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Korea and the U.S. will scrap tariffs on all manufacturing products within 10 years of the free trade agreement sealed Monday going into effect. Ninety-four percent of the tariffs will be lifted within three years. The trade pact will give Korea bigger opportunities to penetrate the U.S. market for manufactured products like cars and textiles, while the U.S. will be able to capture a bigger share in the Korean agricultural, services and hi-tech markets.
¡ß Agriculture
The two sides eventually agreed to exclude rice from the FTA. To protect the Korean agricultural industry from repercussions, Korea will apply a tariff rate quota and maintain tariffs on U.S. potatoes, honey, beans and powdered milk. With the quota, Korea can impose lower tariffs on a certain amount of such products. In the case of oranges, Korea will maintain the current 50 percent tariff between September and February the following year, when domestic mandarine oranges are in season, but for the rest of the year it will be reduced to 30 percent. In seven years, this will be eventually abolished. A tariff rate quota will be applied to 2,500 tons of U.S. oranges a year.
Tariffs on apples, pears, pork and chicken will be removed over the long term. The current 40 percent tariffs on beef will be removed over the next 15 years, but the Korean beef industry will be temporarily protected by a safeguard whereby tariffs rise when there is a surge in imports. Seoul and Washington will discuss the resumption of U.S. beef import after May, when the World Organization for Animal Health reviews its classification of the U.S. as a "controlled risk" region for mad cow disease. The U.S. backed down from its original demand for a written guarantee on the full re-opening of the Korean beef market and compromised on a verbal promise. President Roh Moo-hyun made the promise in a public statement Monday evening.
¡ß Cars
The U.S. will immediately scrap tariffs on Korean passenger cars smaller than 3,000 cc and auto parts. It will abolish tariffs on passenger cars with an engine displacement of 3,000 cc or more in three years. Tariffs on tires will be removed in five years and on pickups in 10 years. Korea will immediately lift tariffs on U.S. cars. It will also overhaul within three years its auto tax system, under which a flat special excise tax of 5 percent is levied on cars and streamline its car taxation scheme. Seoul agreed with the U.S. to introduce expedited procedures whereby tariffs will be restored if the other side violates an auto-related agreement.
¡ßTextiles
The U.S. will immediately abolish tariffs on 61 percent of Korean textiles and garments, and exclude major Korean textile exports such as linen, rayon, men's shirts and women's jackets from the so-called yarn-forward rule that forces exporters to use U.S. or Korean yarn in any product. The two will strengthen cooperation to prevent detour exports of cheap Chinese and Southeast Asian textile products to the U.S. via Korea.
¡ß Manufactured goods
The Korean government expects the FTA to increase the share of Korean passenger cars, LCD monitors, camcorders, polystyrene, earphones and color TVs in the U.S. market, as tariffs on all manufacturing products will be abolished within 10 years. They agreed to lift tariffs on all IT products. In a press conference on Monday where two countries announced the conclusion of the trade talks, Korean top trade negotiator Kim Jong-hoon predicted tangible effects, calling the extent of tariff removal ¡°very high.
¡ß Kaesong Industrial Complex
By using the so-called ¡°built-in¡± method, the two sides will address the issue of the inter-Korean Kaesong Industrial Complex in North Korea after the FTA goes into effect. Korea wants to include products from the industrial park. The same standard will be applied to products manufactured in other inter-Korean economic cooperation zones. The two sides agreed to establish a committee that will designate inter-Korean joint ventures as outward processing zones if some conditions are met, like progress in efforts to make the Korean Peninsula nuclear-free and improvements in North Korea¡¯s human rights.
(englishnews@chosun.com )
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