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September 16, 2012
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Kentucky Exports at Highest Level Ever

Ambassador: State businesses can benefit from U.S. free trade agreement with Korea

By Lorie Hailey

Y.J. Choi, ambassador of the Republic of Korea to the United States, said Kentucky businesses should consider exporting to Korea now that the two countries have a free trade agreement.

Export of Kentucky products is on the rise. The state’s exports grew nearly 8 percent for the first half of 2012 to a record $10.7 billion, eclipsing the former mark set the first six months of 2011.

In all of 2011, export shipments totaled $20.1 billion, the state’s all-time high. Canada was Kentucky’s largest market, importing $6.5 billion and accounting for 32.2 percent of Kentucky’s total exports. Canada was followed by the United Kingdom ($1.5 billion), Mexico ($1.5 billion), Japan ($1.1 billion) and Brazil ($99.7 billion).

Kentucky’s merchandise shipments to other countries in 2010 were just more than $19.3 billion.

“Exports are a key driver of economic growth, and this bodes well for Kentucky’s future,” said Cabinet for Economic Development Secretary Larry Hayes.

Exports added $4.7 billion to the commonwealth’s direct state gross domestic product that year and directly created 47,000 jobs, according to the Kentucky Export Initiative, a consortium of trade-related organizations. Kentucky ranks 19th in the nation in total exports, and is ranked 11th in U.S. exporting on a per capita basis.

The exports figures are a positive sign of the state’s economic development growth and success in the global marketplace, said Gov. Steve Beshear.

This year’s exports in categories such as transportation equipment, chemicals, machinery manufactures, computer and electronic products and electrical equipment are outpacing the 2011 figures in several countries. For example, exports were up 164 percent in Austria, 123 percent in Sweden, 79 percent in Italy and 27 percent in Mexico.

Export growth in the motor vehicles and parts sector, as well as the beverage and spirits sector, including bourbon, were particularly strong, increasing 32.6 percent and 30 percent respectively.

In merchandise exports, Kentucky’s sales for the first half of 2012 are outpacing figures for the same 2011 period to nations such as Austria, Sweden, Italy, Mexico and Japan.

New opportunities created by KORUS

Meanwhile, a recently implemented U.S. free trade agreement with South Korea will allow Kentucky companies more opportunities to export to the East Asian country and increase their profits and global presence, said Y.J. Choi, ambassador of the Republic of Korea to the United States.

Kentucky’s exporters — In 2008, nearly 3,300 Kentucky companies exported goods. Among Kentucky exporters, 2,500 were small and medium-sized enterprises with fewer than 500 employees.

“Among East Asian countries, Korea should be a major target for you,” said Choi, the keynote speaker at World Trade Center Kentucky’s annual World Trade Day last month in Lexington.

Elimination of tariffs and related barriers is expected to increase the U.S. GDP by nearly $12 billion and U.S. goods exports to Korea by nearly $11 billion each year, according to the U.S. Department of Commerce International Trade Administration (ITA). Because of the U.S.-Korea Trade Agreement (KORUS), exports to Korea are expected to double by 2015.

Before KORUS, American exporters to Korea paid an average 6.2 percent tariff, or nearly $1.3 billion a year, while Korean exporters to the United States faced an average 2.8 percent U.S. tariff.

Korea’s own key exports are chemicals and machine manufacturing as well as computers and electronic products.

Among Kentucky’s exports to Korea from 2008 to 2010, chemicals accounted for an average $282 million per year. Exports of pharmaceuticals, cosmetics, fertilizers, inorganic chemicals, organic chemicals, plastics and agro-chemicals made up 65 percent of Kentucky’s merchandise exports to the country.

In the past, Korean tariffs for chemicals averaged 6 percent but could be as high as 50 percent, the ITA said.

The machinery manufactures category accounted for an average of $44 million per year of Kentucky’s exports to Korea from 2008 to 2010, while computers and electronics products averaged $28 million per year between 2008 and 2010.

Machinery exports, excluding electrical machinery, accounted for 10 percent of Kentucky’s exports to Korea, while 6 percent were computers and electronics products.

The top electronics product exports were digital integrated circuitry, semi-conductors, semi-conductor manufacturing equipment, telecommunications equipment, radio and television parts, static converters and magnetic tape. Tariffs on such products previously ranged from zero to 13 percent. From 2008 to 2010, those products accounted for 6 percent of Kentucky exports, while transportation equipment exports were 5 percent.

Lifting of tariffs and other trade barriers in Korea increases opportunities for a range of Kentucky’s agricultural products, including poultry, beef and feed grains.

International Trade Awards

Two businesses that have excelled in global trade were presented the Martha Lane Collins International Trade Award at Kentucky World Trade Day.

Eminence Speaker and United Parcel Service received the awards, named for the Kentucky governor who successfully brought Toyota Motor Manufacturing Co. to Georgetown in the mid-1980s.

Eminence Speaker began in Eminence, Ky., in 1966 and has been exporting its loudspeaker products all over the globe for more than 40 years. It has distribution channels in over 86 countries.

In the past three years, Eminence Speaker’s international sales growth exceeded its domestic sales. In 2001 it created distribution channels for its American-made products to mainland China, and in 2005, it opened a factory in China.

UPS is the world’s largest package delivery company and a global supplier of specialized transportation and logistics services. The UPS Worldport – its worldwide air hub – is located at the Louisville International Airport.

Because of its importance to international trade, nearly 140 companies have located in the Louisville area to reach the world with their products faster and more efficiently, according to the World Trade Center Kentucky.

Lorie Hailey is associate editor of The Lane Report. She can be reached at lorie@lanereport.com.

 

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