Washington Council on International Trade
KORUS: How Our Washington State Companies and Workers Benefit
The following are some examples of the strong economic benefits to Washington State of deepening our ties with South Korea. WA State companies and working families benefit from this agreement as both consumers and employees. While the benefits range from expanded agricultural exports and intellectual property rights to lower duties on key imports, this agreement is supported by WA State industries of all shapes and sizes.
Boeing: For decades, Korea has been a long-term customer of Boeing aircraft, having purchased over 100 commercial planes from Boeing since 2004 alone.
Both Korean Air Lines and the Government of Korea have placed orders with Boeing that help drive the Washington State economy and provide high-paying jobs for Boeing workers. In April 2005, Korean Air placed an order for up to 20 Boeing 787 Dreamliners in a deal worth approximately $2.6 billion at list prices. The agreement involves 10 firm orders and options for 10 additional 787s. Korean Air also purchased 25 Boeing airplanes in November 2006, an order valued at $5.5. billion at list prices. This sale represented the largest airplane order in Korean history. The fifteen 777s and five 747s are built in Everett; the five 737s are built in Renton. Boeing workers in Washington State are also responsible for final assembly of four Airborne Early Warning and Control (AEW&C) planes ordered by the Government of Korea in November 2006. That deal, valued at $1.7 billion with jet delivery in 2012 further strengthens both Boeing's and America's ties with South Korea. In December 2007, South Korea-based Jeju Air ordered five Boeing Next-Generation 737-800s. The 737s will be the first Boeing airplanes to enter the Jeju fleet, and are valued at $370 million at list prices.
Starbucks Coffee Company: Korea's bound tariff on roasted coffee is currently 29.5 percent. Under the free trade agreement, Korea's tariff will be eliminated, significantly improving the competitiveness of Starbucks and other U.S. roasters. In addition, the KORUS agreement reverses a trend from NAFTA and CAFTA, and contains a preferential rule of origin, conferring origin on all U.S. beans roasted in the U.S., regardless of where the beans were grown.
Technology Sector: In 2006, U.S. companies exported $8.3 billion in computer and electronic products to Korea. That number could grow significantly under KORUS, which would commit Korea to eliminating duties on all products in this sector, and to treating digital products equally regardless of whether they are transmitted in physical form or electronically. KORUS also locks in and improves an open trade regime for technology related services (e.g. telecommunications) and strengthens intellectual property by deterring piracy and unauthorized sharing of music, video, software and other content.
Washington State Cherry Farmers: Under the terms of the agreement (KORUS) Korea will immediately eliminate its 24% tariff on sweet cherries. This tariff adds an extra $0.75/lb to $0.90/lb to the price Korean consumers pay for cherries. In 2007, our region's cherry exports to Korea are up to $8.4 million (210,000 cartons). KORUS makes Washington State cherries cheaper for the Korean grocer who will hopefully increase his/her demand for our products versus our international competitors. According to B.J. Thurlby, President of the Washington State Fruit Commission, "South Korea is the number one growth market for Washington State cherries. Cherry growers need markets like Korea to remain profitable as the volume of the U.S. cherry crop continues to increase. KORUS will help our growers and our valuable customers in Korea."
Potato Growers: Washington State is the #1 potato exporting state in the U.S., making up 1/3 of all American potato exports. Korea is the U.S.'s fifth largest destination for frozen potato exports, generating $25.9 million in sales in 2007. The ratification of KORUS would immediately eliminate the 18% tariff that these products currently face when entering Korea. Bellevue-based Pacific Valley Foods currently exports around $100,000 per year of frozen processed potato products, of which they have to pay approximately $18,000 in tariffs.
Altogether, KORUS will make American potato products more competitive and save the potato processing industry overall more than $4 million per year that they otherwise would have to pay in tariffs. The end result is improved prosperity for Washington State potato farmers, which in turn leads to more vibrant economies in rural parts of our state.
Wine Industry: South Korea has a small yet growing wine market which U.S. wine and Washington growers in particular are beginning to target. The yearly sales figures are in the tens of millions of dollars today in comparison with locally produced "soju". However, a MarketResearch.com forecast predicts the volume of wine sold in South Korea will grow by 45.2% through 2011 and the value growth will be 188% by the same date. Most wine imports into Korea today come from Chile (which struck a trade deal with Korea in 2004 that spares its wineries), France, followed by the U.S. Tariffs and taxes on U.S. wine into Korea are quite high today with the price for most bottles being almost double what a consumer would pay in the U.S.
Washington wine makers are positioning themselves to crack into Asian markets. As of the close of the June 30, 2006 fiscal calendar, Washington wineries exported 30,000 cases to Asia according to the Washington Wine Commission. KORUS would greatly benefit Washington wine growers' attractiveness with Korean consumers as the agreement erases a 15 percent tariff on U.S wines. This provides a competitive advantage versus France until the EU deal is negotiated and against Australia who does not currently have a trade deal with Korea.
WCIT Research
US-KOREA Free Trade Agreement at a Glance
WCIT's policy briefing paper and support of the U.S.-Korea FTA (KORUS)
Read.
Helpful Links
Description of benefits of FTAs
from the U.S. Government's Export Portal
from the U.S. Trade Representative
"The Pros and Cons of Pursuing Free-Trade Agreements"
from the Congressional Budget Office, July 31, 2003
U.S. - Korea Free Trade Agreement
Brief summary by the Office of the U.S. Trade Representative
Read. (pdf)