10 Years of Korea-US FTA... Central Role in Strengthening Supply Chains for Semiconductors and More

Contributing to the Expansion of Trade and Investment

[Asia Economy Reporter Kim Jin-ho] The Korea-US Free Trade Agreement (FTA), which marks its 10th anniversary this year, has played a key role not only in significantly expanding trade and investment between the two countries but also in strengthening supply chain ties, according to an analysis.

According to the "10-Year Evaluation and Tasks of the Korea-US FTA" published on the 11th by the Korea International Trade Association's International Trade and Commerce Research Institute, bilateral goods trade increased by 67.8% over 10 years, from $100.8 billion in 2011 before the FTA took effect to $169.1 billion last year.

The share of the United States in Korea's goods trade rose from 9.3% in 2011, before the FTA took effect, to 13.4% in 2021, making the US Korea's second-largest trading partner. Exports were led by automobiles and parts, petroleum products, secondary batteries, refrigerators, and synthetic resins. As a result, the trade surplus increased from an annual $11.6 billion before the FTA to $22.7 billion in 2021.

The US is Korea's top country for attracting foreign direct investment (FDI) and also the largest overseas investment destination for Korean companies. Since the FTA took effect, the US accounted for 22.3% of total foreign investment in Korea, and 25.2% of Korea's overseas investment was directed to the US.

According to the report, Korean investment in the US has significantly increased, focusing on batteries, semiconductors, and electric vehicles, contributing to the expansion of production bases and job creation in the US, while providing Korean companies with opportunities to expand their markets.

Furthermore, the Korea-US FTA has been evaluated as playing a pivotal role in strengthening supply chain cooperation between the two countries. In the semiconductor industry, the US and Korea have built a strong value chain based on a stable investment foundation, with the US excelling in design and Korea in manufacturing. The battery industry has also established a strong cooperative relationship through joint investments between Korean battery manufacturers and US automakers. Additionally, cooperation between the two countries based on the Contract Manufacturing Organization (CMO) system for pharmaceuticals during the COVID-19 pandemic evolved into a vaccine alliance, cited as an example of strengthened supply chain ties.

The report stated, "Based on the increasingly close economic cooperation resulting from the Korea-US FTA and expanded trade and investment, Korea has grown into a major supply chain partner for the US," adding, "Especially amid the supply chain crisis triggered by US-China tensions and COVID-19, the reorganization of supply chains centered on trust is increasingly emphasized, and supply chain cooperation between the two countries is strengthening."

There is also an analysis that the Korea-US FTA, marking its 10th anniversary, will lead to strengthening the alliance relationship in terms of economic security beyond market opening. Yoo Ji-yoon, senior researcher at the Korea International Trade Association, said, "The US recently emphasized solidarity with allied and partner countries through the 'Indo-Pacific Economic Framework (IPEF),'" and suggested, "It is necessary to consider how to link the cooperation between Korea and the US through the Korea-US FTA to new regional economic security alliance discussions."

Meanwhile, the Korea International Trade Association will hold the "Korea-US FTA 10th Anniversary Seminar" both online and offline on the 11th to evaluate the achievements of the Korea-US FTA over the past 10 years and discuss future prospects. The event will be attended by former Prime Minister Han Duck-soo, Trade Negotiations Director Yeo Han-gu, and Christopher Del Corso, Charg? d'Affaires at the US Embassy in Korea.

During the panel discussion session, former French Ambassador Lee Hye-min, Seoul National University Professor Ahn Deok-geun, PIIE Research Fellow Jeffrey Short, and Andrew Kim, Delta Air Lines Korea representative, will share their opinions on the Korea-US FTA and future cooperation between the two countries.

This content was produced with the assistance of AI translation services.