U.S.-Korea Trade Agreement
Assistant Secretary, Bureau of Economic, Energy and Business Affairs
Thank you for your warm welcome. Thank you, Mr. Hughes, for your introduction. I'm pleased to see you all, and I’m delighted to be here at the Wilson Center.
The U.S.-Korea trade agreement – which we call the “KORUS” agreement – will strengthen not only our economic relationship, not only our vital strategic alliance with Korea, but also our deep human bond with the Korean people, who already see us as one of their closest friends and most loyal partners.
Before I became Assistant Secretary in the Economic, Energy and Business Affairs Bureau at the U.S. Department of State, I had the honor to serve on the Board of Directors at Dartmouth College in New Hampshire. I was also fortunate to be on the search committee to find Dartmouth’s new President. It’s not an easy task to pick a new President – but one candidate stood out to me. He was valedictorian of his class and the star quarterback for the football team. He went to Ivy League schools and left with a medical degree and a doctorate in anthropology. He co-founded Partners-in-Health and was named by Time magazine as one of the most influential people in the world. I thought the guy was fantastic and I knew Dartmouth – my cherished alma mater – had to have him. So I convinced the board this was their man, and watched him be inaugurated as the 17th President of Dartmouth College in September 2009. Perhaps the detail I should have mentioned from the outset was that the 17th President is named Jim Yong Kim. He was born in Seoul, moved with his family to the United States at the age of five and grew up in a small town in Iowa. This son of immigrants and son of Korea grew up to be a world health expert and the first Asian leader of an Ivy League institution.
The Korea Jim Yong Kim’s parents left is different from the Korea of today. Over the last 60 years, Korea has built itself up to become one of the most dynamic economies in the world. Today’s Korea is both a strong partner and a new source of economic opportunity that has also created many American jobs.
The U.S.-Korea economic relationship is one of the world’s most vibrant, with two-way goods trade reaching nearly $88 billion in 2010. Korea is our 7th largest trading partner, and the United States is South Korea’s third largest trading partner. Our alliance with Korea has expanded from its military roots to develop into one of the most vibrant and dynamic full-spectrum strategic partnerships in modern history. Today’s Korea stands shoulder-to-shoulder with us in peacekeeping and reconstruction efforts in Haiti, Afghanistan, Iraq and Lebanon.
Recent events with North Korea have reminded us that the alliance is a vital linchpin of not only the security of Korea and the U.S., but also for the Asia Pacific as a whole. Implementation of KORUS will signal to other Asia-Pacific nations our abiding presence in the region as a vital partner in its defense and development. It will underscore our commitment to prosperity and security in the Asia Pacific. KORUS will re-establish U.S. leadership in shaping economic policy in the region and in crafting its emerging economic institutional architecture.
Of course commercial ties are not only important for the U.S.-Korea relationship, but for America’s prosperity. Now more than ever, America’s ability to create jobs here at home depends on our ability to export goods and services to the world. We are aggressively promoting U.S. exports to fulfill the President's National Export Initiative goal of doubling exports over the next 5 years. An increase at this level would support up to two million new jobs, helping to put the American people back to work. KORUS is an integral piece of that. KORUS presents an historic opportunity to increase exports, create jobs, and bolster the American economy.
We signed KORUS with Korea on June 30, 2007, but U.S. Congressional approval was not forthcoming at that time due to concerns about market access for U.S. car manufacturers in Korea. The Obama Administration consulted extensively with U.S. stakeholders, including the business community, labor representatives and Congress, and reached a new agreement in December 2010 to ensure we created a level playing field for U.S. auto companies and auto workers in the Korean market. This package is a better deal for America’s auto industry and auto workers, and it is winning widespread bipartisan support.
The December Deal
What are some of the changes we negotiated in December? I’ll quickly highlight four differences.
First, we agreed to encourage green technologies by immediately cutting in half Korea’s tariffs on U.S. electric car imports, and eliminating both of our tariffs altogether in 5 years – 5 years earlier than in the 2007 KORUS agreement.
Second, we leveled the playing field and improved transparency by addressing ways Korea’s system of automotive safety standards have served as barriers to U.S. exports, as well as ensured that new, imminent Korea automotive environmental regulations did not place a disproportionate burden on U.S. autos.
Third, we agreed that Korea will immediately cut in half its tariffs on U.S. automotive exports, while our tariff on Korea’s auto exports will remain in place for 5 years. This will give American car companies and their workers a chance to build up more business in Korea before U.S. tariffs come down.
Finally, to protect U.S. auto companies and their workers from harmful surges in imports from Korea, we agreed to a new special motor vehicle safeguard.
