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KORUS FTA benefits US more than Korea

While President Donald Trump was denouncing the bilateral free trade pact between the United States and Korea as a bad deal that cost U.S. jobs and increased its trade deficit, which led to its revision, it turns out that his country benefited more from the deal.

The Ministry of Trade, Industry and Energy submitted an evaluation of the Korea-U.S. free trade agreement (KORUS FTA) to the National Assembly, Tuesday, for the first time since the pact took effect in 2012. It was based on the Trade Procedure Act, which requires evaluating FTAs every five years since they took effect and reporting the results to the National Assembly.

According to the report, exports to the U.S. increased on average by $18.4 billion a year compared with the five-year period before the KORUS FTA took effect. Among the increase in exports, the contribution from the KORUS FTA was estimated to be between 17.2 percent and 36 percent.

Imports from the U.S., meanwhile, increased on average by $5.6 billion a year and the KORUS FTA contributed between 36.5 percent and 47.4 percent of the increase.

The bilateral trade pact also steeply increased Korea's investment in the U.S. Direct investment there increased on average by 61.2 percent annually following the deal, which was responsible for 35 percent of this. U.S. investment in Korea increased 184.2 percent, but the FTA's contribution was lower at 29.3 percent.

Korea's annual trade surplus with the U.S. on average stood at $22 billion, which is up 138.8 percent from the average $9.2 billion annual surplus before the FTA. However, it isn't clear whether the KORUS FTA was the main cause of the surplus since surpluses with other countries increased more steeply during the same period. Korea saw a $37.9 billion surplus with other countries, up 179.6 percent from before the FTA.

The United States also increased its market share more than Korea. While Korea's stake in the U.S. market rose to 3.2 percent in 2016 from 2.6 percent in 2011, the U.S. share in the Korean market rose to 10.7 percent from 8.5 percent.

Its gain in services was also evident. While Korea's services exports to the United States increased 9 percent to stand on average at $16.6 billion following the FTA, Washington increased its services exports to Korea by 17.3 percent for an annual average of $29.1 billion. Korea's services deficit with the United States thus increased to $12.6 billion on average following the FTA, compared to $9.6 billion before the pact.

The report also noted that Korea sustained a 195.1 billion won loss on average in agricultural and fisheries production annually.

"The KORUS FTA played a positive role in mutually beneficial economic relations between the two countries, by the balanced expansion of bilateral trade," the report noted. 

Source: The Korea Times

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