The Proposed U.S.-South Korea Free Trade Agreement (KORUS FTA): Provisions and Implications

William H. Cooper, Coordinator
Specialist in International Trade and Finance

Mark E. Manyin
Specialist in Asian Affairs

Remy Jurenas
Specialist in Agricultural Policy

Michaela D. Platzer
Specialist in Industrial Organization and Business

On June 30, 2007, U.S. and South Korean trade officials signed the proposed U.S.-South Korean Free Trade Agreement (KORUS FTA) for their respective countries. If approved, the KORUS FTA would be the second largest FTA that South Korea has signed to date, after the agreement with the European Union (EU). It would be the second largest (next to North American Free Trade Agreement, NAFTA) in which the United States participates. South Korea is the seventh largest trading partner of the United States and the United States is South Korea's third largest trading partner. Various studies conclude that the agreement would increase bilateral trade and investment flows. The final text of the proposed KORUS FTA covers a wide range of trade and investment issues and, therefore, could have substantial economic implications for both the United States and South Korea. The agreement will not enter into force unless Congress approves implementation legislation. The negotiations were conducted under the trade promotion authority (TPA), also called fast-track trade authority, that the Congress granted the President under the Bipartisan Trade Promotion Act of 2002 (P.L. 107-210). The authority allows the President to enter into trade agreements that receive expedited congressional consideration (no amendments and limited debate). The Bush Administration did not send draft implementing legislation to Congress. 

The Obama Administration has not indicated if and when it will send the draft implementing bill to Congress. The Administration has stated that it is developing "benchmarks for progress" on resolving "concerns" it has with the KORUS FTA, particularly over market access for U.S. car exports. While U.S. Trade Representative Ron Kirk has called attention to the economic opportunities the KORUS FTA presents, he also has said that if the Administration's concerns are not resolved, "we'll be prepared to step away.... " Presidents Obama and Lee Myung-bak met in Seoul in November 2009, and the two presidents agreed to "move the agreement forward." However, the prospect of congressional action on the KORUS FTA in 2010 appears slim; as of late January 2010, the Obama Administration reportedly had not presented ideas for changes to the U.S. auto industry, key congressional offices, or the Korean government. 

In South Korea, however, the politics of the KORUS FTA likely will make it difficult for the government of President Lee Myung-bak to appear to accede to new U.S. demands. This is particularly due to memories of events in 2008, when Lee reached an agreement with the United States to fully lift South Korea's ban on U.S. beef imports, triggering massive anti-government protests that forced the two governments to renegotiate the beef agreement. Lee lifted the ban to make it easier for the George W. Bush Administration to submit the KORUS FTA to Congress. The South Korean National Assembly has yet to vote on the KORUS FTA, and is debating whether or not to do so before the U.S. Congress acts. It is expected that the Assembly would pass the agreement, at least in its current version. While a broad swath of the U.S. business community supports the agreement, the KORUS FTA faces opposition from some groups, including some auto and steel manufacturers and labor unions. Some U.S. supporters view passage of the KORUS FTA as important to secure new opportunities in the South Korean market, while opponents claim that the KORUS FTA does not go far enough. Other observers have suggested the outcome of the KORUS FTA could have implications for the U.S.-South Korean alliance as a whole, as well as on U.S. Asia policy and U.S. trade policy, particularly in light of an FTA completed in October 2009 between South Korea and the European Union.


Date of Report: February 12, 2010
Number of Pages: 53
Order Number: RL34330
Price: $29.95

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