July 19, 2010

 

US-Korea FTA could boost US pork industry

 

The US-Korea free trade agreement, awaiting approval since June 30, 2007, will provide huge economic impact to the US, according to Korean Economic Affairs Minister Jong hyun Choi.

 

"The passing by Congress of this agreement could create 9,000 new jobs in the US pork industry and impact prices with an increase of US$10 per hog within the next 10 years," said Giordano, quoting a study done by Iowa State University economist Dermot Hayes.

 

"Pork producers want to see it implemented right away. This is the single most important trade deal out there for our industry. These high levels of US exports have been achieved even with significant tariffs of 25% on frozen pork products and 22.5% on fresh or chilled pork products. However, if this FTA is not signed, there will be a decrease in these numbers as FTAs have been signed with other countries, and Korea will get their pork elsewhere," said Choi.

 

Once the FTA takes effect, tariffs will be eliminated in 2014, after Congress approval. Consequently, the US will have a trade advantage with Korea over other countries in the world.

 

"The US is currently the global leader in providing a high-quality, safe and low-cost pork product. But we have to make these important FTAs in order to stay at the top," said Giordano.

 

As the world recovers from the recent economic crisis, consumers throughout the world will renew a trend toward additional meat consumption, states Hayes' report. These countries find it more efficient to import the finished meat products, rather than import the grain needed to produce meat domestically.

 

South Korean import duties on Chilean pork have been reduced nine to 10% in 2010 and will go to zero by 2014. Due in large part to the gradual reduction of duties under the Chile-Korean FTA, Chilean market share grew 34% in 2009.

 

"If the US fails to implement the Korean-US FTA, the US could be out of the Korean market as soon as 10 years from now. It would be tragic to the US to not pass and implement this FTA. The US has been the low-cost producer of high-quality, safe pork, but we cannot compete with other countries when they have no tariffs, no matter how safe our product is," said Choi.

 

According to Choi, Korea has already five FTAs implemented now and nine more in negotiations, including preliminary talks with China. Passing the FTA with Korea, along with those pending with Columbia and Panama, would make huge trade impacts for all US industries.

 

A total increase in hog prices of US$11.83 per pig in the next 10 years, along with a large increase in the number of jobs in the pork industry, makes it easy to see the great impact FTAs have on trade.

 

"If we pass these three pending FTAs, it will help to double pork exports in the next five years," concluded Giordano.