KORUS FTA and the Trade Balance
1. Bilateral trade has seen significant growth under the KORUS FTA. This increased exchange brings benefits.
Bilateral goods trade volume between Korea and the U.S. exceeded $100 billion each of the last four years. In 2014, total trade volume reached a record of $114.1 billion.
o In 2014, Korea continues to be the United States’ 6th largest trading partner (it had been 7th until 2012) behind Canada, Mexico, China, Japan and Germany.
o In 2014, the U.S. passed the E.U. to become Korea’s 2nd largest trading partner, behind China.
In 2014, U.S. exports to Korea were $44.5 billion, a 6.8% increase from the previous year.
o U.S. Agricultural exports to Korea were $6.8 billion, a 33.6% increase from 2013.
o Specific agricultural products that saw increases included corn ($1.1 billion, +335.5%), beef ($815 million, +45.7), wheat and meslin ($414 million, +21.7%), pork ($405 million, +66.7%), and soybeans ($362 million, +28.1%), all of which are beneficiary items under the KORUS FTA.
o Pharmaceutical exports to Korea, which reached $1 billion in 2013, increased 4.2%, to $1.05 billion.
o U.S. Automobile exports to Korea reached a record of $1 billion, a 33.2% increase from 2013, and a 517.6% increase since 2009.
We expect to see continued growth in bilateral trade as tariffs continue to be reduced and eliminated under the KORUS FTA.
2. Since implementation of the KORUS FTA, bilateral trade is balanced when you consider the full trade picture, including services and investment.
In 2014, the U.S. enjoyed a $10.4 billion trade surplus with Korea in the services industry, a 2.2%
increase from 2013 and a 24.4% increase from 2011, the last full year before the KORUS FTA was implemented.
The U.S. saw more than $6.3 billion in Korean investment in the first three quarters of 2014, a positive net flow. Since 1968, cumulative Korean investment in the U.S. has totaled $76.6 billion.
The United States remains the top destination for Korea’s foreign direct investment.
The U.S. $25 billion merchandise deficit with Korea in 2014 is smaller than the equivalent deficits with the U.S.’s five largest trading partners, which range from a $343 billion deficit with China to a
$34 billion deficit with Canada.
In March 2014, USTR noted that the U.S. trade deficit in trade in goods is unrelated to the KORUS FTA.
o Korea's top export items did not benefit from the KORUS FTA:
Automobiles (U.S. tariffs still remain)
Smart phones (Duty free before the KORUS FTA)
Steel products (Duty free before the KORUS FTA)
o Although some trade skeptics and TPP opponents incorrectly attribute the merchandise deficit to the KORUS FTA, U.S. exports of beneficiary items, those goods that receive more favorable tariffs under the KORUS FTA, continue to grow.
