Updated July 27, 2022
U.S.-South Korea (KORUS) FTA and Bilateral Trade Relations
The U.S.-South Korea free trade agreement (KORUS FTA)
increased U.S. IPR protection in South Korea, and
entered into force in March 2012. The agreement has
improved transparency in South Korea’s regulatory process.
reduced and, in most cases, eliminated tariff and non-tariff
Others have argued that the agreement’s impact is
barriers between the two parties on manufactured goods,
disappointing, often pointing to an increase in the U.S. trade
agricultural products, and services; provides rules and
deficit with South Korea since the agreement took effect,
disciplines on investment, intellectual property rights (IPR)
though most economists dispute this argument (see below).
and other issues; commits both countries to maintain certain
The two countries continue to address implementation
worker and environmental standards; and provides
issues using the agreement’s consultative mechanisms.
mechanisms for resolving disputes. KORUS is the second
largest U.S. FTA by trade flows, after the U.S.-Mexico-
Trade and Investment Patterns
Canada Agreement (USMCA). The agreement is extensive
South Korea is the seventh largest U.S. trading partner, with
in scope, but on some issues, such as digital trade, its
total trade (goods and services) in 2021 of $194.5 billion.
commitments are limited compared to more recent trade
From 2020 to 2021, U.S. exports to South Korea increased
agreements, leading some stakeholders to call for updates.
by $16.8 billion (+24%) to $86.1 billion. South Korean
spending on U.S. travel services, however, remained
In May 2022, the Biden Administration launched the
depressed in 2021 due to the pandemic, and was $5.7
process to establish the Indo-Pacific Economic Framework
billion below 2019 levels. U.S. imports from South Korea
for Prosperity initiative. South Korea is among 14 inaugural
increased in 2021 by $22.0 billion (+25%) to $108.4 billion.
negotiating partners in the U.S.-led initiative, which may
The stock of South Korean FDI in the United States has
provide a forum to enhance the U.S.-South Korea economic
more than tripled since the KORUS FTA took effect,
relationship beyond existing KORUS FTA commitments.
reaching $72.5 billion in 2021. The stock of U.S. FDI in
South Korea also has been active in regional economic
South Korea, by contrast, has grown by a more modest 35%
agreements that do not include the United States, including
during this period, reaching $38.1 billion in 2021.
the Regional Comprehensive Economic Partnership
(RCEP), among major Asian trading nations, such as China,
The U.S. trade deficit with South Korea has fluctuated since
Japan, and the 10 Association of Southeast Asian Nations
KORUS took effect, growing significantly early on,
(ASEAN) members. South Korea also has initiated
declining from 2015-2018, and then increasing again
domestic procedures necessary for potential application to
(Figure 1). Auto imports, which account for much of the
the Comprehensive and Progressive Agreement for Trans-
increase in U.S. imports since the FTA took effect, grew
Pacific Partnership (CPTPP), but has not applied to date.
most rapidly from 2011-2015, before the 2.5% U.S. car
tariff was reduced under KORUS. As a result, many
KORUS has been modified twice since originally signed in
economists argue that the FTA has not contributed
2007 under the George W. Bush Administration. The
significantly to the increase in the bilateral trade deficit.
Obama Administration negotiated modifications to certain
Economists generally find that macroeconomic factors are
auto and agricultural provisions prior to submitting the
the main drivers of bilateral trade balances, rather than trade
agreement for congressional approval in 2011. In 2018, the
agreements.
Trump Administration negotiated amendments relating to
U.S. auto exports, the U.S. truck tariff, and certain rules,
Figure 1. U.S. Total Trade with South Korea
including on investment, which took effect in January 2019.
The United States and South Korea, allies since 1953,
originally negotiated KORUS to deepen and enhance
economic ties and to strengthen a critical alliance
relationship. During the Trump Administration, trade
tensions were an irritant in the broader bilateral
relationship, including President Trump’s threats to
withdraw from KORUS during the modification
negotiations, and the imposition of new U.S. global import
restrictions on important South Korean industries, including
steel. Bilateral trade tensions have eased under President
Biden, who has prioritized working more closely with U.S.
allies to address global economic issues. The Trump-era
trade restrictions affecting South Korea, however, remain in
effect. During summits with former President Moon Jae-in
(May 2021) and President Yoon Suk Yeol (May 2022),
Source: Bureau of Economic Analysis.
President Biden announced plans for greater bilateral
cooperation in industries, such as electric vehicle batteries
Selected Key Sectors and Provisions
and semiconductors.
Agriculture
Views on KORUS and its outcomes over its nearly 10-year
Agricultural products are an area of U.S. comparative
existence are mixed. Proponents argue the FTA has
advantage. The United States ran an $8.2 billion
expanded trade (including U.S. exports), investment,
agricultural trade surplus with South Korea in 2021. South
competition, and consumer choice in both countries,
Korea’s agriculture sector is highly protected—its
https://crsreports.congress.gov
U.S.-South Korea (KORUS) FTA and Bilateral Trade Relations
agricultural tariffs average 61.5%—but through KORUS,
changing tariff commitments by extending the 25% U.S.
South Korea immediately granted duty-free status to almost
light truck tariff to 2041;
two-thirds of U.S. agricultural exports. Tariffs and import
doubling the number of U.S. vehicle exports to South
quotas on most other agricultural goods were phased out by
Korea that can be imported with U.S. safety standards
2021. One of the most significant market access gains for
(25,000 to 50,000 per manufacturer per year), and
U.S. producers is South Korea’s phased elimination of its
clarifying South Korean recognition of certain U.S.
