Free trade agreement with South Korea takes effect
By Heather Thorstensen
Date Modified: 03/29/2012 10:10 AM
MANKATO, Minn. — As a free trade agreement between the United States and the Republic of Korea took effect March 15, some in the agriculture industry looked forward to expanding an export market while others had concerns over the deal's fairness.
The Office of U.S. Trade Representative says the United States-Korea Free Trade Agreement, or the KORUS FTA, is the most commercially significant of its kind in nearly two decades. Reducing Korea's tariffs and tariff-rate quotas on U.S. products is expected to add up to $12 billion to annual U.S. gross domestic product.
Korea's website states that changing the tariffs will lower prices for Korean consumers.
According to information from Minnesota Soybean, the Republic of Korea is the ninth-largest importing country of U.S. soybeans. With the FTA, Korea's purchases of U.S. agricultural products are expected to increase by $1.8 billion annually.
"Any time we have less of a tax on our exports, it just creates more of a market," said Joel Schreurs, a farmer from Tyler and a board member of the Minnesota Soybean Growers Association.
Approximately half of Minnesota's soybean crop is sent to foreign countries each year.
"We're always trying to develop new markets throughout the world," said Schreurs. "Right now, Asia is by far the biggest customer."
It's anticipated that the FTA will bring the most benefit to the soybean sector's food-grade product. These soybeans will no longer be channeled through a Korean trading enterprise that reportedly marked up the price.
The FTA is also expected to increase exports of U.S. meat, which could help soybean farmers, who sell much of their crop to livestock producers.
"Better access to U.S. soy, grain and meat products advances food security for South Korea. For Minnesota and the U.S., expanded world trade of agricultural products brings more money to help keep the lights on in our rural communities," Schreurs said.
National Farmers Union's policy, which Minnesota Farmers Union follows, does not support the FTA.
NFU withholds support largely because Korea has a history of manipulating its currency and the FTA fails to address that, said NFU president Roger Johnson.
"If they devalue their currency, whatever marginal benefits that were anticipated could be wiped out, similar to what happened with NAFTA (the North American Free Trade Agreement)," Johnson said.
NFU also takes issue with a part of the agreement that allows Korean exporters to put their country of origin label on products that may have largely been made elsewhere.
"We know from talking to folks in Korea and watching business activities there that there's this relationship that a number of large corporations have with North Korean government that allows them to outsource a lot of their work to extraordinarily low wage earners in North Korea and then those products can be stamped 'made in South Korea',"said Johnson.
NFU will monitor how the FTA unfolds.
"Hopefully, the concerns that we had will be addressed," Johnson said.
NFU supports trade agreements that give American farmers a level playing field for trade by working with countries that pay attention to environmental and labor standards.
Those aspects could be bypassed if Korea's exports have the potential to come from North Korea or any under developed country in Asia. Their gateway in to the United States would be artificially enhanced through the FTA, said Johnson.