The 2010 deal has, according to the United Auto Workers and the U.S. automotive industry, addressed the concerns about the agreement's potential impact on the U.S. auto industry. These benefits are not limited solely to autoworkers, but also benefit others, including those in the steel sector, and other suppliers to the auto industry. We think this agreement will support additional jobs and growth in America, and that is ultimately the best security and benefit we can secure for American workers.
The easy part has been done. We are now ready to move forward. To bring home KORUS’ promise – billions of dollars in exports and tens of thousands of jobs in America – the President intends to submit KORUS to Congress and will work with Congress to secure its approval without delay.
Once Congress approves KORUS, and the agreement enters into force, the benefits will be tangible. The U .S. International Trade Commission estimates that America's economic output will grow more from KORUS than from our last nine trade agreements combined.
Let me share some local examples of that anticipated benefit from KORUS:
In the last few years, electronics exports from Virginia to Korea averaged nearly $50 million per year. KORUS will provide a competitive boost to those exporters by eliminating almost all tariffs on electronics not already covered by the WTO Information Technology Agreement.
Also benefits for Maryland: Between 2008 and 2010, Maryland businesses exported on average $75 million annually in chemicals and related products to Korea. KORUS will immediately remove many of the Korean tariffs on these products – tariffs that are as high as 50% – and make these U.S. exports more affordable for Koreans to buy.
KORUS Supports Job Creation
But, at the end of the day, let me re-emphasize the huge job-creating potential of KORUS. The tariff cuts in KORUS alone could increase exports of American goods by $10 to $11 billion annually, supporting about 70,000 jobs. For example, last year, the United States provided almost one-third of Korea's total agricultural imports, valued at nearly $5 billion. KORUS is expected to boost agricultural exports by as much as $1.8 billion a year. It will do this by immediately eliminating duties on the majority of U.S. farm exports to Korea, and reducing or eliminating other duties over time.
But the benefits are not limited to agriculture. KORUS guarantees U.S. service suppliers the right to compete with Korean counterparts on a level playing field in Korea's $580 billion services market. New rights include the ability to establish joint ventures or offices in Korea, liberalizing work rules and easing investment restrictions. That’s good news for U.S. service providers, including law firms, CPAs and financial institutions, and their workers, who account for 80% of U.S. employment.
And, speaking of transparency, I should add that KORUS includes strong transparency obligations. It addresses corruption in international trade and investment and includes obligations for anti-bribery measures as well.
We Must Act Fast
These are the benefits. The numbers are clear. We need to act fast. We’re not the only game in town. Led by Korea and other dynamic economies, the Asia Pacific is the fastest growing region in the world. But we risk losing our market share if we don't move to approve KORUS fast. I mentioned moving from top to third exporter. Our competitors – the European Union, Japan, China and others – are not standing still, and either have signed, are negotiating, or are considering free trade agreements that can eventually severely disadvantage U.S. exporters in the Korean market.
Let me give you a couple of examples, without KORUS, American exporters will be at an immediate competitive disadvantage – American producers would still pay Korean agriculture duties averaging over 50% and non-agricultural duties of nearly 7%. Time has come to move on KORUS.
Let me preempt a couple of questions. I cannot finish my remarks without mentioning our trade agenda including the signed Colombia and Panama trade agreements. This Administration is committed to pursuing an ambitious trade agenda that will help our economy grow, double exports and support good jobs for American workers.
The commercial benefits of the Colombia and Panama agreements will be in our favor. Today, for example, 96% of exports from Panama are duty free. Simply put, that means our exporters are the only ones paying tariffs. U.S. exporters have paid an estimated $3.2 billion in tariffs to Colombia since the agreement was signed in 2006 – that’s money Americans could have earned if this agreement had been approved.
The Administration is discussing with Congressional leadership how we can work together to accomplish the President’s comprehensive trade agenda this year: including the Korea, Colombia and Panama trade agreements; Trade Adjustment Assistance for workers; the Generalized System of Preferences (GSP) and Andean Trade preference program; and permanent normal trade relations as Russia joins the WTO.
With Korea and other agreements, we are on the brink of bringing home more job opportunities that can help working families in every corner of the country. KORUS is more than about trade – this agreement continues to links our countries together even closer, strengthening a vital partnership in the Asia Pacific. Jobs will be created and lives improved by removing the barriers to a closer economic relationship between these two countries. Just as Jim Kim overcame adversity to experience a remarkable trajectory of service, so too can the work to deepen this U.S.-Korea relationship end in success.
I invite your questions, comments and concerns, but to those that share this vision of the transformative power of a U.S.-Korea trade agreement, I ask that you join me in making it a reality. Thank you.