15.2 million.

The trade agreement will eliminate 72 percent of textile and apparel tariffs immediately upon effect and remove all of them within five years.

South Korean textile firms pose no competitive threat to the United States, and both have shrunken substantially in the face of competition from low-wage countries.

Nonetheless, to guard against an unforeseen import surge from South Korea, the trade agreement provides textile-specific safeguards that allow the United States to reapply all its textile and apparel tariffs for up to four years, if South Korea is found to have violated the agreement.

It also includes stringent rules to prevent illegal trans-shipments of textile and apparel products through South Korea to the United States. For example, it requires the South Korean government to provide US Customs officials with detailed information about every person engaged in textile or apparel production in South Korea. And it allows US customs inspectors to make unannounced visits to South Korean firms that may be involved in illegal trans-shipment.

All these tariff eliminations and regulatory protections already apply to European textile and apparel firms, thanks to the trade agreement between the EU and South Korea. And that advantage will continue the longer there isn’t an agreement between South Korea and the United States. Meanwhile, South Korea is close to finalizing free trade agreements with Canada and Australia. American exporters will face an increasingly greater challenge to access the South Korean market.

In 2010, President Obama set a goal of doubling exports by 2014 and adding two million jobs to the US economy. Congressional approval of the US-Korea Free Trade Agreement would make this goal achievable by stimulating job creation, exports, and securing US market share in South Korea’s growing economy.

Kangho Park is South Korea’s consul general in Boston.