S. Korea Ratifies Revised KORUS FTA on Dec. 7
At the beginning of the year, we reported that Korean investment in the U.S. had steadily expanded following the implementation of the Korea-U.S. Free Trade Agreement (KORUS FTA). According to an analysis of data from global commercial information provider Dun & Bradstreet, 847 U.S. affiliates of Korean enterprises (1,716 including regional offices) were registered in the U.S. and employed a total of 75,000 workers as of August 2017. Korean investments in the U.S. reached a record high level of $13.5 billion in 2016, and hit another new record high level of $15.3 billion in 2017. In 2018, many Korean firms announced their investment in the States. In January, Samsung Electronics decided to expand their $380 million washing machine factory plant in South Carolina on June. On February, CJ Bio America announced that they are preparing for a $51 million expansion project for a new product in the industrial park west of Fort Dodge in Iowa. Hyundai Motor increased production in U.S. by 20%, allocating 70,000 units of the next Tucson model and 60,000 units of the Tucson pickup truck to its Alabama plant in order to mass produce them in 2021. Hanhwa Q Cells Korea announced in May that they are planning to construct a solar module production facility in Georgia by 2019. SK Innovations is considering building an electric vehicle battery plant in the Southern region of the U.S.
In February, the PyeongChang Olympic Games offered a showcase for how South Korea’s increased presence on the world stage – as an economic player, a diplomatic leader and a role model to developing countries – had emerged side-by-side with its industrial and commercial successes. Mike Pence, Vice President of the U.S. led Presidential delegation to the 2018 Olympic Winter Games and Ivanka Trump, advisor to the President Trump attended closing ceremony while leading the U.S. delegation. The country’s economy had been built upon the ravages of the Korean War to become the world’s 12th largest economy in the world today, the sixth largest exporter of goods and services, and the United States’ sixth largest trading partner. At the Seventy-Third Session of the UN general Assembly, President Moon noted “The participation of North Korea’s athletes and delegation in the Pyeongchang Winter Olympics provided a decisive momentum to break the impasse in building peace”. After the Winter Olympics closed, three 2018 inter-Korea summits took place on April, May and September.
In April, the Honorable Kim Young-Ju, chairman and CEO of the Korea International Trade Association (KITA), headed a delegation of 30 business leaders to Washington. KITA and the U.S. Chamber of Commerce jointly held a forum on “Enhancing the U.S.-Korea Partnership”. The delegation participated in meetings at leading Washington think tanks, met with Members of Congress, and were the featured guests at a reception on Capitol Hill.
Successes from the KORUS FTA were highlighted often throughout the year. The market share for U.S. products and services in Korea grew from 8.5 percent in 2011, the year before the agreement was implemented ($44.6 billion), to 10.6 percent in 2017 ($50.7 billion). Doing business with Korea has reduced the U.S. trade deficit by 7.9 percent. Across the United States, the average growth per state in exports to Korea has been nearly 31 percent.
The historic summit meeting in Singapore in June between U.S. President Donald J. Trump and North Korean leader Kim Jong-Un offered an opportunity to look toward a future in which trade and investment with North Korea can expand after hostilities are de-escalated and normal diplomatic relations are established.
The increasing importance of trade and investment in the auto industry resulted in key changes in the automotive provisions of the renewed KORUS FTA, which was signed by President Moon and President Trump in September. The provisions improve market access of U.S. automobiles in Korea and postpone the opening of the U.S. truck market for an additional 20 years. U.S. automobiles will also have better access to the Korean market because burdens on U.S. automakers in terms of meeting safety and environmental standards have been reduced. This will build upon the successes of the past few years, during which the U.S. automotive industry has increased its exports to Korea by 270 percent. Meanwhile, Korea introduced a new clause aimed at instituting additional improvements to investor-state dispute settlement (ISDS), and both parties agreed to make minor edits to it.
When South Korean and the U.S. leaders met in New York in September to formally sign the updated KORUS FTA, global intelligence analyst Stratfor noted that most “U.S. imports from South Korea are finished products that go to end consumers. The products include $16.4 billion worth of automobiles in 2016 and $7 billion in phones, representing about a third of U.S. imports from South Korea alone.” The Ministry of Trade, Industry and Energy announced that the Korean National Assembly ratified the revised KORUS FTA on December 7. Now that the domestic procedure for implementing the deal is complete in Korea, the Korean government will discuss with its U.S. counterpart, the revised KORUS FTA to take effect on January 1, 2019. Once realized, the new, improved KORUS FTA will lead to further strengthened trade and economic cooperation, mutual investment ties and will contribute to consolidating a robust and comprehensive U.S.-Korea alliance.
