3 Ways U.S.-Korea Trade Agreement Has Helped U.S. Dairy

 
3 Ways U.S.-Korea Trade Agreement Has Helped U.S. Dairy

The pact's third anniversary shows the urgency of finishing TPP to further open Asia.

by Shawna Morris, U.S. Dairy Export Council

Sunday was the third anniversary of the U.S.-Korea free trade agreement (KORUS), our most recent deal with an Asian nation.

KORUS has been a boon to the U.S. dairy industry, so we celebrate its birthday. The agreement with Korea also highlights the need to finish the long-negotiated Trans-Pacific Partnership (TPP) trade agreement, which would expand opportunities for U.S. dairy exporters throughout the Pacific region.

KORUS has helped U.S. Dairy in many ways. But three benefits stand out:

  1. Higher U.S. Sales to a Major, Growing Market

Since the FTA’s 2012 implementation, U.S. dairy sales to Korea have spiked by 86% compared to the year before the trade deal took effect, reaching a high of $417 million last year. That jump doesn’t just reflect a change in global price levels; volumes have also surged. Cheese sales, which represented three quarters of total U.S. exports on a value basis last year, have increased 50% on a volume basis over that same time period as well. 

  1. Preserved Competitiveness

KORUS was the first FTA Korea signed with a major dairy exporting nation, but it wasn’t the last. After finishing its FTA with the U.S., Korea swiftly moved on to an FTA with the European Union and more recently wrapped up deals with Australia and New Zealand. If the U.S. didn’t have its own FTA, we could have faced a gradual erosion of competitiveness against all three of our top competitors in this key market, rather than gaining a leg-up over Oceania suppliers for several years and maintaining parity with European suppliers. Those who stand still in global markets run a high risk of being run over!

  1. Provided a Model for Agreements to Follow

Agricultural negotiations with Korea were not easy; dairy in particular was a tough sector where ultimately U.S. negotiators had to settle for less than full tariff elimination in a few cases. But in all product areas, including those where tariffs do not zero out, opportunities for access to the Korean market are allowed to grow over time. This expansion is possible either by doing away with duties or by continually expanding tariff-rate quotas. KORUS was a very ambitious agreement and the benefits of that commitment to a high-standard FTA are paying dividends, serving as a good model as the U.S. pushes towards conclusion of TPP.

USDEC_chart_-_US_dairy_exports_to_Korea_3-16-15

Was KORUS perfect? Of course not. But where certain elements of the agreement didn't get off to as smooth a start as they should have, the Administration has devoted careful attention to addressing those issues and helping ensure that the implementation of the FTA lives up to its potential.

The U.S. needs to keep this lesson in mind as TPP countries drive toward bringing those long-running talks to a close this year. We need to keep the focus on securing a strong agreement that continually expands market access across all product categories.

Happy Birthday, KORUS!

The U.S. Dairy Export Council represents dairy farmers, proprietary processors, cooperatives, ingredient suppliers and export traders. Its mission is to enhance U.S. competitiveness and increase global sales of U.S. dairy ingredients and products.

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