Industry by the Numbers
Chemical products are one of the United States’ top three exports to Korea. According to the U.S. Department of Commerce, Korea was the U.S chemical industry’s 7th largest export market, totaling $6.7 billion in 2011. In addition, U.S. companies imported $2.5 billion worth of chemicals from Korea, for a total bilateral trade of 9.1 billion in 2011. The implementation of the U.S.-Korea Free Trade Agreement should provide significant opportunity for that trade to increase in the coming years. The accompanying graph illustrates the rapidly growing trade in chemicals between the U.S. and Korea over the last six years.
The Chemical trade between the U.S. and Korea includes many products the average person uses on a daily basis including pharmaceuticals, plastics, pesticides, fertilizers, paints, soaps, cleaning compounds, resin and synthetic rubber.
U.S. companies are well positioned to take advantage of improved market access and the elimination of tariffs, which will make products are more cost-competitive and allow firms to reinvest in technology and production improvements. Now that the agreement has taken effect, more than 50% of U.S. chemicals exports to Korea now receive duty-free treatment, and more than 82% of will become duty-free within three years
- Plastics (Resins and Products): The agreement eliminated tariffs on 53% of plastics exports immediately. Tariffs on an additional 30% of exports would be eliminated over three years and a further 9% over five years. The remaining 8% would be eliminated over ten years.
- Rubber: The agreement eliminated tariffs on 80% of U.S. rubber exports immediately, with the rest of the tariffs being reduced over five or ten years
- Fertilizer and agro-chemicals: The agreement eliminated tariffs on 24% of U.S. fertilizer and agro-chemicals exports immediately. Tariffs on an additional 74% of exports would be eliminated over three years and on the remaining 2% over five years.
Reductions in U.S. tariffs as a result of the agreement should also increase the subsequent competitiveness of U.S. producers. Many U.S. made products like plastics and certain fertilizers should become cheaper as a result of the reduced cost of chemical components being imported from Korea providing benefits to U.S. consumers.
Petrochemicals, which are important components used by U.S. manufacturers to make products like synthetic rubber, dyes, detergents, solvents and fertilizers will see their tariffs , many as high as 6.5%, eliminated immediately, and plastic components being imported from Korea will have their 6.5% tariff eliminated over the next five years. Both of these should lead to significant reductions in price on the products in which they’re used.