10 Years Since the Korea-US FTA Implementation... Positive Impact on Securing and Maintaining the US Market

The Changwon Chamber of Commerce and Industry in Gyeongnam conducted a survey on changes in Gyeongnam's trade with the United States and the effects of the Korea-US FTA on the occasion of the 10th anniversary (11th year) of the FTA's enforcement and announced the results.

Changwon Chamber of Commerce and Industry.
Photo by Se-ryeong Lee

In Gyeongnam's trade, the United States, along with China, holds the highest share and is a traditional major export country. Durable consumer goods such as automobiles, washing machines, refrigerators, and dryers mainly constitute exports, while imports are structured around capital goods and raw materials such as aircraft parts, engines, gas compressors, aluminum, and castings.

In particular, during the COVID-19 pandemic year of 2021, Gyeongnam's exports to the US recorded an all-time high, providing a stable export market for Gyeongnam's industries. Above all, due to the US-China trade dispute and the expansion of domestic procurement, trade volume with China decreased, and the relatively stable US market expanded its share to 22.3% in 2022.

◆ Changes in Tariff Rates on Major Export and Import Items to the US and Market Share in the US

Among Gyeongnam's top 20 export items to the US, eight items have a zero basic tariff rate (WTO agreement): 'Refrigerators and freezers,' 'Automobile parts (chassis),' 'Excavators,' 'Aircraft and helicopter parts,' 'Compressors for refrigeration and freezing equipment,' 'Ovens and cooking appliances,' 'Gas turbines for aircraft,' and 'Printing and writing paper and cardboard.'

On the other hand, 12 items such as 'Passenger cars' (basic tariff 2.5%), 'Dryers' (2.6%), 'Washing machines' (1.0%), 'Automobile tires' (4.0%), 'Household dishwashers' (2.4%), 'Metal cutting lathes' (4.4%), 'Machining centers for metal processing' (4.2%), 'Parts for compressors for refrigeration and freezing equipment' (4.7%), 'Automobile parts (drive axles)' (2.5%), 'Vehicle piston engines (cylinder capacity over 1000cc)' (8.0%), 'Railway passenger cars (excluding self-propelled)' (5.0%), and 'Cooking utensils and heating plates' (5.7%) are items that have benefited from Korea-US FTA preferential tariffs and can now be exported duty-free after 10 years (11th year) of enforcement.

As of the first half of 2023, the market share of these items in the US import market shows that 'Railway passenger cars (excluding self-propelled)' had the highest share at 68.5% among Gyeongnam's top 20 export items to the US. Other items also show relatively high single-item market shares: 'Dryers' 40.7%, 'Household dishwashers' 33.1%, 'Washing machines' 23.9%, 'Metal cutting lathes' 19.2%, 'Refrigerators and freezers' 16.7%, 'Machining centers for metal processing' 11.0%, 'Ovens and cooking appliances' 8.7%, and 'Passenger cars' 8.0%.

◆ Effects of the Korea-US FTA on Gyeongnam's Exports

From 2012, when the Korea-US FTA was enforced, to 2022, the effects of the FTA were analyzed for the top 50 export and import items (HS 6-digit level) between Gyeongnam and the US (including items that were already duty-free).

Among the top 50 export items analyzed (accounting for 84.8% of Gyeongnam's total exports), 34 items (average basic tariff rate 3.2%) are subject to Korea-US FTA preferential tariffs, while the remaining 16 items have a 0% basic tariff and are exported duty-free regardless of the FTA.

Among the top 50 import items (accounting for 66.3% of Gyeongnam's total imports), 45 items (average basic tariff rate 6.0%) benefit from Korea-US FTA preferential tariffs, and the remaining 5 items have been imported duty-free since before the FTA enforcement.

The timing of tariff elimination varies by concession type for each item, but tariffs on the top 50 export and import items between Gyeongnam and the US analyzed were completely eliminated as of January 1, 2021.

An official from the Changwon Chamber of Commerce and Industry stated, "As of 2023, Gyeongnam's FTA utilization rate is 73.4% for exports and 84.5% for imports, showing a gradual increase, but the FTA is still not being fully utilized. Utilizing the FTA to secure corporate profitability or improve export profitability ultimately depends on increasing the utilization rate. Therefore, efforts to maximize the utilization of the Korea-US FTA are needed, especially focusing on small and medium-sized enterprises, which show relatively low utilization rates, through reclassification of items and efficient management of rules of origin."

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