The long-awaited and often controversial free-trade agreement between the United States and South Korea went into effect Thursday. In what has been hailed as the most significant U.S. free trade pact in 20 years, this deal is expected to boost trade by billions of dollars while creating tens of thousands of jobs. Effectively the pact eliminates 80 percent of South Korea’s duties on U.S. manufactured goods and nearly 66% of its duties on U.S. farm products.
Many small business advocates believe this pact will provide a big boost to small business in the U.S., giving smaller companies a better chance to compete on a global scale. In Korea, the impact has been immediate, with prices on American products dropping as much as 20 percent in price—thereby making it much easier for Korean companies and government agencies to justify going outside the country to source products. This is expected to have a major market impact, effectively raising the profile of American products and companies. In addition, stronger exports are expected to lead to job creation in the U.S. and a much needed boost for the struggling economy.
Signed in 2007, the pact was finally approved by both countries in late 2011. South Korea is the U.S.’s seventh-largest trading partner, with a $1 trillion economy. The tariff cuts are project to boost U.S. exports by $10–$11 billion and create upwards of 70,000 jobs. Even more promising, White House analysts have estimated the potential market for South Korean government contracts at $100 billion.
However, controversy over the pact persists in Korea, causing demonstrations and a vow by Korea’s left-wing opposition to renegotiate or even repeal the deal if they are able to take power through their national elections later this year. Other opposition comes from U.S. automakers, who feel it doesn’t do enough to address Korea’s many non-tariff trade barriers within the auto market.
Pagliery, Jose. “Ready, Set, Free Trade with South Korea.” CNNMoney. 3/15/12. (3/21/12.) http://money.cnn.com/2012/03/15/smallbusiness/south-korea/index.htm?iid=SF_SB_River.
Palmer, Doug. “U.S.-Korea Free Trade Pact Takes Effect Amid Controversy.” Reuters. 3/15/12. (3/21/12.) http://www.reuters.com/article/2012/03/15/us-usa-southkorea-trade-idUSBRE82E05820120315.
Russell, Mark. “US-South Korea Free Trade Opens to Cheers, Jeers.” Newser. 3/15/12. (3/21/12.) http://www.newser.com/story/141864/us-south-korea-free-trade-opens-to-cheers-jeers.html.