WASHINGTON, Mar. 8, 2017 - Is the U.S.-Korea free trade agreement in the crosshairs of the Trump administration? The White House signaled its displeasure with the five-year-old pact that is widely popular with the U.S. agriculture sector when it released its controversial 2017 Trade Policy Agenda last week.
Officials blamed the trade pact, known as KORUS, for boosting the U.S. trade deficit. The document pointed out that total South Korean exports to the U.S. rose by $13 billion since the deal was implemented in 2012 while U.S. exports fell by $1.2 billion.
“Needless to say, this is not the outcome the American people expected from that agreement,” the White House concluded. “Plainly, the time has come for a major review of how we approach trade agreements.”
But, like other major trade pacts, KORUS has also been a boon for U.S. farmers and ranchers.
President Donald Trump’s dislike of the Trans-Pacific Partnership and the North American Free Trade Agreement is well-established. He’s already scuttled U.S. involvement in the TPP and demanded NAFTA be renegotiated. Both of those developments have been unsettling for the U.S. beef sector. Under NAFTA, Mexico has become the largest foreign market for U.S. beef, and exporters were counting on TPP to boost sales of the meat.
The overall trade relationship with Korea is also lopsided, but U.S. cattle ranchers, beef producers and exporters love it.
The U.S. exported just $582 million worth of beef to South Korea in 2012, the year KORUS was implemented, but tariffs were immediately reduced and U.S. sales have risen steadily every year since.
The U.S. became the largest beef supplier to South Korea in 2016, finally surpassing export juggernaut Australia. U.S. beef exports to the Asian country rose to about $1.1 billion last year, almost double what they had been just four years earlier. That’s according to data maintained by the National Cattlemen’s Beef Association, a group that knows its members need growth in international markets.
“The Korean agreement has been wonderful for us,” said Kent Bacus, NCBA’s director of international trade. “It just goes to show you that (KORUS) has been a huge opportunity for us.”
South Korea’s tariff on U.S. beef dropped from 40 percent to 32 percent when the pact was put in force on March 15, 2012, and it is scheduled to drop gradually to 9 percent by 2028. By last year the tariff had fallen to 26.7 percent and this year it will drop to 24 percent.
Australia and South Korea also signed a trade pact in 2014, but the U.S. is benefitting from making its deal first.
“We’ll have that advantage for the next few years until they catch up to us,” Bacus said.
KORUS has also been wonderful for U.S. corn and soybean farmers, who sell more of their crops to feed the livestock needed to satisfy South Korea’s growing demand for U.S. beef.
The mere fact that Koreans are clamoring for U.S. beef is a testament to how product quality, strong marketing campaigns, and free trade can transform a foreign market. Just nine years ago Koreans were staging mass protests in the streets of Seoul against the importation of U.S. beef. It had been five years since the U.S. discovered its first case of bovine spongiform encephalopathy (BSE), but fears of the disease were still high and South Korea had just agreed to lift its ban on U.S. product.
David Salmonsen, a senior director for congressional relations at the American Farm Bureau Federation, told Agri-Pulse he hasn’t heard of any direct threats to KORUS, but that may be because the deal is working well for agriculture.
Much of the controversy lately with trade deals has been focused on manufactured goods, he said, while agriculture continues to benefit out of the spotlight.
“You see everyone driving Kias and Hyundais and buying Samsung TVs,” he said. But KORUS is working “the way it’s supposed to” when it comes to ag, he added.
And not just for beef.
As part of the trade deal, South Korea eliminated tariffs and taxes on about two-thirds of all U.S. farm commodities, including wheat, corn, cotton, cherries, almonds and wine. Other U.S. agricultural goods like potatoes, popcorn, barley and hay are benefitting from new tariff-rate quotas.
USDA’s Foreign Agricultural Service credits the trade pact for huge spikes in tree nut sales to South Korea.
Since Korus took effect, “the United States has been the primary supplier of tree nuts to Korea,” a recent FAS report concluded, noting that in 2015, U.S. tree nut exports to the Asian nation exceeded 34,400 metric tons, and generated over $367 million in value.
The U.S. exported record amounts of walnuts ($129 million worth) and almonds ($231 million) to South Korea in 2015 and those successes are due to tariffs that were slashed or eliminated under the trade pact, according to the report.
The success story of almonds is one of the most obvious. In 2011, before KORUS was implemented, the U.S. sold about $85 million of the nuts to South Korea. Four years later those sales had increased by about 170 percent.