March 18, 2016
This week marks the fourth anniversary since the U.S.-Korea Free Trade Agreement (KORUS) entered into force and our bilateral trade and investment relationship is substantially larger and stronger than before the KORUS agreement. Since KORUS entered into force in 2012, the United States and South Korea have carried out five rounds of tariff cuts and eliminations, creating significant new market access opportunities for businesses in both countries. The agreement has also expanded opportunities for our growing bilateral services trade, strengthened intellectual property protection, and resulted in improvements in the regulatory environment such as increased transparency and greater opportunities for stakeholder input across a number of sectors including financial services, motor vehicles, pharmaceuticals and information technology. Overall, U.S.-Korea goods and services trade has risen from $126 billion in 2011 to nearly $150 billion in 2015.
Exports of manufactured goods are up 8.4% from 2011 (pre-KORUS) to $37.3 billion in 2015. This is more than twice as fast as the U.S. growth rate in exports of manufactured goods to the world over the same period.
While starting from a low base, U.S. auto exports to Korea increased by 208% by value between 2011 and 2015, more than 14 times faster than the increase of U.S. auto exports to the world (up 14%), thanks to Korea’s 50% tariff reduction (from 8% to 4%) when KORUS entered into force. The remaining tariffs were eliminated on January 1, 2016. Korea is now the United States’ 9th largest export market for autos, with annual exports of $1.3 billion in 2015.
Korea is currently the United States’ fifth-largest market for agricultural exports thanks to KORUS. U.S. exports of key agricultural products benefiting from tariff cuts and the lifting of other restrictions under KORUS have seen significant growth. U.S. cherry exports to Korea were valued at $109 million in 2015, up 172.5% compared to 2011. In 2015, exports of citrus fruit were up over 25% from 2011, with lemon exports up 241.3% to $30 million and grapefruit exports up 47.8% to $13 million in 2015. The $810 million in exports of beef and beef products to Korea in 2015 marked an increase of 18.1% between 2011 and 2015. Dairy products grew by nearly 37% from 2011, with the $147 million worth of fresh cheese exports showing a remarkable 398% increase from a base of less than $30 million before the FTA.
U.S. services exports to Korea have been particularly strong, up 34.5% to an estimated $22.4 billion in 2015 as compared to $16.7 billion in 2011. This rate of growth is nearly three times the overall 13.1% growth of U.S. services exports to the world. South Koreans continue to travel to the United States, as exports in U.S. travel services to South Korea increased $1.7 billion since 2011.
KORUS has helped South Korea attract more foreign direct investment (FDI) by creating a more liberalized and transparent market. U.S. investments include automaker General Motors Korea, which has invested $8.2 billion since 2002 and employs 17,000 with manufacturing facilities in Bupyeong, Gunsan, Changwon, and Boryoung. Manufacturer 3M employs 1,700 in eight locations throughout South Korea, including its Dongtan Innovation Center, which is 3M’s seventh largest laboratory worldwide. Other recent U.S. investments include the Microsoft Korea’s Cybersecurity Center, Google’s 2,000 square-meter Campus Seoul, and IBM’s Client Center.
Likewise, South Korea has made recent large scale investments in the United States. OCI Solar Power announced in June 2015 that it is building a 110-megawatt solar plant located in Pecos County, Texas, one of the largest solar plants in Texas, creating 800 long-term jobs. Nature Republic, a Korean-based cosmetics company, opened its 11th U.S. store in Los Angeles in 2015, and is already present in Hawaii, New Jersey, and California. Also in 2015, Lotte Chemical Corporation and Atlanta-based Axiall Corporation announced a combined $3 billion capital investment in two new chemical manufacturing plants in Lake Charles, Louisiana. Hanwha Q CELLS, a top solar power maker with 1,400 U.S. employees, has already finished more than 110 megawatts of projects and announced in April 2015 that it is contracted to supply 1.5 gigawatts of solar supply modules to NextEra, a Florida-based electricity supplier. Hanwha Azdel, a thermoplastic maker, has expanded its manufacturing facility in Lynchburg, Virginia, investing $21.3 million to add another production line.