KORUS Free Trade Agreement

Better Trade practices

In February 2006, the United States announced its intention to negotiate a free trade agreement with the Republic of Korea. The KORUS Free Trade Agreement was approved in April 2007 by the legislative bodies in either country and signed by President George Bush in June 2007. The better trades agreement required 10 months of bargaining, but immediately lifted 85 percent of the tariffs on industrial goods. The agreement is designed to eliminate tariffs and other barriers to trade in goods and services, promote economic growth, and strengthen economic ties between the two countries.

The KORUS Free Trade Agreement is considered to be the most significant trading act proposed since the North American Free Trade Agreement (NAFTA). Korea has a $1 trillion economy and is the seventh-largest trading partner for the United States. Under the terms of the KORUS, 95 percent of the consumer and industrial products traded will become duty free within three years of the act's approval. The remaining tariffs would be eliminated over the next 10 years, leading to better trades between the two countries.

Among the biggest beneficiaries will be United States farmers and ranchers, who will see duty eliminated on more than half the current farm exports. Korean rice is excluded from tariff and, in return, Korea will reduce its 40 percent tariff on beef over the next 15 years. Because the Korean agriculture industry is expected to be adversely impacted, the U.S. allocated $119 billion in aid over the next ten years to help balance the playing field. Some alarmists claim the KORUS will cost Korean more than 130,000 agriculture-related jobs.

One of the sticking points came in the automobile field. In 2006 only 4,000 U.S. cars were sold in Korea, while Korea exported more than 800,000 cars to the United States. The KORUS agreement will abolish taxes that Korea place on large American cars.

Korean exports are expected to rise by 12 percent each year. Korea's GDP is expected to increase by0.6 percent per year for the next 10 years. The agreement requires both countries to enforce their own better trade labor and environmental laws, and also ensure enforcement of the agreement.