KORUS FTA: Year Three in Deepening Market Integration
March 12, 2015
“Thank you, Eric. And thank you Consul General Kim, Guy Fox, and the fellow organizers of this event at KOTRA, the District Export Council of Southern California, the City of Fullerton, and the U.S. Department of Commerce for inviting me here today.
“It is wonderful to be here in Fullerton. My mother-in-law is a graduate of Cal State/Fullerton, and my wife grew up here, so this is a homecoming of sorts for me.
“And, wholly apart from that, Fullerton is an entirely fitting venue to celebrate the third anniversary of the KORUS Free Trade Agreement, given Orange County and Southern California’s deep ties to Korea and Korea trade.
“Korea is one of Orange County’s top five trading partners. Around 8% of U.S. exports to Korea originate in the Los Angeles Metro area, worth over $3 billion.
“And more than one third of the nation’s trade with Korea’s $1 trillion market passes through the Los Angeles Customs District.
“But the region’s deep connections to Korea are not just limited to trade.
“Korea sends more university students to the United States per capita than any other major economy, over 72,000 per year. Of these, nearly 13,000 (18 percent) studied at colleges and universities in California, the most of any state. Several California cities and towns have Korean sister cities – including Fullerton, whose sister city is Yong in-si.
“And Southern California boasts the largest Korean population outside of Korea, with Korean-Americans comprising nearly 12% of Fullerton’s population. They not only serve as a significant link between our two countries, but also make countless contributions to the strength and vitality of American society.
“So in a very real sense, Fullerton and Southern California are a cultural and trade crossroads, both a driver and beneficiary of our close trading relationship with Korea.
“And that’s what I want to emphasize today: this agreement truly has been win-win. And that means our workers, companies, farmers, consumers, and our citizens, all gain from this agreement.
“As the KORUS anniversary approaches, our gathering today presents a great opportunity to take stock of what we have accomplished with KORUS over the past three years.
“In a key respect, we are already in the 4th year of the KORUS agreement – four rounds of tariff cuts have already taken place.
“In addition to cutting tariffs, KORUS has expanded market access for services, improved regulatory transparency, streamlined the movement of goods, and strengthened intellectual property protection.
“Those are impressive achievements, ones that are contributing to boosting bilateral trade and making our countries a more attractive place for each other’s businesses.
“And the numbers are telling this positive story. After running into some headwinds in the first two years of the agreement due to a sluggish Korean economy, overall export numbers are strong and continuing to improve. Year-on-year goods exports to Korea for 2014 were up 6.8% compared to 2013. At $44.5 billion, these were record level exports.
“And the fact that the United States has been faring better than Korea’s non-FTA trading partners provides further evidence of KORUS’s benefits.
“Last year, manufacturing exports were up by nearly $3 billion from pre-FTA figures, hitting an all-time high. That includes a host of “Made-in-America” exports, like ships and boats (up nearly 36%), toys, games and sports equipment (up 12%), and plenty of others.
“This agreement has been good for American farmers and ranchers, too. Today, Korea is our fifth-largest market for agricultural exports, as agricultural exports were up 31.2% in 2014. That’s nearly 7 times faster than U.S. agricultural export growth to the world.
“Exports of dairy products hit record levels, with exports of fresh cheese alone up 563% from pre-FTA levels, and major agricultural exports from here in California have been booming as well. Shelled almonds are up 175.7%, and exports of wine and beer are up 21.6%.
“Services have also seen robust growth since KORUS went into effect, up 24.4% to an estimated $20.7 billion – a rate that was nearly twice as fast as U.S. services growth to the rest of the world.
“Behind all of these numbers are the real stories of flesh and blood people. American farmers who are exporting more cherries and nuts, ranchers who are exporting more meat, factory workers exporting more machinery and chemicals, U.S. express delivery companies making more shipments, and U.S. law firms providing more legal services.
“For example, right here in California, total exports to Korea reached $8.4 billion, equaling $10 million for every mile of its 840-mile coastline.
“Pelican Products of Torrance is among those California companies that has benefited from KORUS. Under the agreement, Korea eliminated its 8 percent tariff on Pelican’s portable lighting equipment for hazardous environments. Pelican’s business with Korea has grown tremendously since it began exporting to Korea 15 years ago. And by allowing the company to lower its prices and provide goods to its customers more quickly, KORUS has given Pelican a further leg up in the Korean market, helping its business grow in Korea by around 10 to 15 percent since KORUS entered into force.
“Likewise, a Los Angeles-based law firm was among the first U.S. law firms to be granted approval by Korea’s Justice Ministry to practice in Korea under the KORUS FTA.
“And I’m sure Olaf from down the road would be pleased to hear that Korea was the second biggest market for the movie Frozen.
“In many other cases just like these, increasing exports abroad to key markets like Korea supports more U.S. jobs back at home.
“Likewise, Korea has also seen increases in its goods and services exports.
