U.S. Details Additional Changes to Korea FTA
The U.S. has secured a number of changes to its free trade agreement with Korea, some of which were reported previously. The Office of the U.S. Trade Representative asserts that these changes will reduce the U.S. trade deficit with Korea, which has increased 70 percent since the KORUS agreement took effect in 2012. USTR notes that once the amendments are completed they will undergo domestic review procedures in both countries, which in the U.S. will include a 60-day consultation period with Congress on any required modifications to the tariff schedule.
According to USTR, key changes to the agreement include the following.
- The U.S. will have an additional 20 years, until 2041, to phase out its 25 percent tariff on Korean trucks.
- Korea will double the number of U.S. automobile exports, to 50,000 cars per manufacturer per year, that can meet U.S. safety standards (in lieu of Korean standards) and enter the Korean market without further modification.
- U.S. gasoline engine vehicle exports will be able to show compliance with Korea’s emission standards using the same tests they conduct to show compliance with U.S. regulations without additional or duplicative testing for the Korean market.
- Korea will recognize U.S. standards for auto parts necessary to service U.S. vehicles and reduce labeling burdens for parts.
- Korea will expand the amount of “eco-credits” available to help meet fuel economy and greenhouse gas requirements under the regulations currently in force while also ensuring that fuel economy targets in future regulations will be set taking U.S. regulations into account. Korea will also continue to include more lenient targets for small volume manufacturers.
- Korea has agreed to principles for conducting verifications of origin of exports under KORUS and will establish a working group to monitor and address future issues that arise.
- By the end of 2018 Korea will amend its Premium Pricing Policy for Global Innovative Drugs to make it consistent with Korea’s commitments to ensure non-discriminatory and fair treatment for U.S. pharmaceutical exports.
- The two sides are negotiating a side agreement on provisions to prohibit competitive devaluation and exchange rate manipulation. While USTR states that this agreement will include strong commitments on transparency and accountability, press sources note that it will not be subject to the FTA’s dispute settlement provisions.
- U.S. imports of steel products from Korea will not be subject to a recently announced 25 percent additional tariff but will be subject to a product-specific quota equivalent to 70 percent of the average annual import volume of such products during the period 2015 to 2017.