U.S.-Korea Free Trade Agreement Goes Into Effect Today

Cantwell-backed deal could boost Washington farmers’ exports this season by eliminating tariffs on important crops such as cherries, wine, beef, potatoes, hay, and wheat

WASHINGTON, D.C. – Today U.S. Senator Maria Cantwell (D-WA) hailed the free trade agreement with South Korea going into effect. The Cantwell-backed deal eliminates burdensome tariffs on U.S. products today, in time for this year’s growing season.

As of today, various tariffs are eliminated on agricultural products important to Washington’s economy, including a 24 percent tariff on sweet cherries, a 15 percent tariff on wine, an 18 percent tariff on frozen potato products, and a 1.8 percent tariff on wheat. Today also marks the beginning of phasing out a 40 percent tariff on beef and a 30 percent tariff on fresh potato products.

South Korea is an important export market for Washington state. The country is the fourth largest export market for Washington state goods, taking in $1.4 billion worth of agriculture exports from the state last year.

The free trade agreement (FTA) with South Korea is the first of three trade agreements – with South Korea, Panama and Colombia, enacted into law last October – to go into effect. Cantwell consistently championed the passage of the FTAs through her role on the Senate Finance Committee. She helped secure passage in the Senate after the deals passed the House on three separate votes. The American Farm Bureau estimates that the increased market opportunities for Washington state under these trade agreements could increase direct exports by $52.8 million per year and add hundreds of jobs to the state economy.

“The elimination of these harmful tariffs today is a big win for Washington’s agricultural economy,” Cantwell said. “The trade agreement with Korea gives Washington products more competitive access to the state’s fourth largest export market. That’s why I fought in the U.S. Senate to get this bipartisan agreement passed. In Washington state, it means a potential boost for cherry, wine, beef, potato, hay, and wheat exports right away.”

Under the agreement, South Korea will immediately eliminate a 24 percent tariff on sweet cherries, which was equivalent to $7.5 million last year. The reduction in tariffs would reduce the price of cherries by 75 to 90 cents per pound in South Korea, which the Northwest Cherry Growers anticipate could boost sales by $18 to $20 million per year over the next few years.

“Effective today, Korea’s 24 percent tariff on sweet cherries imported from Washington state is no more,” said Mark Powers of the Northwest Horticultural Council. “The timing is perfect as our growers are several months away from the start of their season and are now making plans to increase sales to their valued Korean customers.”

The Korea FTA would also immediately eliminate a 15 percent tariff on wine. During fiscal year 2010, 24 percent of the wine exported from Washington went to South Korea.

“This is great news for the Washington wine industry as the opportunities for wineries, both large and small, have expanded and should bring a greater variety of Washington wines to South Korea,” said Shylah Alfonso, vice president of the Washington Wine Institute and co-owner of Pomum Cellars, a boutique family winery in Woodinville, WA. 

The FTA with South Korea will also eliminate a 40 percent tariff on beef over 15 years. The American Farm Bureau estimates Washington state is expected to increase beef exports by $7 million per year. Beef production is the state’s fifth largest commodity and the market for American beef in South Korea has the potential to reach $1 billion.

“The implementation of the U.S.-Korea Free Trade Agreement will mean trade barriers are removed over the phase-in period and market opportunities will increase for U.S. beef,” said Jack Field, executive vice president of the Washington Cattlemen’s Association. “The Korea FTA is a great step forward for the U.S. beef industry.”

“The U.S.-Korea free trade agreement is one of the most positive things for our industry in a long time,” said Dick Coons, rancher and immediate past president of Washington Cattlemen’s Association. “We have such a huge portion of the world’s population that lives outside the U.S. They love our beef and of course we love producing it for them. Getting these trade restrictions reduced is a relatively painless way to improve the economy for U.S. producers. Now with the 40 percent beef tariff in South Korea gradually being eliminated, that gives us a huge advantage over the Australians and other competitors. We’ve made a huge positive stride in improving our exports to Korea in the last year or so, and I think that it’ll go nowhere but straight up with this tariff reduced.”

The free trade agreement immediately eliminates an 18 percent tariff on frozen potato products and over time a 30 percent tariff on fresh potato products. Annual exports of U.S. potato products to South Korea could reach $75 million under this trade agreement, according to the American Potato Trade Alliance. Last year, more than $36 million in frozen potato products were exported from Washington state to Korea. Washington state’s potato industry supports 23,500 jobs and adds more than $4.6 billion to the state’s economy, according to a recent Washington State University study.

“Our Washington State Congressional delegation fought long and hard to make sure the Korea Free Trade Agreement supports business, agricultural and fair labor interests,” said Matt Harris, assistant executive director of the Washington State Potato Commission. “Senator Cantwell in particular spent many years devoting her time making sure the Korea FTA was fair and balanced for all aspects of Washington business. Without their support we would have had a tough hill to climb. With 87 percent of Washington state’s 9.8 billion pounds of estimated potato production being processed into French fries, and chipped or dehydrated potato products, the Korea Free Trade Agreement will go a long way to support our farms and industry related jobs.”

The FTA also will immediately eliminate a 1.8 percent tariff on wheat, which will make the United States more competitive in the Korean market with Australia and Canada. The fourth largest producer of wheat in the nation, Washington state exports 85 percent of its wheat crop each year. The American Farm Bureau Federation estimates Washington state is expected to increase wheat exports by $1.97 million per year to South Korea.

“We are thankful that the trade agreement with South Korea will quickly be in place,” said Eric Maier, president of the Washington Association of Wheat Growers. “Washington’s family wheat farmers rely heavily on export trade markets, with more than 80 percent of our crop shipping overseas. These agreements are vital to our industry and the thousands of jobs tied to wheat production from the farm to the ports. Lowering barriers to trade increases the value and volume of all Washington state agricultural exports, including wheat. We commend the Administration and Congress for expediting the implementation of this agreement.”

Washington’s ports and waterways – the closest to Asia and Alaska of all U.S. ports – also stand to significantly benefit from the U.S.-Korea FTA. According to 2007 projections by the U.S. International Trade Commission, the FTA is expected to grow U.S. exports by up to 33 percent and U.S. imports from South Korea by up to 15 percent. This means more business for Washington state ports. South Korea is the Port of Seattle’s fourth largest waterborne trading partner and the Port of Tacoma’s third largest international trading partner. Last year, $16 million worth of cherries were exported to South Korea, the majority of which went through Seattle-Tacoma International Airport.

Washington state is the largest exporting state in the country per capita, and together, the Ports of Seattle and Tacoma comprise the third largest container load center in the country. In 2010, $704 million in state revenue was generated from port activities and 8,480 companies exported their goods from operations in Washington. 

During the first two months following the implementation of the European Union-Korea Free Trade Agreement on July 1, 2011, the European Union’s exports to South Korea grew by nearly 28 percent compared to the same period in 2010. The United States-South Korea FTA will help secure America’s place in an important export market.