February 27, 2012

US-Korea FTA permits tariff-free access for dairy products

The implementation of a free trade agreement (FTA) between the US and South Korea will allow the US dairy industry to gain tariff-free access for approximately 16,000 tonnes of vital dairy products.

The agreement will take effect on March 15, providing a tremendous boost to US dairy through reduced tariffs and expanded market opportunities in a historically restricted and high-value market.

The US International Trade Commission estimates that the dairy provisions of the agreement could expand US dairy exports by up to US$336 million per year on average. In 2011, the value of US dairy exports to South Korea was over US$222.3 million, up 70% from the previous year. South Korea currently constitutes the United States' sixth-largest export market for dairy and dairy products.

"IDFA thanks the administration and US Trade Representative Ambassador Ron Kirk for their significant efforts throughout the negotiations and final steps leading up to implementation," said John Kelly, IDFA manager of international affairs.

"IDFA considers the agreement to be a critical step forward for US dairy processors to take full advantage of growing markets in a vital economic region."

South Korea is one of Asia's fastest growing economies, and global consumption patterns show that as income grows, the consumption of animal protein increases, including dairy. Per capita consumption of dairy products in South Korea is increasing in part due to the younger generation and an increasing penchant for Western foods.

According to the USDA, most increased demand will be met by imports because local production of cheese is constrained by the lack of manufacturing facilities. Thus, US dairy exports are uniquely positioned to fill a specific consumer demand that local manufacturers are not able to supply.