US-South Korea FTA progress praised, but 'disappointing'

by Bryan Salvage
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WASHINGTON – Although the long-negotiated, free-trade agreement between the United States and South Korea finally broke an impasse last Friday night, as it stands the current beef market access to South Korea will remain intact and the tariff reductions will proceed as outlined in the original agreement. Despite disappointment the agreement didn’t open full market access to US beef, industry was happy with the recent progress made but expressed urgency in keeping the momentum moving forward.

“The American Meat Institute supports the free-trade agreement between the US and South Korea announced by President Obama [on Dec. 3] and urges the Congress to ratify it at its earliest opportunity,” said J. Patrick Boyle, AMI president and CEO.

Still requiring legislative approval in both the US and South Korea, the overall agreement is the largest by value of trade volume anywhere in the world since the North American Free-Trade Agreement took effect in 1994 involving the US, Canada and Mexico. It would eliminate tariffs on more than 95% of industrial and consumer goods within five years. In addition to agricultural products, the agreement also addresses autos, manufacturing, services, investment, financial services, government procurement, labor rights and environmental commitments, according to The White House.

Through the first nine months of 2010, the US has exported 81,866 metric tons (180.5 million lbs.) of beef valued at $383.8 million to South Korea – an increase of 136% in volume and 181% in value versus the same period in 2009, said Philip Seng, US Meat Export Federation president and CEO. Pork exports to South Korea, however, are down about 17% year-over-year, but still total 64,209 metric tons (141.6 million lbs.) valued at $136.5 million.

Several industry executives, including Gregg Doud, National Cattlemen’s Beef Association chief economist, thanked Sen. Max Baucus (D.-Mont.) for his efforts to reopen the South Korean marketplace to US beef in 2008. Since the market reopened, sales have grown rapidly and should exceed $500 million this year, making South Korea the fourth-largest buyer of US. beef.

“While we support continuing efforts to obtain full market access, it is imperative we act quickly to prevent our competitors from having the upper hand,” Doud said. “Congress must ratify this agreement and should do so quickly. If Australia beats us to the signing table, they would have a 2.67% tariff advantage over US beef for the next 15 years. When this agreement is finally signed, sealed and delivered, it would phase out Korea’s 40% tariff on beef imports. We are talking about $325 million in tariff reductions annually once fully implemented.

Beef exports continue to grow, from 233 metric tons valued at $612,000 in 2006 to 56,000 metric tons valued at $56 million in 2009, AMI said. Through the first nine months of the year, exports to South Korea are up 136% in volume and 181% in value over the same period last year.

Sam Carney, National Pork Producers Council president, said NPPC had worked particularly hard the past several years to get a good deal for US pork in the FTA with South Korea. “We had that, but to get a final agreement, we needed to give a little, we needed to take one for the team. This is still a good deal for us,” he added.

Carney added that at NPPC’s insistence, the US had negotiated in the agreement that was signed June 30, 2007, a zero-tariff rate on most pork products going into South Korea effective Jan. 1, 2014, the same date Chile’s pork and 30 months before the European Union’s goes to a zero duty. Chile’s FTA with South Korea was implemented in 2004; the EU’s agreement will be in force July 1, 2011.

The US-South Korea FTA had been held up most recently primarily because of issues related to trade in beef and automobiles. The logjam was broken when US pork producers agreed to move back the effective date on the zero tariff rate on some cuts of pork to Jan. 1, 2016, Carney said.

“With the date for a zero tariff on pork moved back, we likely will lose some market share in the South Korean market to Chile,” Carney added. “But as the lowest-cost producer of pork in the world, we’ll hold our own. We still will go to zero six months prior to the EU.”

Once the FTA is fully implemented, beef and pork exports to South Korea could increase by $2 billion and result in more than 26,700 new American jobs, AMI predicts.

Commending the Obama administration for its approval of the U.S.-Korea Free Trade Agreement (KORUS FTA), the National Turkey Federation (NTF) relayed South Korea is the tenth-largest export market by quantity and the eleventh-largest by value for US turkey exports. In 2009, combined exports of US chicken, turkey and egg products to South Korea totaled $47.8 million. By the time the agreement is fully implemented, US poultry exports are expected to triple to more than $150 million annually.
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