Major outcomes

The Korea-US FTA has helped revitalize the Korean economy through brisk trade and increased foreign investment. Thanks to the Korea-US FTA, the economy could produce outcomes, which would otherwise have been less desirable amid difficult external conditions, including the European fiscal crisis. In 2012, the bilateral trade amount reached US$101.9 billion, making Korea the third largest trade partner of the US.

The Korea-US FTA also provided a more transparent and secure environment for investment. Korea was the second largest investment destination of the US last year, following Japan.

Outcomes by category

1. Exports to US increased

For products with Korea-US FTA tariff rates, the growth of exports to the US far exceeded the growth of exports to the other parts of the world, presenting an apparent positive effect of the Korea-US FTA.

2. FDI from the US increased

From March 15, 2012 to February 28, 2013, foreign direct investment (FDI) from the US has increased by 113.6 percent from US$2.120 billion to US$4.529 billion, through both M&As and greenfield investments. US direct investment in the manufacturing sector increased 88.6 percent, while the direct investment in the service sector rose 90.6 percent.

3. Consumer prices decreased

The government has been monitoring the prices of eight import items—wine, cars, almonds, orange juice, grape juice, grapefruit, lemons and walnuts—all of which, with the exception of walnuts, have shown reductions in their prices. The prices of almonds and wine have dropped by 12.3 percent and 11.5 percent, respectively, while the prices of imported cars shed 3.4 percent.

4. Positive effect on SMEs

Growth of exports to the US by small- and medium-sized enterprises (SMEs) surpassed the growth of the nation’s total exports to the region, each of which increased 3.1 percent and 2.7 percent, respectively, partly because exports that benefit from the FTA are the products mostly made by SMEs, such as automobile parts, textiles and food. Such sectors are also shown to have actively utilized the trade agreement. According to the US International Trade Commission, as of the end of 2012 the Korea-US FTA utilization rate of Korea’s component exporters was 76.5 percent, while that of textile exporters was 75.8 percent and food exporters 74.3 percent.

* Source : Ministry of Strategy and Finance and Korea Development Institute, Economic Bulletin Vol.35 No.3 (March 2013).
Website: http://english.mosf.go.kr