In late October, a joint KITA/Republic of Korea Embassy delegation visited Wisconsin and Minnesota to promote Korean businesses there. The aim was to share ideas with regards to the stronger partnership between Korea and the States, exchange opinions on how to utilize the modernized KORUS FTA for both Korean and Wisconsin and Minnesota companies, and to seek to hear ideas and voices from local industries for further cooperation.
And finally in late November, KITA Washington Center launched a Trade Advisory Council and held a successful preliminary luncheon meeting. Members comprised of luminaries in trade, legal, congressional, academic, private industry and Think Tanks gathered together to discuss the present state and future of Korea-U.S. trade policy.
In sum, 2018 was an impactful year for the KITA Washington Center. Our successes, to include this newsletter, could not have been possible without your indispensable help and support. We look forward broadening and deepening our mutual relationships as we anticipate another successful year together in 2019 for the betterment of the Korea-U.S. alliance. Taking this opportunity, we want to wish you, your colleagues, friends and families, our heartfelt best wishes over the Holiday Season and for a happy, healthy and prosperous New Year.
KITA Washington "Trade Advisory Council"
On November 28th, the KITA Washington Center held its preliminary luncheon meeting of the KITA Washington Center “Trade Advisory Council” in Washington, DC. Twenty members of Trade Advisory Council—comprised of former U.S. government officials, think tank experts, legal professionals, executives of economic organizations and other professionals in related fields, etc.—congregated to exchange information and opinions on global trade issues and U.S.-Korea trade ties in particular. The luncheon meeting started off with opening remarks delivered by Tiger Minsok Chu, President & Chief Representative of the KITA Washington Center. He noted that the Honorable Young Ju Kim, Chairman and Chief Executive officer of KITA had taken a keen interest in this meeting and played a video of Chairman Kim’s congratulatory remarks. Thomas Kim, President of Thomas Capitol Partners, then briefly explained the purpose of Trade Advisory Council and recognized the Honorable Terry Miller, Director at Heritage Foundation, as the Council’s inaugural Chairman. During the trade discussion session, Kenneth Levinson, Executive Director at the Washington International Trade Association led a robust conversation by introducing discussion topics that ranged from the current trade policy environment to U.S.-Korea FDI. The main points that were highlighted during the council meeting included: 1) Regulatory Reform and Harmonization that could significantly ease trade tensions between Korea and the U.S. 2) Energy, which is a critical security and trade issue that presents an opportunity to deepen Korea-U.S. ties and; 3) Korean investments in the U.S. and how KITA/Korean business can generate data on Korean foreign direct investment and related job creation numbers in the U.S. both direct and indirect.Along with trade discussions, members also exchanged their views on the long term plan for the Council such as upcoming advisory council activities and operations and a decision on the inaugural meeting schedule/discussion topic in early 2019.
Conversation with the Honorable Edwin J. Feulner
On November 28th, the Honorable Edwin J. Feulner, Founder and Former President of The Heritage Foundation, who has a deep understanding and keen interests in Korea, visited the KITA Washington Center with Anthony Kim, Research Manager of The Heritage Foundation. Edwin Feulner and Tiger Minsok Chu had discussions regarding the Trump Administration’s trade policy, recent Korean companies’ interest and challenges, U.S.-China trade conflicts and its impacts on Korean companies, etc. President Feulner expressed tremendous interest and support for the KITA Washington Center’s activities. He also hoped that KITA would continue to develop a central role in promoting the bilateral relationship between the U.S. and Korea. Tiger Minsok Chu appreciated The Heritage Foundation and President Edwin Feulner’s special interest in Korea and asked for continued support.
KITA Washington Center Renovation Project
The first phase of the KITA Washington Center’s renovation project (the lobby and the garage), which was initiated in 2017, was successfully completed in 2018. The second phase of renovation project will be to build a fitness center. The architectural design of the fitness center has already been completed and is ready for construction. The third phase of the renovation project will be the installation of a larger conference facility equipped with state-of-the-art technology and exterior wall construction, etc. KITA has been contributing to job creation and regional economic development by investing $53 million in 2005 in DC, spending more than $13 million in capital until this year. The KITA will continue necessary investments to make the KITA Washington Center a “Hub of Korea-U.S. Trade & Investment Cooperation.”
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