The U.S. and South Korea: Building a Win-Win Trade Relationship
Tong, Lee-Ing, Tong, Carl H., Competition Forum
The U.S.-South Korea Free Trade Agreement took effect on March 15, 2012. It is a big deal and marks a new chapter of economic relationship between the two countries. Both countries' governments and businesses should strive to take full advantage of the opportunities newly created by this bilateral agreement. The objectives of this article are to report on recent U.S.-South Korea trade statistics, and to offer practical recommendations for building a healthy, long-term and mutually beneficial U.S.-South Korea trade relationship.
Keywords: U.S.-South Korea Free Trade Agreement, KORUS FTA, U.S.-South Korea goods trade, win-win trade relationship, Leading sectors for U.S. export and investment in South Korea
The United States has the world's largest economy, with a gross domestic product (GDP) of $15.06 trillion in 2011 (Central Intelligence Agency, 2012). South Korea has achieved incredibly high economic growth over the past four decades and has become the 15th largest economy in the world today. At present, South Korea is the 7th largest trading partner of the U.S., with the total goods trade (including both exports and imports) between the two countries exceeding $100 billion in 2011 (U.S. Census Bureau, 2012).
The U.S.-South Korea Free Trade Agreement (also known as KORUS FTA) was approved by the two countries' governments in late 2011, and put into effect on March 15, 2012. The Office of the U.S. Trade Representative (2012a) says:
The Agreement is the United States' most commercially significant free trade agreement in almost two decades . . . Under the FTA, almost 80 percent of U.S. exports to Korea of consumer and industrial products will become duty free on March 15, 2012, and nearly 95 percent of bilateral trade in consumer and industrial products will become duty free within five years of that date. Most remaining tariffs would be eliminated within 10 years . . . For services, the FTA will provide meaningful market access commitments that extend across virtually all major service sectors . . . The KORUS FTA will also provide U.S. suppliers with greater access to the Korean government procurement market. In addition to strengthening our economic partnership, the KORUS FTA would help to solidify the two countries' long-standing geostrategic alliance.
The objectives of this article are twofold: (1) to provide a concise and up-to-date report on the U.S.-South Korea trade statistics; and (2) to offer some practical recommendations to help build a smooth win-win trade relationship between the two countries.
WHAT THE U.S.-SOUTH KOREA TRADE STATISTICS TELL US
Both the U.S. and South Korea are heavily involved in international goods trade (see Table 1). In 2011, the international goods trade (including both exports and imports) of the U.S. and South Korea totaled $3.73 trillion and $1.08 trillion, respectively. While the U.S. had a $738.4 billion goods-trade deficit in 2011, South Korea experienced a $33.3 billion of goods-trade surplus in that year.
Although the goods export from the U.S. to South Korea grew ninety-two percent from 2002 to 2011 (see Table 2), the U.S. had a goods-trade deficit with South Korea every year in the past ten years. America's annual goods-trade deficit with South Korea has been fluctuating around $13 billion during the past decade.
The U.S. exported $43.4 billion of goods to South Korea in 2011. Table 3 presents 2011's top U.S. exports to South Korea (in terms of product categories), including computer and electronic products, chemicals, machinery, transportation equipment, and agricultural products. The U.S. imported $56.7 billion of goods from South Korea in 2011. Table 4 presents 2011's top U.S. imports from South Korea. Considering the popularity of such products as Samsung televisions and Hyundai vehicles in the U.S., no one should be surprised to see that "computer and electronic products" and "transportation equipment" are at the very top of the list reported in Table 4. …