10 April 2018

4 minute read

Asia

According to The Hankyoreh, an assessment report on post-FTA conditions submitted to the National Assembly by the Ministry of Trade, Industry and Energy on Apr. 9 showed US livestock product imports averaging US$7.3 billion per year over the five years from 2012 to 2016 after the FTA went into effect.

The average was up by 14.8 per cent from US$6.36 billion for the five years before the agreement (2007–2011). At the same time, South Korea’s average agriculture and livestock product exports to the US rose 46.7 per cent from US$400 million before the FTA to US$590 million after it entered effect.

The numbers show a higher rate of increase for South Korea’s exports, but a much larger increase for the US in actual dollar terms.

According to the report, South Korean agriculture and livestock product fell by an average of 195.1 billion won (US$181.4 million) per year after the KORUS FTA, for a cumulative five-year total of 975.3 billion won (US$907.0 million). Domestic agricultural production fell by an estimated 0.44 per cent per year as a result. Increased imports since the FTA were also found to have resulted in the loss of 5,407 jobs in the agriculture, livestock, and seafood industries.

Of the three industries, the livestock sector, including beef and pork, suffered the biggest hit in terms of lost production over the five years after the KORUS FTA went into effect. Lost livestock production averaged 119.5 billion won (US$111.1 million) per year, or 61.2 per cent of all farming losses. Pork in particular suffered average annual losses of 70.8 billion won (US$65.8 million), or 36.3 per cent of all farming losses.

"The relatively rapid lowering of tariffs on imported US pork appears to have had a large effect during the agreement’s implementation period," the report concluded.

Beef losses averaged 27.4 billion won (US$25.5 million) per year, or 14.1 per cent of all farming losses. Soybeans and other beans suffered average annual losses of 24.0 billion won (US$22.3 million), or 12.3 per cent of all farming losses. With beans subject to tariff-rate quotas (TRQs) in exchange for lower tariffs, the losses were seen as resulting from an increase in volumes that could be imported tariff-free into the South Korean market.

While the increase in South Korea’s total exports to the US was much larger than the rise in US imports over the five years after the FTA took effect, the US saw a greater rise in exports as a result of the agreement, the report concluded. South Korean exports to the US rose by an average of US$18.399 billion a year from the five years before the FTA.

Direct increases in exports as a result of tariff abolition or lowering totaled US$3.16–6.62 billion, or 17.2–36.0 per cent of all increased exports. Rises in exports were observed in all manufacturing areas apart from textiles/apparel/other manufacturing and electrical/electronic products. At the same time imports of US products rose by an average of US$5.6 billion a year after the FTA took effect, with the direct increase as a result of the agreement totaling US$2.04–2.65 billion, or 36.5–47.4 per cent. The figures show that while South Korea experienced a larger increase in exports in sheer numerical terms, the US enjoyed more an effect from the FTA in terms of increases as a direct result of the agreement.

South Korea’s trade balance with the US rose 138.8 per cent from an average annual surplus to US$9.22 billion before the FTA to US$22.01 billion after it took effect.

"Over the same period, South Korea’s surplus in trade with other countries besides the US rose 179.6 per cent from US$13.54 billion to US$37.86 billion," the report noted.

"In light of this, no immediate conclusions can be drawn about a connection between the FTA and the increased trade surplus with the US," it said.

In the area of services, the effects for the US were clearly greater. South Korea’s service exports to the use increased 9.05 per cent from an average of US$15.2 billion per year for 2007–2011 to US$16.6 billion for 2012–2016, while average annual US service good imports to the South Korean market rose 17.3 per cent from US$24.8 billion to US$29.1 billion over the same period.

The biggest increases in service imports to the US were in copyright usage fees and communications/computers/information services. South Korea’s average annual service trade deficit with the US grew from US$9.65 billion before the agreement to US$12.58 billion after it took effect.

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