MINNEAPOLIS
Minnesota exporters are welcoming this week's long-awaited free trade agreement with South Korea, which will lower tariffs on Minnesota-made medical, machine, meat and grain products.
Under the new agreement, 67 percent of U.S. agricultural exports and 80 percent of U.S. consumer and industrial exports to South Korea will become duty-free effective Thursday. Most remaining tariffs will be eliminated in stages over the next 10 years.
Similar free trade pacts with Panama and Colombia also have been approved by Congress and signed by President Obama, but are pending final implementation in those countries. The process is likely to take several more months.
But for now, all eyes are on South Korea -- by far the biggest of the three markets. The trade deal is generally good news for Minnesota manufacturers such as Medtronic, Boston Scientific, Cargill, Hormel and Rani Engineering and for farmers. They have increasingly found South Korea a hungry consumer of their medical and optical products as well as pork, beef, grains, aircraft and car parts and electronic goods.
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Minnesota's annual exports to the small Asian country have more than doubled in the past decade to $702 million last year. And South Korea has surged from the state's 14th-largest trading partner in 2000 to its sixth-largest last year. Exports grew 26 percent just in the fourth quarter after a trade mission led by Gov. Mark Dayton last fall.
"We are anticipating great growth through this," said Minnesota Trade Office Executive Director Katie Clark in a phone interview with the Star Tribune. "This is the most commercially significant free trade agreement we've had in 16 years."
Cargill spokesman Tim Loesch agreed. "We are enthused about the passage of this agreement. What it means for us is that we are able to move corn, wheat and soybeans and fresh and frozen pork for export there without barriers. This levels the playing field. This is important to us. And we are excited about that."
Cargill and others in the industry expect the end of Korea trade tariffs could help generate an additional $1.8 billion a year in U.S. agricultural exports.
Officials with the U.S. Department of Commerce also expect a big payback as the cost of exporting goods into South Korea drops in the next few years.
"The impact of the elimination of tariffs and related barriers is estimated to increase U.S. gross domestic product by $12 billion and to increase U.S. goods exported by $11 billion annually," said Janelle Weyek, commercial officer for the U.S. Commercial Service Office in Minneapolis.
On average, U.S. exporters to Korea now pay 6.2 percent in tariffs or about $1.3 billion a year just for industrial goods, she said. Other tariffs run as high as 23 percent. In contrast, Korean firms only pay about 2.8 percent in tariffs to bring goods into the United States.
"As far as we are concerned, the free trade agreement is good news for the companies in Minnesota and the country," said Weyek, who met Tuesday morning with a large medical firm that was founded in Minnesota. The company, which she declined to name, has been busy of late shipping goods to South Korea. That's about to get a lot cheaper.
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The company's Korean tariffs will drop from 8 percent to 5.3 percent on Thursday and then to 2.7 percent next year. By 2014 the tariffs drops to zero.
As a result the company expects to see "a significant impact on their ability to sell additional products [cheaper] there because of the reduction in tariffs," Weyek said.
But the change in export duties won't affect all firms the same way. Some product categories will see tariff reductions faster than others. To find out which goods and what time frames to expect, The U.S. Commerce Department suggests Minnesota firms look up South Korea product codes under the Opportunities section of www.export.gov/Minnesota .
Distributed by MCT Information Services
