The Prospective Free Trade Agreement with Korea: Background, Analysis, and Perspectives for California Agriculture

After several years of informal and formal negotiations, South Korea and the United States reached an agreement to move towards free trade in April 2007. Currently, both countries await congressional approval before the agreement can be implemented. This study explains the substance of the agricultural parts of the agreement and considers its agricultural implications. The study finds that the Korea-United States Free Trade Agreement has the potential to be a significant demand driver for many sectors within California agriculture. Despite its high import tariffs, tight import quota quantities and restrictive sanitary and phytosanitary regulations, South Korea has become a major agricultural importer from California. South Korea is an important export destination for a broad array of California agricultural products and has recently ranked among the top five or six export destinations for California agriculture. The agreement provides for gradual elimination of Korea’s high tariffs for most California export products, with the exception of rice, where a previously negotiated quota would remain and fresh citrus where high seasonal tariffs would continue to limit shipments of oranges and mandarins. With lower import barriers there is significant potential for expanding California agricultural exports to Korea in for important commodities from dairy products to tree nuts. This study catalogs current agricultural exports to Korea from California, reviews the existing trade barriers that limit exports to Korea, considers explicitly the export positions of major competitors and examines the size of the Korean market for each important commodity and commodity group. The study’s insight on the potential effects of the Agreement will help California agriculture better appreciate and communicate what is at stake for California agriculture and prepare for the realistic impacts of the potential market opening in Korea.