“Even in agriculture, a sector that many in Korea feared would not survive KORUS, Korean exports are up. For example, more Americans are able to enjoy Korean products such as Korean pears, kimchee and red pepper paste, thanks to KORUS. Samgyetang exports are off to a great start – sales to American consumers last year reached over $1.2 million.
“Korean services and investment are both up as well.
“KORUS has also created closer linkages between our two economies.
“Take the aerospace industry, for example. Incheon airport in Seoul has been named one of the top 10 airports in the world for 8 consecutive years. Many of the aircraft that serve Incheon are built with parts from U.S. aerospace manufacturers – many of which are from right here in California – and thanks to KORUS those parts have been duty free since 2012. And 75 percent of Korea's aircraft, parts and component imports are from the United States.
“In addition, Korea decided to purchase its next generation of fighters and other defense aircraft from the United States, adding to the $3.2 billion in total U.S. aerospace exports to Korea in 2013.
“Not all of the obligations of KORUS have yet entered into force. But as they do, both with respect to further tariff cuts and additional rules that were given transition periods, we expect the economic gains to continue to grow.
“But we’ve also experienced some implementation issues over the past three years.
“Some in the room are familiar with some of these examples. From automotive issues, to financial services issues, to origin verification issues, we’ve encountered problems and urged our Korean counterparts to faithfully implement both the letter and the spirit of KORUS.
“Working together, we have been able to resolve or find a path forward on many of these issues.
“Of course, in a trade and investment relationship as big as ours, it’s normal to have irritants and issues to resolve. But frankly, finding solutions in many cases has taken too long.
“I’m hopeful this will change in the coming year, as ministries in Korea have become fully familiar with their KORUS obligations and it has become apparent that living up to these obligations will lead to real gains in the Korean economy.
“Our cooperation in resolving problems has itself helped us make progress towards a smoother and expanded trading relationship.
“One example is the ongoing dialogue between our two countries’ customs experts to help facilitate trade flows and smooth over the bumps that have occurred in the implementation process. This dialogue will continue to serve a critical role in achieving KORUS’s full potential, as customs and origin verification are central elements to the success of this agreement.
“Achieving that potential and meeting all KORUS obligations will keep our trade and investment relationship on the right track and help build support in the United States for expanding these ties.
“Now just a few years after KORUS, the United States finds itself working towards the completion of another trade agreement that goes even further than KORUS, and does so on a regional rather than a bilateral basis, with eleven partners in the Asia-Pacific region. Of course, I am speaking of the Trans-Pacific Partnership, or TPP.
“TPP is important not just to the U.S. economy, but to the economies of all the TPP partners, and, I believe, to the entire Asia-Pacific region.
“A high standard TPP will bring substantial economic benefits to its members and elevate standards for trade and investment, as we did in KORUS, throughout this dynamic region for years to come.
“Specifically, TPP will pioneer new disciplines that advance digital trade, promote and protect innovation, combat corruption, improve customs rules, and place disciplines on state-owned enterprises. And TPP will incorporate the highest labor standards and environmental protections of any trade agreement.
“TPP is also designed as a living agreement that provides a potential platform for expanding trade and investment throughout the Asia Pacific.
“That’s why we welcomed Korea’s expression of interest in the TPP back in November of 2013. Korea plays an important role in the regional economy, and as such, its membership would meaningfully contribute to the value of TPP and increase its benefits for other Parties.
“Looking forward, we are encouraged by the fact that Korea has already taken on high standard commitments in many of its FTAs, and KORUS shows that Korea and the United States already share a common approach on many issues covered in the TPP. But there are other areas where the TPP will go beyond KORUS.
“Over the past year, we have held preliminary consultations with Korea on its interest in joining TPP, most recently in January. These consultations, like our consultations with other TPP candidate countries, have focused on Korea’s demonstrated readiness to take on the obligations being negotiated, as well as addressing bilateral issues of concern.
“We will continue to consult extensively with our stakeholders and with our Congress going forward on Korea’s potential membership in TPP.
“So let me bring this back to those of you here today. I want to thank the larger business community both here in Fullerton and throughout Orange County and Southern California, as well as our Korean friends, for all of your work on strengthening the U.S.-Korea economic relationship. You helped us reach KORUS. You continue to be invaluable in helping us implement the agreement.
“As you all know well, our trade and investment ties have long been a central pillar of our countries’ bilateral partnership. And these ties have strengthened and deepened under KORUS, as it continues to open up trade and expand opportunities for companies on both sides of the Pacific.
“Here in California, over $70.4 billion (40 percent) of the state’s goods exports in 2014 went to FTA partners, and KORUS will continue to contribute a significant share.
“The United States and Korea share economic goals for the region, and our work together in KORUS and in international fora like APEC, the WTO, and the G20 gives us a strong foundation for increased collaboration and cooperation on global and regional economic issues.