SEOUL, Nov. 22 (Yonhap) -- The free trade pact with the United States, set to take effect early next year, will open a new chapter for South Korea as the export-driven economy taps deeper into the world's largest economy, experts said.
On Tuesday, South Korea's National Assembly approved the Korea-U.S. free trade agreement signed in 2007. The U.S. Congress ratified the deal early last month. The free trade accord, known as KORUS FTA, was supplemented in late December with minor modifications that mostly dealt with the auto industry.
The KORUS FTA will help Asia's fourth-largest economy expand more than 5 percent in the long term as it will lead to more exports by reducing trade barriers, a study showed. The deal will also create about 350,000 jobs, helping ease tightened labor market conditions here, according to the report compiled by 10 local think tanks.
The report predicted that South Korea will see its trade surplus with the U.S. increase by US$140 million annually over the next 15 years after the FTA goes into effect. The nation's total global trade surplus, however, will expand by an annual average of $2.77 billion, the report showed.
"The deal will help boost our exports, especially sales of autos, electronic goods and textiles, to the American market," said Kim Soo-dong, a researcher at the state-run Korea Institute for Industrial Economics and Trade (KIET). "The U.S. market is one of the major markets for local manufacturers."
Bilateral trade totaled some $90 billion last year. South Korea's exports to the U.S. surged 32.3 percent on-year last year to $49.8 billion and imports from the world's largest economy jumped 39.1 percent to $40.4 billion.
In the first 10 months of the year, South Korea's exports to the U.S. rose 12.7 percent on-year to $46.2 billion, and imports gained 11.3 percent to $37.3 billion, according to data compiled by the Korea International Trade Association.
South Korean exports, which constitute more than 70 percent of the nation's economy, will be one of the major winners, according to experts.
When put into effect, it will eliminate about 95 percent of tariffs on commodities within three years.
Analysts said the free trade deal would help South Korea's auto companies further expand their shares in the vast American market.
"Automakers and auto-parts makers will benefit most from the KORUS FTA, and their market shares will expand further," Chae Hee-keun, an analyst at Hyundai Securities.
Under the terms revised in 2010, the two countries agreed to scale back tariff cuts for cars. The U.S. will eliminate its 2.5 percent tariff on automobiles in four years, instead of immediately or after three years, as was previously agreed, after the deal takes effect.
South Korea will cut its 8 percent tariff on U.S. car imports to 4 percent immediately, instead of eliminating it immediately.
The free trade deal with the U.S., in addition, can assist South Korea in securing firm footing in the world's largest economy, according to Kim Do-hoon, an analyst at the state-run Korea Institute for Industrial Economics and Trade. "South Korea's image as an 'advanced trading country' will be boosted as well," he said.
Other analysts predicted the deal would help South Korea attract more foreign investments and make business practices and management more transparent.
The FTA would also create new opportunities and markets for Korean goods, services and workers, while benefiting Korean consumers with more competitive pricing and better quality of goods and services in the Korean market.
However, some economists and opponents argue the deal would devastate the livelihoods of South Korean farmers and the poor, and worsen the economic polarization between the haves and have-nots.
According to the report from the Ministry of Food, Agriculture, Forestry and Fisheries, the Korea-U.S. FTA will lead to a reduction of 12.67 trillion won ($10.5 billion) in production by the country's agricultural, farming and fisheries industries in the next 15 years.
The most severely affected will be the livestock industry, whose accumulated production will decline by nearly 7.3 trillion won in the first 15 years following the implementation of the FTA.
Seoul already has plans to support the country's farmers and help make up at least part of their losses due to the Korea-U.S. FTA and is in the process of updating the measures devised shortly after the deal was signed in 2007.
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