While it has been expected, the signing of the EU-Korea Free Trade Agreement (FTA) today is a jarring reminder that the United States continues to sit on the sidelines when it comes to expanding market access for manufacturing in America, while our competitors around the world race to gain new markets for their goods. The U.S. and Korea signed a Free Trade Agreement more than three years ago, but it has never been approved by Congress. Lack of action to implement this agreement is hurting manufacturing in America now, and it threatens far greater harm going forward.
The European Union (EU) will implement its FTA with Korea early next year. As a result, European manufacturers will see tariffs removed on nearly every product they export to Korea – while American manufacturers continue to face tariffs averaging nearly 12 percent. This will be a significant blow to American manufacturers –- one that we can ill-afford in this economic climate. This is not an idle threat – the EU is not only a significant competitor to the United States in manufactured goods exports to Korea, they are actually ahead of us. (See chart.) With this FTA, they will reap the benefits of zero tariffs, stronger protection for investments, and the removal of myriad non-tariff barriers.
The EU has already surpassed the United States in manufacturing exports to South Korea. In sectors like machinery, medical equipment, aircraft, chemicals, high-technology products, vehicles, processed foods, and many others, manufacturers in America face significant and direct competition from European producers.
The Obama Administration is working to address outstanding concerns raised in the automotive and beef sectors and has promised that these negotiations will be completed by November 2010, when the President visits Seoul for the G20 meeting. He has vowed to bring the Korea agreement to Congress for approval in the months following that meeting. But every month that the EU has duty-free barrier-free access to Korea and we don’t is another month of booming European manufacturing exports to Korea, and another month of slumping U.S. exports. Every month is one more month for our European competitors to permanently gain market share by taking it away from an American manufacturer.
Korea is a dynamic and fast-growing economy that represents robust and long-term potential for American manufacturing exports. Across Asia, economies are recovering strongly and are rapidly moving to sign trade agreements with each other – China, Japan and Korea are all looking to open Asian markets through FTAs. We are the fourth largest manufacturing exporter to Korea – China, Japan and the EU are all larger and are growing faster. The U.S.-Korea FTA will provide our manufacturing exports with a level playing field so we can compete fairly and freely.