The Republic of Korea, with its population of 50 million packed densely into bustling urban areas, has the second highest standard of living in Asia and is the continent's fourth largest economy. And since the US-Korea Free Trade Agreement [KORUS FTA] took effect in March 2012, doing business in this vibrant country became potentially far more profitable for US firms.
The Office of the United States Trade Representative calls KORUS the "United States' most commercially significant free trade agreement in almost two decades," with good reason. The trade office estimates the FTA will boost US GDP by as much as $12 billion per year.
Once the agreement took effect, about 80 percent of U.S. exports to Korea of consumer and industrial products immediately became duty free. Within five years of the effective date, nearly 95 percent of bilateral trade in consumer and industrial products will be free of tariffs. Most remaining tariffs will be eliminated altogether within 10 years of the effective date. KORUS also removes the other major bump on the US-Korea trade road by easing quotas.
Although many businesses that produce products or offer services that are potential beneficiaries of the KORUS FTA have yet to familiarize themselves with the agreement or how it can benefit them, other companies were well-positioned to take advantage at its inception. For example, Albermarle Corporation, a specialty chemical company based in Baton Rouge, Louisiana that supplies polymer products to key Korean electronics companies, including Samsung and LG, had already established a presence in the country, thanks to its 2003 acquisition of Seoul-based Taerim International Corporation. The FTA helped support an expansion of Albermarle's operations: a new research and development laboratory and manufacturing facility in Yeosu, Korea. The company reports that its sales in Korea are increasing by about 20 percent annually.
Brammo, Inc., a manufacturer of electric motorcycles based in Ashland, Oregon, found Korea, with its teeming cities and jam-packed streets, a perfect market for vehicles designed to whiz its riders through congested thoroughfares. Brammo is aggressively expanding into the market now that under the FTA, the 8 percent tariff on electric motor vehicles has been halved, and is set to be eliminated altogether in a few years. In just the first three quarters of 2013, exports of passenger vehicles by Brammo and other US manufacturers rose 26.9 percent.
Agricultural trade to Korea has also reached record highs. In those same first three quarters of 2013, US dairy producers expanded their exports to the country by 99.9 percent. Other major early KORUS beneficiaries include US packaged medicines manufacturers, with exports up 33.2 percent; mechanical appliance makers, whose exports have increased in the same period by 132.2 percent; and turbo-jet and turbo-propeller parts manufacturers, enjoying a boost of 30.7 percent.
While Korea offers countless opportunities for other companies hoping to widen their international reach, the first question for small to medium enterprises new to this market is likely to be: where to begin?
US and Korean trade and groups, enthusiastic about expanding trade between the countries, are offering a host of tools and expert assistance to help businesses succeed. The Korean International Trade Association (KITA)
, for example, has developed an online infrastructure to guide those new to this market.
KITA works with about 71,000 companies in Korea; its mission is to help those companies expand internationally and find cross-border trading partners. But that mission, by necessity, also means assisting the US firms with which its member companies do business. KITA has two US branches, one in Washington, DC, and one in New York City, to connect Korean firms with US firms.
KITA's Korean constituency is diverse, from giants who already have a global presence, like Hyundai and Samsung, to small and mid-sized operations making their first forays into international trade.
"We are the bridge connecting entire business communities," says Mr. Young Hwa Sung, President of KITA's Washington DC Office.
Many goods and services that haven't yet benefited from the elimination of tariffs, will in coming years. Now, while the KORUS FTA is in its early stages, may be the best possible time to establish a foothold in the Korean market—and to ride the momentum—especially for small to medium-sized enterprises.
Toward that end, Webport Global has engaged in a memorandum of understanding with KITA
to provide access to web tools and experts, generating benefits for members of each organization, beginning with free membership in KITA's extensive e-marketplace, tradekorea.com. A quick visit to tradekorea.com reveals a multitude of enterprises of every size and description looking for trading partners across borders. A ticker showing the latest buying and selling leads streams across the home page. Trade statistics and reports are a click away, as are online trade shows.
The heart of the e-marketplace beats to the rhythm of international business relationship creation. Businesses wishing to trade in virtually any of the myriad goods and services that can be offered between countries can establish web showrooms on tradekorea.com that are as detailed and information-packed as the companies' own websites. These "storefronts" enjoy instant exposure to Korean firms searching for made-in-America imports.
Likewise, someone whose firm is searching for reliable exporters of Korean fruits, or machinery, or raw materials—virtually any made-in Korea product—can log in, type a few keywords, see what's on offer, and send an immediate inquiry by hitting the "contact" button.
The site also engages trade experts who match companies according to their specific requirements.
"If a US company wants to export wine to Korea, we find the Korean companies that are interested in importing wines," says Mr. Sung. "And vice versa: if we get an inquiry from a Korean company that wants to export electronic items, then we find a US company that wants to import electronics from Korea."
With no membership fees for either Korean or US companies, KITA
plans for tradekorea.com to be a one-stop shopping experience for companies trading internationally. It also offers business consulting services to navigate the entire Korean trade process.
was developed to facilitate trade with Korean businesses, it also hosts potential trading partners from across East and South East Asia, including China, Indonesia, and India. Of course, only US and Korean businesses trading with each other benefit from the KORUS FTA.
And while working across borders with new partners in a different culture and language can sometime bring unexpected challenges, having a KITA trade expert on hand can help US companies navigate the unfamiliar terrain—and ensure a smoother path to a productive relationship.
The World Bank recently rated Korea eighth among the 183 economies it ranks for ease of doing business. With exports to Korea expected to increase by about $10 billion per year under the KORUS FTA, and the added tools available to Webport Global members via KITA's tradekorea.com, the path to getting made-in-America goods into the hands of Korean customers may become even smoother.
To find out if your product or service currently benefits from the KORUS FTA, go to http://export.gov/fta/ftatarifftool/TariffSearch.aspx
You may also read the full text of the agreement here