US-Korea Free Trade Agreement

Definition

The US-Korea Free Trade Agreement (KORUS FTA) is a trade pact between the United States and South Korea aimed at reducing barriers to trade and investment between the two countries. This agreement facilitates increased economic cooperation by eliminating tariffs on goods, improving market access, and fostering a more predictable trade environment. KORUS is significant as it reflects the broader trend of free trade agreements that aim to boost economic growth and strengthen bilateral relations.

5 Must Know Facts For Your Next Test

1. The KORUS FTA was signed in 2011 and officially took effect in 2012, marking a significant step in U.S.-Korea economic relations.
2. Under the agreement, around 95% of U.S. consumer and industrial products were given duty-free access to South Korea, greatly benefiting American exporters.
3. The KORUS FTA also includes provisions on labor rights, environmental standards, and intellectual property protections to ensure fair trading conditions.
4. The agreement aimed to enhance cooperation in sectors such as agriculture, manufacturing, and services, helping both economies to grow and become more competitive globally.
5. In 2018, the KORUS FTA was revised to address U.S. concerns regarding trade imbalances and to strengthen provisions related to auto trade and other sectors.

Review Questions

• How did the US-Korea Free Trade Agreement impact tariffs on goods traded between the two nations?
  • The US-Korea Free Trade Agreement significantly impacted tariffs by eliminating duties on approximately 95% of U.S. consumer and industrial products exported to South Korea. This reduction in tariffs made American goods more competitive in the South Korean market, increasing exports and encouraging economic growth. The agreement aimed to create a more favorable trading environment by reducing barriers that previously hindered trade.
• Discuss the broader implications of the KORUS FTA for economic relations between the United States and South Korea.
  • The KORUS FTA has had broad implications for U.S.-Korea economic relations by enhancing trade flows and increasing bilateral investments. By eliminating tariffs and improving market access, the agreement fostered stronger economic ties that benefited both nations. Additionally, it set a precedent for future free trade agreements in the Asia-Pacific region, reflecting a strategic partnership that extends beyond just trade, encompassing political and security cooperation as well.
• Evaluate how the revisions made to the KORUS FTA in 2018 addressed specific economic concerns from the United States.
  • The revisions made to the KORUS FTA in 2018 were primarily driven by U.S. concerns about trade imbalances, particularly in the automotive sector. The updated agreement included stronger provisions aimed at enhancing auto trade by addressing tariffs and promoting fair competition. This revision not only sought to rectify existing economic disparities but also aimed to create a more balanced framework for future trade interactions, emphasizing the importance of ongoing dialogue and negotiation in international trade relationships.

Related terms

Tariff: A tax imposed on imported goods and services, typically used to restrict trade by increasing the price of imported goods.

Trade Balance: The difference between the value of a country's exports and imports over a certain period; a positive balance indicates more exports than imports, while a negative balance shows the opposite.

Bilateral Trade Agreement: A trade agreement between two countries to promote trade and investment by reducing or eliminating barriers to trade.