Mar 15, 2016 - 1:45pm

Four Years In: The Benefits of the U.S.-Korea Free Trade Agreement


Former Senior Vice President, Asia

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A shipyard keeps busy in Ulsan, South Korea. Photo credit: SeongJoon Cho/Bloomberg

The U.S.-Korea Free Trade Agreement entered into force four years ago today. While it’s still too early to arrive at a full assessment of its results, the agreement has already brought real benefits for American workers, farmers, ranchers, and companies.

Some of the agreement’s provisions have yet to enter into force, but many are in place.  And they are already helping create a more level playing field for U.S. trade with our sixth-largest trading partner. Consider:

Without the FTA ...

Around 90% of American agricultural good exports to Korea would still face high tariffs, averaging 53%. And nearly two-thirds of America’s other goods exports, including manufactured goods, would still face tariffs averaging nearly 7%.  As a result, U.S. products would still be much less competitive in Korea.

In comparison, the majority of Korean-made goods already entered the U.S. market duty free prior to the FTA’s entry-into-force. And if a U.S. tariff was charged, the average rates would have been much lower – about 5% for agricultural and 3% for other goods.

With the FTA ...

Over 95% of American goods today face no tariff in Korea, and this will increase to nearly 100% of goods over the coming years – thus erasing large tariff disadvantages that American goods have long faced.

Without the FTA ...

Many American exports to Korea would likely be losing ground. After all, Korea’s recent FTAs with the European Union, Australia and other countries provide preferential access for their goods to the Korean market. If the United States has not entered into a FTA with Korea, U.S. goods would be at a conspicuous disadvantage.

With the FTA ...

American exports are now highly competitive in Korea because they encounter the fewest tariff barriers in the market among Korea’s other trading partners.

Without the FTA ...

Korea likely would continue to provide less protection for American ideas and ingenuity than the United States provides Korean innovators.  Other disadvantages would also likely persist, ranging from fewer American movies in Korean cinemas to higher barriers against U.S. providers of energy, financial, distribution, and other services than those faced by Korean providers in America. And Korea would continue to be free to erect barriers that restrict innovative American providers of new, innovative services – simply to protect its market.

With the FTA ...

America’s leading artistic and technological innovators and service providers are benefitting from improved terms, fewer restrictions, and commitments that enable innovative American providers to introduce new types of services, thus supporting American competitiveness and growth in Korea’s large services market.


What can we learn from the data? In a nutshell, U.S. exports are up for U.S. products and services already benefitting from the FTA, even as Korea’s economy has been cooling. Since the FTA has come into effect:

  • For goods, U.S. exports to Korea that benefit from the FTA’s tariff cuts have increased every year since it came into effect, growing on average nearly 5% each year despite the slowdown in the Korean economy.
  • For services, U.S. gains have consistently been solid, with U.S. exports up by approximately $6 billion, or over 34%, since the FTA came into effect.

Free trade agreements go much further than removing tariffs and restrictions on services: They also set the rules that help ensure American exporters and service providers continue to benefit from an open, transparent market. This is critical to securing a foothold for developing long-term growth opportunities in this dynamic market. The U.S.-Korea FTA set a high mark in this area, improving the business climate greatly for U.S. exporters on many different levels.

As the FTA is implemented, the past four years also have not been without their share of bumps and problems. Serious differences have arisen across several issues – ranging from automotive regulations to audits by customs authorities to lingering inadequacies in transparency affecting medical devices and pharmaceuticals. Many, but not all, of these issues have been addressed through the FTA’s various consultation mechanisms. More work is needed to deal with emerging concerns, including those relating to procedural fairness in the Korea’s conduct of investigations by competition authorities.

These issues have soured some of the benefits that U.S. exporters should expect from this key agreement, and more needs to be done by Korea to quickly address these concerns. However, it is also important to ask what opportunities U.S. companies would have lost in Korea in the absence of the FTA – and from this perspective, there is much to celebrate.

About the Author

About the Author

Former Senior Vice President, Asia

Tami Overby was formerly senior vice president for Asia at the U.S. Chamber of Commerce.