MN Cos. to Benefit from South Korea Free Trade Pact
A new free trade agreement is expected to have a positive outcome for Minnesota companies that export goods to South Korea.
The Minnesota Department of Employment and Economic Development (DEED) said Tuesday that under the new agreement, about 80 percent of U.S. consumer and industrial products exported to South Korea will become duty free, beginning Thursday. Within five years, that percentage will jump to 95 percent of exports-and most remaining tariffs on goods traded between the two countries will be eliminated within a decade, DEED said. The trade agreement will also eliminate or phase out tariffs on agricultural products.
The U.S. International Trade Commission estimates that the agreement will add $10 billion to $12 billion in U.S. gross domestic product and about $10 billion in annual exports to South Korea.
It's expected to have a significant impact in Minnesota-whose companies sent $702 million worth of products to South Korea last year, up from $609 million in 2010. South Korea is now Minnesota's sixth-largest export market; during the fourth quarter of last year alone, Minnesota exported $184 million in products to South Korea, up about 26 percent from the same period the prior year.
According to a report by Minnesota Public Radio, Minnesota imported $191 million worth of goods from South Korea in 2011.
Katie Clark, executive director of the Minnesota Trade Office, described the new policy as the “most commercially significant free trade agreement for the United States in more than 16 years.”
Wayzata-based Cargill, Inc., which has invested in numerous U.S. businesses that export to South Korea, voiced support for the free trade agreement while it was pending approval from Congress.
Minnesota manufacturers such as Medtronic, Boston Scientific, Cargill, Hormel, and Rani Engineering export medical and optical products, as well as pork, beef, grains, aircraft, and car parts and electronics, to South Korea, according to a report by the Star Tribune.
Prior to the new agreement, U.S. exporters to Korea paid an average 6.2 percent in tariffs-or about $1.3 billion a year for industrial goods alone, the Minneapolis newspaper reported.
Congress has reportedly approved similar free trade pacts for goods exchanged with Panama and Colombia, although they are pending final approval in those countries.