Resin manufacturers and the automotive industry have hailed the new U.S.-Korea free trade agreement, which the White House forecasts will increase annual exports of American goods by up to $11 billion and support at least 70,000 American jobs.
Dow Chemical Co. (Midland, MI) said the agreement will reduce tariffs on its U.S.-manufactured exports to by more than $1 million. The deal will also provide more than $6.5 million per year in duty reductions for Dow's Korean customers, according to Wan-Je Kim, Dow's country manager in Korea. Dow's president, Andrew Liveris, chairs the global competitiveness subcommittee of the President's Export Council (PEC), which pushed for the agreement.
Chevron, which is a founding member of the U.S.-Korea Free Trade Agreement Business Coalition, said the deal will create more opportunities for its 40-year-old GS Caltex joint venture, which built and developed the Yeosu refinery.
"[The trade deal] will expand cooperation between strategic partners that play a vital role in meeting the growing energy demand of the Asia Pacific region," explained Mike Wirth, Chevron's executive VP, downstream and chemicals. GS Caltex produces homo, random, and impact polypropylene, among other chemical products.
Chevron Phillips Chemical operates a joint venture with Daelim Industrial Co. at Yeosu, manufacturing its K-Resin styrene butadiene copolymer (SBC) elastomer there.
U.S. President Barack Obama said in a Dec. 3 statement that he had instructed his negotiators to "achieve the best deal for American workers and companies, and this agreement meets that test." He added that this deal will help push the country towards satisfying his March 11, 2010 National Export Initiative executive order to double of U.S. exports in 5 years.
The new agreement eliminates tariffs on more than 95% of industrial and consumer goods within five years. In manufactured goods, U.S. exports of aerospace, automotive, consumer goods, electrical/electronic goods, metals, scientific equipment, and shipping and transportation equipment will have duty-free access to the Korean market.
Korea, with an economy of close to $1 trillion, is already America's eighth largest trading partner. The Asian country's economy grew at 5.8% in the second quarter of 2010, with forecast growth of 6.1% in 2010, compared to U.S. growth of 1.7% and 2.6%, over the same time period.
The 2009 goods trade deficit with Korea was $11 billion, impacted in part by Korea's average tariff on non-agricultural goods, which is more than twice that of the United States at 6.6% compared to 3.2%.
Manufactured goods account for 80% of American goods exports to Korea, supporting 230,000 American jobs in 2008. American machinery and equipment exports, which are already one of the country's top exports to Korea, will increase by more than a third, according to the National Association of Manufacturers.
The U.S. International Trade Commission estimates that America's economic output will grow more from the U.S.-Korea agreement than from the U.S.'s last nine trade agreements combined, improving the trade balance by $3.3 to $4 billion.
Korea's safety and environmental standards, which are among the strictest in the world, had helped fuel a large disparity between Korean auto sales to the U.S. and American car sales in Korea.
Four times the number of cars, with 25,000 vehicles per U.S. automaker, will now be allowed into the country. The 2010 supplemental agreement retains the 2.5% U.S. tariff on Korea cars into fifth year, while Korea will immediately halve its tariff on U.S. auto imports from 8% to 4%, with the tariff completely eliminated in the fifth year.
Korea manufactured 3.5 million vehicles in 2009, making it the fifth largest car manufacturer in the world after China, Japan, the U.S., and Germany, according to the U.S. Commercial Service.
Jobs, jobs, and jobs
NAM President John Engler said the deal means "jobs, jobs, and jobs." NAM noted that nearly 60% of exports to Korea will be manufactured goods, encompassing a wide range of industrial sectors and representing every state in America. Some potential markets include the Korean medical device sector, which is expected to reach $3.6 billion in 2009. The total market size of Korea's specialty chemicals sector was valued at $35 billion in 2008, according to the Commercial Service, up 4% over 2007.
Countering opponents of free trade, NAM said data show that for the past three years, the U.S. has had a trade surplus with its free trade agreement partners. NAM said this deal "paves the way for the passage of additional agreements," specifically naming proposed agreements with Colombia and Panama, as well as the Trans Pacific Partnership.
The U.S. was running a trade deficit of $6.6 billion with Korea through September of this year, according to the U.S. Census Bureau. The U.S./Korea trade deficit in 2009 was $10.6 billion. The trade deficit from 2006 through 2008 ranged from $13.1 to $13.4 billion, having most recently peaked at $19.9 billion in 2004. From 1995 through 1997, the U.S. maintained a trade surplus with Korea of $1.1 billion, $3.9 billion, and $1.8 billion.