Korea-US FTA increases bilateral trade by 68% over last 10 years

HMM container ship / Courtesy of HMM

By Kim Hyun-bin

The Korea-U.S. Free Trade Agreement (FTA) has played a key role in significantly expanding trade and investments between the two countries, a report showed. In fact, the pact, which went into effect in 2012, increased bilateral trade volume by 67.8 percent in the past decade.

The Korea International Trade Association (KITA) published a report titled, “Korea U.S. FTA 10-year evaluation and tasks,” to mark the 10th anniversary of bilateral trade pact, Friday. Trade between the two countries increased 67.8 percent over the past decade to $169.1 billion in 2021 from $100.8 billion in 2011 before the FTA took effect.

U.S. goods accounted for 13.4 percent of all products imported into Korea in 2021, up from 9.3 percent in 2011 and making the U.S. become Korea's second-largest trading partner. During the same period, Korea's proportion of U.S. trade rose to 3.5 percent from 2.7 percent in 2011, making Korea the sixth-largest trading partner of the U.S.

Exports were led by automobiles, components, petroleum products, rechargeable batteries, refrigerators, and synthetic resins. Korea's trade surplus surged to $22.7 billion in 2021 from $11.6 billion before the FTA took effect.

After the Korea-US FTA, mutual investments became more active. The U.S. is Korea's biggest source of foreign direct investment (FDI), accounting for 22.3 percent of total FDI here.

In addition, the U.S. is the largest overseas investment destination for Korean companies, accounting for 25.2 percent of Korea's foreign investments. Recently, Korean investments in the U.S. increased significantly, mainly in rechargeable batteries, semiconductors, and electric vehicles.

The Korea-US FTA was evaluated to have played a pivotal role in strengthening cooperation in the supply chains of the two countries. Several joint ventures were inked between Korean battery producers and U.S. automakers, and Korean companies have secured a competitive advantage over competitors by securing major customers in North America, while U.S. automakers have established a cooperative relationship in which they receive stable battery supplies.

“Korea has grown into a major supply chain partner of the U.S. based on closer economic cooperation through the Korea-US FTA and expansion of trade and investment,” KITA said. “As the supply chain reorganization based on trust is more emphasized in the face of a supply chain crisis, the supply chain cooperation between the two countries is intensifying, centering on core industries such as semiconductors, batteries, and pharmaceuticals.”