The US-Korea Free Trade Agreement, set to take effect on March 15, nearly five years after it was first drafted, has major implications for many of America’s industries, both large and small. For example, Detroit and other auto-manufacturing areas will see benefits as a result of reduced tariffs and increased import quotas of US cars into the Korean market.
Agriculture is undoubtedly one of the big industries anticipating significant gains after the implementation of the FTA. Every state in the union is expecting some degree of increased profits in one or more of the agricultural sectors. Alaska will export more fish, Wisconsin will sell more processed foods, North Carolina more pork, Illinois more soy, Vermont more dairy and Arizona more fruit. While every state will see revenues from trade with Korea rise, certain states will notice it more. For example, the beef business stands to make major gains. Even before the FTA takes affect, US beef exports to Korea have been gaining on the levels achieved prior to the 2003 bovine spongiform encephalopathy (BSE, or “mad cow disease”) scare that temporarily halted all trade in the meat. Korea is now back in the top five
global importers of American beef. In 2011, beef exports earned US cattle ranchers $686 million from South Korea alone and once the FTA takes effect, American Farm Bureau Federation figures suggest that the industry should earn a further $563 million in the first year, putting the value of the beef trade at over $1 billion. Cattle raising states are obviously looking forward to the months ahead as tariffs begin to fall.
What is more important, however, is to look at the relative gains for each state; that is, the anticipated increases in their agriculture industries as a share of their state GDP. The beef business in Texas will be the biggest winner of all 50 states, at over $97 million in anticipated extra revenues, but as far as how strongly those gains will impact that state’s economy, it comes in at number eleven. South Dakota, on the other hand, expects the eighth largest share of additional beef profits, at $21.7 million in new revenues, but when compared to the state’s GDP, it ranks number three. As the numbers show, as in Figures 1 & 3, the FTA means significantly more to some states than to others. California’s $211 million in agricultural gains are a smaller share of its $1.9 trillion economy than North Dakota’s $24 million is of its own $33 billion economy.
Nebraska’s major industries include agriculture and indie rock, only one of which really stands to benefit from KORUS. According to USDA Foreign Agriculture Service figures, Nebraska’s agricultural exports to Korea nearly tripled in the last three years, reaching $288 million in 2011. Other states saw significantly less growth in their exports to Korea over the same period and some even saw reductions. If the Farm Bureau’s predictions prove accurate, Nebraska’s agriculture exports to Korea could be worth over $400 million in 2012 with KORUS implementation in March, assuming continued growth following the ’08-’10 trend. Exporting agricultural goods to Korea alone would then contribute nearly half of one percent to the state’s GDP. The benefits of the FTA to Nebraskans
have not escaped the notice of the National Corn Growers Association or the American Soybean Association, both of which are anticipating significant increases in jobs and exports in Nebraska and nationwide. After beef (see Fig. 2), the industries expecting the biggest gains in the state are pork, processed foods and soy.
Just to the south of Nebraska, Kansas is another state with a lot to gain. The anticipated $107 million increase in agricultural trade revenues with Korea, the majority of which would come from beef, would be a dramatic increase, given that the state averaged $159 million in agricultural exports to Korea from 2008-2011. After Texas, Kansas is expecting the second greatest increase in beef revenues as a result of the FTA. Kansas comes in fourth for total agriculture gains and for gains as a share of its GDP, driven not only by beef, but also largely by its pork and processed foods industries, among others. Texas, on the other hand, is second in terms of anticipated gains, but it drops to 21st place in gains as a share of its GDP. And while Kansas is best known for what its farmers’ fields produce, the fields of technology and manufacturing are also being targeted by the state’s government as areas with growth potential. When a small robotics company launched last year as the North American distributor for a South Korean electronics company, the governor was on hand to talk about the opportunities that lie ahead for Kansas as it enters realms traditionally dominated by industry heavyweights like California.
All told, in agriculture alone, the US-Korea free trade agreement is anticipated to increase revenues by over $1.9 billion in the first year after implementation. Furthermore, Korea’s actions may prove to be a catalyst in the Asian region, as its example is influencing Taiwan’s decision to import more American beef. Considering the significance of the gains in agriculture, the less industrial and primarily farming heartland of America will feel the boost from the FTA most strongly. And given the relative size of those states’ GDPs, Korea clearly stands to matter most to the little guys.