As we reach the U.S.-Korea Free Trade Agreement’s sixth anniversary of entry into force today, it is useful to once again take stock of this important agreement – commonly known as KORUS. The U.S. Chamber and its U.S.-Korea Business Council have long maintained the view that KORUS has delivered on its goal of spurring trade, economic growth, and job creation for both economies.
Not everything with regard to KORUS is perfect. There are important areas where Korea has not met its commitments, and the U.S. Chamber is a leading voice urging both governments to resolve them. But these shortcomings should not overshadow the fact that in six years KORUS is actually advancing many of the administration’s highest priorities and delivering wins for U.S. workers and the economy.
Here are six wins KORUS delivers:
Win #1: Growing exports
KORUS is driving growth in U.S. exports of goods ranging from agriculture to autos to information technology and just about everything in between. U.S. aerospace exports to Korea have doubled to $8 billion, and beef exports doubled to more than $1 billion. U.S. services exports have increased nearly 25%, reaching $21 billion. All told, U.S. exports of both goods and services hit record levels in 2017, with its total growing by $8.5 billion – or 13.39% – to surpass the $70 billion mark for the first time ever.
Win #2: Creating jobs
Jobs in the U.S. that are supported by trade with Korea are also on the rise, thanks to KORUS. Goods exports to Korea supported 250,244 total jobs in 2017, and an additional 135,690 jobs were supported by services exports in 2016. Rising foreign direct investment from Korea is also contributing to U.S. job creation. Korean companies now directly employ roughly 51,900 Americans in roles that pay an average of $91,000, well-above the average of other foreign investors.
Win #3: Reducing the deficit
While the trade balance is the wrong metric to evaluate a trading relationship, the U.S. administration clearly views deficit reduction as a priority. From that perspective, KORUS is delivering. In fact, the trade deficit with Korea has declined substantially over the past two years. In 2017 alone the overall deficit with Korea declined by $7.27 billion – or 41% – to reach $10.3 billion. At the same time, the overall U.S. trade deficit with the world increased by 12.6%. The diverging paths are largely due to macroeconomic forces but, on net, none of the combined U.S. trade deficit in goods and services comes from the group of 20 countries where the U.S. has a free trade agreement.
Win #4: Establishing enforceable rules in Asia
The Trump administration has been clear in its aspirations to create “free, fair and reciprocal” trade, and officials often express concern that other nations are exploiting the international trading system at the expense of the U.S. In this context, the administration’s approach to the agreement is perplexing. KORUS serves as a symbol of the rules-based economic order in the Asia-Pacific region because of the high standards and advanced rules and enforcement mechanisms it put in place. As the United States seeks to hold Korea and others – including China – accountable for their trade commitments, we must also consider what’s lost if we walk away from ours.
Win #5: Increasing American competitiveness
It’s important to seek new opportunities for free and fair trade around the world. KORUS has clearly provided such an opportunity. Over the past six years, it’s helped keep American manufacturers, farmers, ranchers, and service provides competitive in this important market against exporters from Europe, China, and other countries which also have free trade agreements with Korea.
Win #6: Bolstering national security
As the U.S. prepares for a possible Trump-Kim summit and the South Koreans begin preparations for the Moon-Kim summit, it is necessary to ensure the allies are working in lock-step and that any openings for Pyeongyang to drive a wedge between Washington and Seoul are closed. Economic tensions are likely to be exploited and may provide leverage to adversarial powers. Conversely, a strong economic relationship between the U.S. and South Korea bolsters the alliance at this critical moment on the peninsula. KORUS symbolizes the partnership, trust, and shared vision between the U.S. and South Korea that will be critical for any diplomatic success.
Acknowledging these KORUS wins is important, arguably now more so than ever. Last week, a group of 11 nations gathered in Santiago, Chile to sign the Trans-Pacific Partnership (TPP), a sweeping trade deal that drastically drops tariffs and sets broad new trade rules in the Asia-Pacific. The same day, announcements from the president related to planned steel and aluminum tariffs grabbed the headlines, stoking pushback from the business community, strategic allies, and more than 100 members of Congress.
These developments reflect the reality that trade around the world will continue with or without us, and provide a sober reminder that the U.S. only has three free trade agreements in Asia. KORUS is one of those, and the U.S. Chamber is leading the charge and working closely with both nations to ensure KORUS remains a modern and properly implemented agreement that can continue to provide “wins” for years to come.