Korea-U.S. FTA in its Third Year: Current Status of Implementation and Issues

8 Pages Posted: 29 Apr 2016 Last revised: 13 May 2016

See all articles by Young Gui Kim

Young Gui Kim

Korea Institute for International Economic Policy

Jun-Hyun Eom

Korea Institute for International Economic Policy

Hyuk-Hwang Kim

Korea Institute for International Economic Policy

Do Hee Kim

Korea Institute for International Economic Policy

Date Written: September 11, 2015

Abstract

March 15, 2015 marks the third year since the entry into force of the KORUS FTA. The effect of the FTA has been positive in trade and investment. During the 34 months since its entry into force, Korea saw an increase of 31.54% in exports to and 10.77% in imports from the U.S. The effect of the trade increase under the KORUS FTA was 82.4% for exports and 8.44% for imports. In analyzing the portion of Korean trading products with the U.S. in overall trade products, the KORUS FTA was considered as to have contributed not only to the intensive margin, but also the extensive margin, with a 2.1% increase in the portion of exports to the U.S. and a 1.9% increase in the portion of imports from the U.S.

Although the utilization rate has increased after FTA effectuation, the rate for exports was 43.8% and that of imports was 60.7% in 2014. In order to overcome the severe deviation in industrial impact, we need to find a solution involving active utilization in industries that were insufficiently affected by the KORUS FTA. There should therefore be an attempt to improve the environment for appropriate FTA application to mitigate this deviation.

Continuous monitoring is necessary from the present moment on. There are differences in the two countries’ perspectives concerning the contents and levels of implementation, and newly imposed measures by Korea could become problematic with respect to KORUS FTA implementation.

Issues such as origin verification, express delivery packages and financial data transfer also reveal the divergence of views between Korea and the U.S. Detailed regulations or specific agreements are called for.

A close review is also required for newly enforced measures in Korea, including the incentive-penalty system based on automobile emission figures, policies to reduce the price of pharmaceuticals and the verification system for processed organic food, to verify whether or not these measures are consistent with the KORUS FTA’s objective and purpose.

Keywords: KORUS, Korea-U.S. FTA, FTA Implementation

Suggested Citation

Kim, Young Gui and Eom, Jun-Hyun and Kim, Hyuk-Hwang and Kim, Do Hee, Korea-U.S. FTA in its Third Year: Current Status of Implementation and Issues (September 11, 2015). KIEP Research Paper No. World Economy Update-15-18-1. Available at SSRN: https://ssrn.com/abstract=2771075 or http://dx.doi.org/10.2139/ssrn.2771075

Young Gui Kim (Contact Author)

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Jun-Hyun Eom

Korea Institute for International Economic Policy ( email )

Seoul 137-602

Hyuk-Hwang Kim

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Do Hee Kim

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

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