At long last, South Korean trade pact kicks in

Mar. 14, 2012
At long last, South Korean trade pact kicks in
Rob Hotakainen | McClatchy Newspapers

WASHINGTON — Pop the corks: After years of talk and delay, a historic trade pact between the United States and South Korea kicks in Thursday, and officials predict it will increase wine exports from Washington state by 40 to 50 percent in the first year alone. The reason: The Korean cuisine relies heavily on beef, and marketers expect Koreans will want a whole lot more of the state’s red wines now that a 15 percent tariff is getting scrapped.

"This is a great opportunity for Washington wine. ... This will really widen the door," said Marty Clubb, co-owner and winemaker at L’Ecole No. 41 Winery, the third-oldest winery in the Walla Walla Valley. He said his company already has been in the Korean market for six years but will now have a big chance to expand. "The interest in high quality wine is clearly there," Clubb said. Officials say it’s just one example of what to expect as the two nations officially expand opportunities for trade.

Despite the slow economic recovery, Washington state exports hit an all-time high in 2011, rising 21 percent over the previous year to $64.6 billion. And officials say that implementing the new trade pact, first negotiated by the George W. Bush administration, will provide an immediate boon for agriculture in the nation's most trade-dependent state. Congress signed off on the new trade deal in October, but it took months to finalize the details.

Now, effective immediately, tariffs will be lifted on a wide range of products, including cherries, potatoes and apples, big crops for the Pacific Northwest. As a result, Korean consumers _ at least in theory _ will pay lower prices for those products. Officials say one of the biggest winners will be the state’s beef industry. Demand is expected to grow as a 40 percent tariff on beef is phased out over 15 years. On Capitol Hill, members of the Washington state congressional delegation, who lobbied hard for the agreement, say it’s sure to fuel demand for the state’s products and help reduce unemployment.

“A lot of people have been waiting a long time for this,” Democratic Sen. Maria Cantwell said Wednesday. “We’re a very trade-dependent state, and so when you can get trade deals done like with South Korea and open up huge market opportunities for markets like wine and cherries and beef, it means millions of dollars and jobs.”

Democratic Sen. Patty Murray said the agreement “will level the playing field” and give the state’s businesses an opportunity to expand into growing markets. “Too many of our state’s products have been slapped with tariffs by Korea for far too long,” she said.

Until now, for example, South Korea had imposed a 24 percent tariff on sweet cherries. Without it, consumers are expected to save from 75 to 90 cents per pound at the market, officials estimate. And the trade pact is good news for Washington state potato growers, who produced 9.8 billion pounds of potatoes in 2011 and led the nation in per-acre yield. According to industry figures, nine of every 10 potatoes are sold outside of the state, with South Korea already ranking as the fastest-growing market for U.S. frozen potatoes.

With the trade deal now scrapping an 18 percent tariff on frozen French fries and other potato products, potato exports to South Korea are expected to rise by at least $35 million this year. Matt Harris, assistant executive director of the Washington State Potato Commission in Moses Lake, Wash., said that getting rid of the tariff will make it easier for the U.S. to compete with growers in Canada, China, Australia, New Zealand and Europe. But he said it’s impossible to predict what the agreement will mean for Korean consumers because most of the frozen potatoes are sold to retailers in the food-services industry. On average, the commission estimates, 87 percent of the state’s potato crop is sold to processors who convert them into fries, chips and mashed potatoes. “It’s going to be a free market,” Harris said.

Cantwell predicted that the pact will lead to lower prices. “I would assume that that’s why people do it,” she said, adding that eliminating the tariffs will make it easier for South Korea and its “rich environment of consumers” to buy the state’s popular products. “There’s a lot about Washington state that’s already known in Korea. … I think people view our agriculture products and things they’ve been able to access very positively,” she said. Democratic Gov. Chris Gregoire said she plans to visit South Korea later this year “to commemorate the new agreement” and to explore and develop new business ties for the state. She said the pact “is great news for Washington state” and called South Korea “one of our most important export markets.”

Officials have been awaiting the March 15 implementation date since it was announced last month by U.S. Trade Representative Ron Kirk after a final round of negotiations over the long President’s Day weekend. Kirk predicted the pact will create “tens of thousands of export-supported jobs with better wages.”

The pact will make nearly 80 percent of U.S. exports of industrial products to South Korea duty-free, including aerospace equipment, agricultural equipment, auto parts, building products, chemicals, consumer goods, electrical equipment, environmental goods, all footwear and travel goods, paper products, scientific equipment and shipping and transportation equipment. And nearly two-thirds of U.S. exports of agricultural products to South Korea will become duty-free, including wheat, corn, soybeans for crushing, whey for feed use, hides and skins, cotton, cherries, pistachios, almonds, orange juice, grape juice and wine.

“It’s been a long time coming,” said Ryan Pennington of the Seattle-based Washington State Wine Commission, a state agency that represents grape growers and wineries. Pennington said South Korea already is one of the most promising markets for Washington wines. His office is fielding more inquiries from large Korean importers and retailers looking to add more of the state’s wines to their portfolios. “Wine consumption there is already very good, and the taste for wine by consumers is already very developed,” Pennington said. “So there’s an existing network of trade to plug into very quickly.”

South Korea is the fourth largest export market for Washington state goods, taking in $1.4 billion worth of agriculture exports from the state last year.