Korean Free Trade Agreement has strong support

Issue Date: September 8, 2010
Steve Adler

On the world export market for California agricultural products, South Korea comes in with a high ranking of No. 5 with $500 million annually in farm imports. But the potential exists for a substantial boost in those numbers if a previously negotiated free trade agreement is ratified by the two nations' governments.

That's the consensus shared by several leaders of California agricultural groups who met last week with Han Duck-soo, Korean ambassador to the United States. Attending the session at Blue Diamond Growers headquarters in Sacramento were representatives of California Farm Bureau Federation, Western Growers, California Cattlemen's Association, Western United Dairymen, California Walnut Commission, California Table Grape Commission, the Governor's Office of Economic Development and several Blue Diamond executives.

Major commodities exported to Korea include oranges, beef, rice, almonds, walnuts and dairy products. Korea takes more than 20 percent of California oranges, orange juice and beef exports and 15 percent of California rice exports, according to Dan Sumner, director of the University of California Agricultural Issues Center.

"All of those are important current markets in Korea or potential markets in Korea," said Sumner, who attended the meeting with Han. "It is remarkable how important Korea already is as a market for California agricultural products given the substantial trade barriers that are there.

"The free trade agreement is designed to bring those barriers down and I was very happy to hear someone mention competitive trade agreements, because one of the issues that California faces is that the status quo is not an option for us," Sumner said. "We are talking about a market of 50 million increasingly affluent consumers who really like and are willing to pay for high quality, safe agricultural products, and that is something that California has to offer."

After 10 months of intense negotiations, the United States and Korea signed a free trade agreement on June 30, 2007. The pact, which in the United States requires Senate approval, has languished for more than three years, primarily because of lobbying efforts in opposition by the United Auto Workers union, which fears that the FTA will result in a loss of jobs for U.S. auto workers.

There is new momentum in Washington, D.C., that the Obama administration could send the FTA to Congress for ratification soon after an official meeting between the two nations' presidents on Nov. 11. President Obama is a strong supporter of the FTA, saying, "It is the right thing to do for our country. It is the right thing to do for Korea."

Han told the group that agricultural organizations are among the strongest supporters of the FTA in the United States and it is important for them to communicate to members of the U.S. Senate why they need to approve the agreement.

"Now we are on track and we are nearing the finish line, so this is really the time that we should do our best to push this toward approval. We know that Farm Bureau and the other agricultural organizations are the most effective persuaders of free trade for the members of Congress," Han said. "I hope that you all will tell the members of Congress that this agreement should go now, because it will greatly help in making our economic relations much stronger."

Han noted that while the FTA has widespread approval among Korea's 50 million people, there is opposition from farmers in that country who want the high agricultural tariffs to continue to protect them from foreign competition.

"Our farmers will be very much opposed to this free trade agreement, but there are many others who are supporting this agreement in Korea because the U.S. has been such a strong ally for the past 60 years," he said. "You saved our country in the Korean War and because of that military alliance, Korea has become stronger and now is a $1 trillion economy.

"I am very happy to say that we are importing from the United States $4 billion in agricultural products while we export $300 million to $400 million of agricultural products from Korea to the United States. But that trade imbalance I think is good for Korea, because our people can have much lower priced, high quality agricultural products," Han said.

According to a 2009 report by the University of California Giannini Foundation of Agricultural Economics, better access to the Korean market would create significant opportunities for dozens of major commodities.

"As a relatively large, relatively high-income country with a well developed food and fiber distribution system, Korea is a major market for agricultural goods of the type produced in California," the report stated. "Overall, the agreement provides for gradual elimination of Korea's high tariffs for most export commodities of interest to California agriculture.

"Because of the size of the Korean economy and the height of pre-existing trade barriers, the FTA is broadly acknowledged as the most commercially significant free trade agreement the United States has negotiated in nearly 20 years," the report stated.

The U.S.-Korea Partnership of the U.S. Chamber of Commerce notes that when the FTA is ratified, nearly two-thirds of Korean imports of U.S. farm products will become duty free immediately, including wheat, corn and cotton.

"The U.S. meat sector will experience the largest increase in output, and U.S. beef exports will increase by $500 million to $1.8 billion," the group said.

Another agricultural sector that would likely receive significant benefit from the agreement is tree nuts, which already have strong sales in Korea despite the high tariffs.

Bob Silveira, Blue Diamond sales manager for the export industrial division, pointed out that the cooperative has shipped almonds to Korea for several decades with good success.

"The FTA would be a great opportunity for California almond producers. Korea has been one of the best and fastest growing markets for California tree nuts and all agricultural exports in general. Through my responsibility at Blue Diamond, I have seen that the almond industry has had great success in Korea," he said.

Blue Diamond CEO and president Doug Youngdahl said he would like to see the FTA ratified in order for the U.S. to remain competitive with growers from other almond-producing countries.

"We are anxious to have the FTA ratified by our Congress, especially since one of our competitors in the world—Australia—is currently negotiating its own free trade agreement with Korea. We would hate to lose that market simply because of the inability of our Congress to finalize our agreement with Korea," Youngdahl said.

Sean Connell, executive director of the U.S.-Korea Business Council of the U.S. Chamber of Commerce, told the assembled group that since Obama's announcement in July that he wants to have the FTA approved as soon as possible, the coalition of business and government groups supporting the FTA has been extremely active in Washington and across the country.

"We have been reaching out to members of Congress and to others to explain the importance of the agreement, the benefits that it will have, the way in which the agreement would basically serve as a cost-free, budget-neutral stimulus at a time when we are trying to get new growth going," Connell said. "Inaction is not really an option."

(Steve Adler is associate editor of Ag Alert. He may be contacted at sadler@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.

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