Small Businesses Weigh In On U.S.-Korea Trade Agreement in ITC Report

By Christina Sevilla, Deputy Assistant U.S. Trade Representative for Small Business, Market Access and Industrial Competitiveness

This week, the U.S. International Trade Commission (ITC) released a new report requested by the Office of the United States Trade Representative (USTR) entitled “U.S.-Korea Free Trade Agreement: Effects on U.S. Small and Medium-Sized Enterprises.” Under the U.S.-Korea trade agreement, the U.S. and Korea established a Working Group on Small and Medium Enterprises (SMEs) to explore and develop ways for small businesses to take greater advantage of the new economic opportunities created after full implementation of the agreement. To inform the Working Group’s efforts, USTR requested that the ITC examine the agreement’s effects on exports by U.S. small and medium-sized businesses, which account for a significant share of U.S. exporters both to Korea and in general. The ITC sought information from these businesses on the effects of the U.S.-Korea trade agreement on their production, distribution, and export strategies, the benefits of specific provisions of the agreement, as well as challenges those businesses may have faced in exporting to Korea.

The report found that most small companies responding to the ITC’s request for information expressed the view that the agreement had already proven helpful, and would benefit their companies even more over time. Responses came from small firms in diverse sectors of the economy, including agriculture (wine, tree fruit, potatoes, hay), manufacturing (tool and die, aircraft parts), and services (media, software). Several businesses reported immediate sales increases and creation of new business relationships and improved intellectual property protections. Some raised concerns about remaining non-tariff measures, in particular sanitary and phytosanitary (SPS) restrictions.

In the agriculture sector, for example, the report found that under the agreement, Korea immediately eliminated its MFN duty of 24 percent ad valorem on eligible imports of U.S. cherries, and according to the three firms responding in this sector, the elimination has been the primary driver behind increased U.S. cherry exports to Korea. Oneonta Starr Ranch Growers, a Washington State-based grower, packer, and marketer of fruits, said that elimination of the duty on U.S. cherries has greatly reduced prices at the retail level, bringing new consumers to the market for cherries. Still, cherry exporters expressed concerns about a Korean fumigation requirement. The trade agreement established a Committee that provides the U.S with a forum to raise this and other sanitary and phytosanitary (SPS) concerns with Korea.

The report also found that small manufacturers who responded to the ITC expressed the view that the U.S.-Korea trading environment has improved since the agreement entered into force; those firms reported new business possibilities, a strengthening of existing relationships, and more regular sales patterns. Transpo Industries, a New York company that manufactures and supplies safety products and new technology materials for bridges, roadways, tunnels, railroads, airports, and ports reported easier movement of its product into the Korean market since the agreement entered into force, and the company advised ITC that it is “aggressively” pursuing additional trade opportunities afforded under the provisions of the agreement.

Finally, in the area of services, the businesses surveyed reported substantial new opportunities in Korea, attributable at least in part to what they regard as the improved intellectual property environment. For example, CMJ Holdings Corp., a New York small business that connects music fans and music industry professionals with new music through interactive media, live events and print, credited the combination of strong intellectual property rights (IPR) protections and low prices for legal access to music for substantially reduced music piracy in Korea, creating additional value for U.S. artists’ work.

The U.S.-Korea trade agreement entered into force on March 15, 2012, opening a trillion dollar Asian economy to U.S. exports of goods and services. Going forward, the USTR will continue to monitor the implementation of the agreement, and work closely with U.S. small and medium-sized businesses and American companies of all sizes to help them take advantage of the new opportunities the agreement provides.