Home » Ambassador: Ky. companies can benefit from U.S. free trade agreement with Korea

Ambassador: Ky. companies can benefit from U.S. free trade agreement with Korea

World Trade Day honors UPS, Eminence Speaker for success in international markets

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.

LEXINGTON, Ky. (Aug. 22, 2012) — More than 400 representatives from business, industry and government sectors gathered Monday to focus on international trade and learn how Kentucky companies might benefit from  America’s free trade agreement with Korea, which was implemented earlier this year.

PHOTO GALLERY: More photos of Kentucky World Trade Day below story.

Y.J. Choi, Ambassador of the Republic of Korea to the United States, told attendees of Kentucky World Trade Day that the U.S.-Korea Trade Agreement (KORUS) presents numerous money-making opportunities for Kentucky businesses. East Asia is the market of the future, he said.

“Among East Asian countries, Korea should be a major target for you,” said Choi, who noted that Korea is the only East Asian country with an FTA with the U.S.

The elimination of tariffs and related barriers is expected to increase U.S. GDP by nearly $12 million 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). Coupled with the new exports of U.S. services, the ITA expects exports to Korea to double by 2015.

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

The FTA made U.S. products more competitive in the Korean market by:

• Eliminating tariffs for more than 95 percent of U.S. exports of consumer and industrial products within five years;

• Ending tariffs for nearly two-thirds of U.S. agricultural exports;

• Providing significant new market access for U.S. service suppliers; and

• Eliminating non-tariff barriers, including in the autos sector.

How the free trade agreement with Korea affects Kentucky

Kentucky exports are up in 2012, according to the latest numbers from the ITA. Exports grew nearly 8 percent to more than $10.7 billion in the first half of 2012, breaking the previous record of nearly $10 billion set in the first half of 2011.

RELATED: Kentucky exports reach record high in first half of 2012

Kentucky’s shipments of merchandise to other countries in 2010 totaled more than $19.3 billion. In 2008, nearly 3,300 Kentucky companies exported goods, 2,500 of which were small and medium-sized enterprises with fewer than 500 employees.

Exports are a key driver of economic growth in Kentucky, according to Cabinet for Economic Development Secretary Larry Hayes.

Some of the key markets for Kentucky exports to Korea include chemicals and machine manufacturing, as well as computers and electronic products.

From 2008 to 2010, 65 percent of Kentucky’s exports to Korea were chemicals.

Chemicals manufacturing accounted for an average of $282 million per year of the state’s merchandise exports to Korea between 2008 and 2010. Chemicals products exported include pharmaceuticals, cosmetics, fertilizers, inorganic chemicals, organic chemicals, plastics and agro-chemicals.

Fifty percent of U.S. chemicals exports by value received duty-free treatment immediately upon entry into force of the agreement. The remaining tariffs will be phased out within 10 years. Tariffs on high-trade U.S. products such as silicon and certain plastics articles were eliminated when the agreement was implemented.

Previously, Korean chemicals tariffs averaged 6 percent and could be as high as 50 percent, the ITA said.

Machinery manufactures accounted for an average of $44 million per year of the state’s merchandise exports to Korea from 2008 to 2010, while computers and electronics products accounted for an average of $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.

Top electronics products exports included 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.

The lift of tariffs and other barriers also increases opportunities for a range of Kentucky’s agricultural products, including poultry, beef and feed grains.

“With immediate elimination of duties on nearly two-thirds of U.S. agricultural exports to Korea, KORUS gives U.S. exporters improved access to the Korean market for many of the products that have been highly protected,” the ITA said.

Kentucky bourbon distilleries also could benefit from the agreement. Koreans are particularly fond of bourbon, Choi said, but in the past, Bourbon tariffs were as high as 20 percent.

Businesses honored for international trade efforts

Representatives from Eminence Speaker LLC accept the Martha Layne Collins International Trade Award from Collins during Kentucky World Trade Day in Lexington.

Kentucky World Trade Day has become one of the state’s largest annual gathering of international trade professionals. It is organized by World Trade Center Kentucky, one of the top providers of trade consulting, education and missions across the state.

In addition to an exhibit hall with trade representatives from around the world, breakout sessions and presentations by international trade experts, each year, World Trade Day presents Kentucky businesses that have had success in the global economy with the Martha Lane Collins International Trade Award.

The award, named for the Kentucky governor who successfully brought Toyota Motor Manufacturing to Georgetown in the early 80s, recognizes companies that are successfully engaged in international trade.

This year’s honorees were Eminence Speaker LLC and UPS.

Eminence Speaker began in Eminence, Ky., in 1966 and has grown to be a worldwide manufacturer of both custom loudspeakers and its own branded loud speakers for distribution to dealers, distributors and consumers. Its products can be found on stages and entertainment venues the world over.

The company has been exporting its products all over the globe for more than 40 years, with distribution channels in over 86 countries throughout Asia, Europe, Central and South America, and the Middle East. Eminence Speaker employs has nearly 3,000 workers.

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

Zack Scott, World Trade Center Kentucky Vice Chair and President of UPS’s Ohio Valley District, speaks at Kentucky World Trade Day after accepting the Martha Layne Collins International Trade Award.

United Parcel Service, or UPS as it is better known, has become the world’s largest package delivery company and a global supplier of specialized transportation and logistics services.

UPS’s Worldport — its worldwide air hub — is located in Louisville, Ky. Because of its importance to international trade, nearly 140 companies have located in the Louisville area to reach the world with the products faster and more efficiently, according to the World Trade Center Kentucky. Nearly 11,000 jobs, with an estimated payroll of $29 million to the Jefferson County area, have been created.

UPS, with nearly 400,000 employees, has been doing international business for more than 30 years. It recently handled the logistics for the 2012 Olympic Games in London.

World Trade Day was attended by dignitaries from Bahrain, Canada, Ecuador, Germany, Hong Kong, Japan, Korea, Mexico, Poland, South Africa, Switzerland, the United Kingdom and the U.S. The Kentucky Chamber of Commerce, the U.S. Chamber of Commerce, the U.S. Small Business Administration and the World Affairs Council of Kentucky and Indiana were among the exhibitors.

UPS, DHL, Bannockburn Securities, Blackstone Media, BB&T, Expeditors International, Kinetic.The Technology Agency, Mountjoy Chilton Medley LLP, PNC Bank, Redpoint Medical PSC and Superior Battery Manufacturing also provided informational booths.

For more information about the event or World Trade Center Kentucky, click here.