South Korea and the United States finalized a free trade agreement over the weekend which the White House hopes will boost American exports by some $11 billion and sustain at least 70,000 jobs at home. That makes the pact the largest of its kind since the North American Free Trade Agreement with Canada and Mexico came into force in 1994.
In Seoul last month President Barack Obama had to postpone the signing of a trade deal with Korea. In a statement released Saturday, the president explained that he had directed American negotiators “to achieve the best deal for American workers and companies,” particularly with regard to car exports and beef.
Instead of cutting a 2.5 percent tariff on Korean car imports, the United States will lift the tax over the next five years. A 25 percent tariff on trucks will be phased out during the next decade. South Korea’s tariff on American trucks has to be eliminated immediately however. Under the agreement, American automakers are each allowed to export up to 25,000 cars to Korea annually.
Korea’s existing tariffs on agricultural imports are exceptionally high at 54 percent. As the new trade agreement eliminates or reduces import levies, the American Farm Bureau Federation estimates that farmers’ and ranchers’ exports to Korea will increase by as much as $1.8 billion every year thanks to expected increases in sales of major grain, oilseed, fiber, fruit, vegetable, and livestock products. Koreans bought $3.9 billion worth of agricultural products in 2009 and are America’s fourth largest beef importers.
Last month’s economic summit of Pacific countries in Japan attested a commitment to free trade and according to the president, the new trade deal not only “deepens the strong alliance between the United States and the Republic of Korea” at a time of considerable upheaval on the peninsula; it also “reinforces American leadership in the Asia Pacific.”
South Korea is already America’s eight largest trading partner. Last year the United States imported $11 billion more worth in goods from Korea than they exported though—an imbalance that the free trade pact seeks to remedy. The American trade surplus to South Korea was $7.1 billion in 2008.
Business leaders as well as seniors Republicans have welcomed the trade agreement which is subject to congressional approval.