40% tariff on beef by 2026. U.S. export gains from 2011 to
emissions and auto parts standards for U.S. exports;
2021 have been strong in sectors with large tariff
amending the trade remedy chapter by adding
reductions, such as beef (+$1.7 billion), fresh fruit (+$175
transparency and reporting requirements, including
million) and tree nuts (+$162 million). South Korea
calculations of dumping margins;
excluded rice from the FTA tariff commitments, but in
2019 agreed to provide the United States with a country-
amending the investment chapter, by clarifying aspects
specific quota under its WTO obligations, worth
of what may or may not be considered a violation of
certain commitments; and
approximately $110 million annually.
Motor Vehicles
confirming customs principles on expeditious and risk-
based origin verifications.
U.S. and South Korean producers compete intensely in the
Currency provisions were not included in the FTA’s 2019
motor vehicle and parts sector and such imports account for
modifications, but South Korea separately agreed to
roughly one-quarter of U.S. goods imports from South
disclose its foreign exchange transactions moving
Korea. Auto trade was among the most contentious issues
forward—a practice long sought by the United States.
in the original FTA negotiations, but the Detroit Three U.S.
automakers ultimately supported the agreement. Under
Section 201 and 232 Import Restrictions
KORUS, the United States eliminated its 2.5% auto import
Since 2018, certain U.S. imports from South Korea have
tariff in 2016, and was originally to begin reducing its 25%
been subject to restrictions (tariffs and quotas) imposed by
light truck tariff in 2019, gradually eliminating it by 2021.
President Trump using authorities under Section 201 of the
(The 2019 modifications extended the 25% truck tariff to
Trade Act of 1974 (washing machines and solar panels) and
2041.) South Korea’s 8% auto import tariff was reduced to
Section 232 of the Trade Expansion Act of 1962 (steel and
4% immediately and eliminated in 2016, and its 10% light
aluminum). South Korea, typically among the top five
truck tariff was immediately eliminated. Under KORUS,
suppliers of U.S. steel imports ($2.9 billion in 2021), was
bilateral tariffs on virtually all auto parts immediately
one of the first countries to negotiate a quota arrangement
dropped to zero. From 2011 to 2021, U.S. auto and parts
with the Trump Administration, in lieu of the 25% steel
exports to South Korea tripled to $3.8 billion (albeit from a
tariff. As a result, U.S. imports of South Korean steel are
low base), while U.S. imports increased by 76% to $27.1
subject to a quota equivalent to 70% of 2015-2017 imports.
billion.
South Korean officials have urged the Biden
Services
Administration to revisit the quota arrangement in light of
less restrictive arrangements the Administration has
Services trade was a priority in the KORUS FTA talks, as
negotiated with the European Union and Japan. Section 232
the United States sought greater market access for its highly
import restrictions remain in place unless the President
competitive services firms and South Korea hoped to
removes them, whereas those under Section 201 are
improve productivity in a sector that lags behind its
statutorily time-limited and set to expire in February 2023
manufacturers. Commitments are on a “negative list” basis;
for washing machines and February 2026 for solar panels.
i.e., they apply to all sectors except those specifically
exempted. Provisions prohibit discriminatory treatment,
Potential Issues for Congress
local presence requirements, and market access limitations,
and require certain steps in the regulatory process. Industry-
Economists generally view overall bilateral trade
specific commitments include the opening of South Korea’s
balances as a poor metric for the success of FTAs. What
is the best way to evaluate the KORUS FTA? Has it
legal services sector; a financial services chapter, including
achieved congressional goals?
a provision to allow data flow transfers; and an annex on
express delivery. From 2011 to 2021, top U.S. exports gains
In certain areas, KORUS does not reflect the most
have occurred in telecom, computer and information
recent U.S. negotiating positions, such as on digital
services (+$1.2 billion), other business services (+$1.3
trade. Would KORUS benefit from changes or updates,
billion), and financial services (+$813 million).
and, if so, how should this be achieved?
2019 KORUS FTA Modifications
What are congressional priorities for the proposed Indo-
Pacific Economic Framework with respect to South
The changes to KORUS negotiated in 2018 consisted
Korea? How would it affect the KORUS FTA and
primarily of South Korean regulatory changes and U.S.
compare to other regional agreements like CPTPP?
tariff modifications, and were implemented in January 2019
U.S. stakeholders periodically have raised concerns over
by the Trump Administration without action by Congress.
South Korea’s implementation of certain commitments,
The KORUS FTA implementing legislation provides the
such as on customs verifications and cross-border data
President authority to modify the U.S. FTA tariff schedule.
transfers for financial services. Does the executive
branch have adequate resources and tools, including the
[T]he President may proclaim . . modification…of any
FTA’s mechanisms for consultation, to address
duty. . to maintain the general level of reciprocal and
implementation and enforcement issues that may arise?
mutually advantageous concessions with respect to Korea
. .
Brock R. Williams, Specialist in International Trade and
P.L. 112-41, October 21, 2011
Finance
The negotiated modifications included, among other things
Mark E. Manyin, Specialist in Asian Affairs
IF10733
https://crsreports.congress.gov
U.S.-South Korea (KORUS) FTA and Bilateral Trade Relations
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF10733 · VERSION 12 · UPDATED