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_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
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Congressional Research Service (CRS)

The Proposed U.S.-South Korea Free Trade Agreement (KORUS FTA): Provisions and Implications

William H. Cooper, Coordinator,Specialist in International Trade and Finance

Mark E. Manyin, Specialist in Asian Affairs

Remy Jurenas, Specialist in Agricultural Policy

Michaela D. Platzer, Specialist in Industrial Organization and Business

March 1, 2011

http://www.opencrs.com/document/RL34330/2011-03-01/download/1005/

[full-text, 57 pages]

Summary

On June 30, 2007, U.S. and South Korean trade officials signed the proposed U.S.-South Korean

Free Trade Agreement (KORUS FTA) for their respective countries. If approved, the KORUS

FTA would be the second-largest FTA that South Korea has signed to date, after the agreement

with the European Union (EU). It would be the second-largest (next to North American Free

Trade Agreement, NAFTA) in which the United States participates. South Korea is the seventhlargest

trading partner of the United States and the United States is South Korea’s third-largest

trading partner.

Various studies conclude that the agreement would increase bilateral trade and investment flows.

The final text of the proposed KORUS FTA covers a wide range of trade and investment issues

and, therefore, could have substantial economic implications for both the United States and South

Korea. The agreement will not enter into force unless Congress approves implementation

legislation. The negotiations were conducted under the trade promotion authority (TPA), also

called fast-track trade authority, that Congress granted the President under the Bipartisan Trade

Promotion Act of 2002 (P.L. 107-210).

Under TPA the President has the discretion on when to submit the implementing legislation to

Congress. President Bush did not submit the legislation because of differences with the

Democratic leadership over treatment of autos and beef, among other issues. Early in his

Administration, President Obama indicated the need to resolve those issues before he would

submit the implementing legislation. On December 3, 2010, after a series of arduous negotiations

and missed deadlines, President Obama and President Lee announced that their negotiators

reached agreement on modifications in the KORUS FTA, and that they were prepared to move

ahead to getting the agreement approved by the respective legislatures. The White House is

expected to send implementing legislation to the 112th Congress and that it would like to see

Congress approve the agreement by July 1 of this year.

The modifications are in the form of changes in phase-out periods for tariffs on autos, a new

safeguard provision on autos, and concessions by South Korea on allowing a larger number of

U.S. cars into South Korea under U.S. safety standards than was the case under the original

KORUS FTA provisions. The issue of full U.S. beef access was not resolved because of the

political sensitivity of the issue in South Korea. In 2008, when President Lee reached a separate

agreement with the United States to lift South Korea’s ban on U.S. beef imports, massive anti-

South Korean government protests forced the two governments to renegotiate its terms. The U.S.

beef sector has largely supported the KORUS FTA.

A broad swath of the U.S. business community supports the KORUS FTA . With the

modifications in the agreement reached in December, this group also includes the three Detroitbased

auto manufacturers and the United Auto Workers (UAW) union. It still faces opposition

from some labor unions and other groups, including Public Citizen. Many U.S. supporters view

passage of the KORUS FTA as important to secure new opportunities in the South Korean

market, while opponents claim that the KORUS FTA does not go far enough to break down South

Korean trade barriers or that the agreement will encourage U.S. companies to move their

production offshore at the expense of U.S. workers. Other observers have suggested the outcome

of the KORUS FTA could have implications for the U.S.-South Korean alliance as a whole, as

well as on U.S. Asia policy and U.S. trade policy, particularly in light of an FTA signed in by

South Korea and the EU that is expected to go into effect on July 1, 2011.

Contents

The KORUS FTA in a Nutshell ...................................................................................................4

Agriculture...........................................................................................................................4

Automobiles .........................................................................................................................4

Other Key Provisions ............................................................................................................6

Estimates of the Overall Economic Effects of a KORUS FTA .....................................................7

An Overview of the U.S.-South Korean Economic Relationship..................................................8

U.S. and South Korean Objectives in an FTA............................................................................10

Sector-Specific Issues and the KORUS FTA.............................................................................. 11

Agriculture and Sanitary and Phytosanitary Issues...............................................................12

Overview......................................................................................................................12

Beef ..............................................................................................................................13

Rice ..............................................................................................................................14

Oranges ........................................................................................................................15

Pork.............................................................................................................................16

Geographical Indications for Dairy Products .................................................................16

Sanitary and Phytosanitary Provisions ...........................................................................17

Autos .................................................................................................................................17

Expected Impact and Industry Reaction.........................................................................21

Textiles and Apparel............................................................................................................24

Other Manufactured Goods .................................................................................................26

Capital Goods Machinery and Equipment .....................................................................26

Electronic Products and Components ............................................................................27

Steel.............................................................................................................................27

Pharmaceuticals and Medical Devices .................................................................................28

Financial and Other Services ...............................................................................................30

Visas............................................................................................................................33

General Provisions ....................................................................................................................33

Trade Remedies ..................................................................................................................33

Kaesong Industrial Complex ...............................................................................................36

Foreign Investment .............................................................................................................38

Intellectual Property Rights .................................................................................................39

Labor Rights and Conditions ...............................................................................................40

Government Procurement....................................................................................................41

Environment Protection.......................................................................................................42

Transparency ......................................................................................................................42

Institutional Provisions and Dispute Settlement ...................................................................43

Other Technical Provisions..................................................................................................43

Next Steps, Implications, and the Emerging Debate...................................................................44

Implications for South Korea and the U.S.-ROK Alliance....................................................44

Implications for U.S. Trade Policy and U.S. Asia Policy......................................................46

Figures

Figure 1. South Korean Passenger Vehicle and Light Truck Exports to the United States ...........51

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This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.

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Stuart Basefsky                   
Director, IWS News Bureau                
Institute for Workplace Studies 
Cornell/ILR School                        
16 E. 34th Street, 4th Floor             
New York, NY 10016                        
                                   
Telephone: (607) 255-2703                
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