Updated March 17, 2023
U.S.-South Korea (KORUS) FTA and Bilateral Trade Relations
The U.S.-South Korea free trade agreement (KORUS FTA)
entered into force in March 2012. The agreement has
Views on KORUS and its outcomes over its 11-year
reduced and, in most cases, eliminated tariff and non-tariff
existence are mixed. Proponents argue the FTA has
barriers between the two parties on manufactured goods,
expanded trade (including U.S. exports), investment,
agricultural products, and services; provides rules and
competition, and consumer choice in both countries,
disciplines on investment, intellectual property rights (IPR)
increased U.S. IPR protection in South Korea, and
and other issues; commits both countries to maintain certain
improved transparency in South Korea’s regulatory process.
worker and environmental standards; and provides
Others have argued that the agreement’s impact is
mechanisms for resolving disputes. KORUS is the second
disappointing, often pointing to an increase in the U.S. trade
largest U.S. FTA by trade flows, after the U.S.-Mexico-
deficit with South Korea since the agreement took effect,
Canada Agreement (USMCA). The agreement is extensive
though most economists dispute this argument (see below).
in scope, but on some issues, such as digital trade, its
The two countries continue to address implementation
commitments are limited compared to more recent trade
issues using the agreement’s consultative mechanisms.
agreements, leading some stakeholders to call for updates.
Trade and Investment Patterns
In May 2022, the Biden Administration launched the Indo-
South Korea is the seventh largest U.S. trading partner, with
Pacific Economic Framework for Prosperity (IPEF)
total trade (goods and services) in 2022 of $227.4 billion.
initiative. South Korea is among 14 inaugural negotiating
From 2021 to 2022, U.S. exports to South Korea increased
partners in the U.S.-led initiative, which may provide a
by $9.4 billion (+11%) to $96.5 billion. South Korean
forum to enhance the U.S.-South Korea economic
spending on U.S. travel services, however, remained
relationship beyond existing KORUS FTA commitments.
depressed in 2021 due to the pandemic, and was $5.7
South Korea also has been active in regional economic
billion below 2019 levels (latest data available). U.S.
agreements that do not include the United States, including
imports from South Korea increased in 2022 by $23.5
the Regional Comprehensive Economic Partnership
billion (+22%) to $132 billion. The stock of South Korean
(RCEP), among major Asian trading nations, such as China,
FDI in the United States has more than tripled since the
Japan, and the 10 Association of Southeast Asian Nations
KORUS FTA took effect, reaching $72.5 billion in 2021.
(ASEAN) members. South Korea also has initiated
The stock of U.S. FDI in South Korea, by contrast, has
domestic procedures necessary for potential application to
grown by a more modest 35% during this period, reaching
the Comprehensive and Progressive Agreement for Trans-
$38.1 billion in 2021.
Pacific Partnership (CPTPP), but has not applied to date.
The U.S. trade deficit with South Korea has fluctuated since
KORUS has been modified twice since it was signed in
KORUS took effect, growing early on, declining from
2007 under the George W. Bush Administration. The
2015-2018, and then increasing again (Figure 1). Auto
Obama Administration negotiated modifications to certain
imports, which account for much of the increase in U.S.
auto and agricultural provisions prior to submitting the
imports since the FTA took effect, grew most rapidly from
agreement for congressional approval in 2011. In 2018, the
2011-2015, before the 2.5% U.S. car tariff was reduced
Trump Administration negotiated amendments relating to
under KORUS. As a result, many economists argue that the
U.S. auto exports, the U.S. truck tariff, and certain rules,
FTA has not contributed significantly to the increase in the
including on investment, which took effect in January 2019.
bilateral trade deficit. Economists generally find that
The United States and South Korea, allies since 1953,
macroeconomic factors are the main drivers of bilateral
originally negotiated KORUS to deepen and enhance
trade balances, rather than trade agreements.
economic ties and to strengthen a critical alliance
Figure 1. U.S. Total Trade with South Korea
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. During summits
with former President Moon Jae-in (May 2021) and
President Yoon Suk Yeol (May 2022), President Biden
announced plans for greater bilateral cooperation in
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industries, such as electric vehicle (EV) batteries and
semiconductors. However, South Koreans have complained
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that bilateral cooperation is undercut by the CHIPS and
Science Act (CHIPS, P.L. 117-167P.L. 117-167) and the
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electronic vehicle (EV) provisions in the 2022 Inflation
Source: Bureau of Economic Analysis.
Reduction Act (IRA, P.L. 117-169P.L. 117-169), arguing
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that both laws harm South Korean companies.
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U.S.-South Korea (KORUS) FTA and Bilateral Trade Relations
Selected Key Sectors and Provisions
(25,000 to 50,000 per manufacturer per year), and
Agriculture
clarifying South Korean recognition of certain U.S.
emissions and auto parts standards for U.S. exports;
Agricultural products are an area of U.S. comparative
advantage. The United States ran an $8.2 billion
amending the trade remedy chapter by adding
agricultural trade surplus with South Korea in 2021. South
transparency and reporting requirements, including
Korea’s agriculture sector generally is highly protected—its
calculations of dumping margins;
agricultural tariffs average 61.5%—but through KORUS,
amending the investment chapter, by clarifying aspects
South Korea immediately granted duty-free status to almost
of what may or may not be considered a violation of
two-thirds of U.S. agricultural exports. Tariffs and import
certain commitments; and
quotas on most other agricultural goods were phased out by
2021. One significant market access gain for U.S. producers
confirming customs principles on expeditious and risk-
is South Korea’s
based origin verifications.
phased elimination of its 40% tariff on
beef by 2026. U.S. export gains from 2011 to 2021 have
Currency provisions were not included in the FTA’s 2019
been strong in sectors with large tariff reductions, such as
modifications, but South Korea separately agreed to
beef (+$1.7 billion), fresh fruit (+$175 million) and tree
disclose its foreign exchange transactions moving
nuts (+$162 million). South Korea excluded rice from the
forward—a practice long sought by the United States.
FTA tariff commitments, but in 2019 agreed to provide the
Section 201 and 232 Import Restrictions
United States with a country-specific quota under its WTO
Since 2018, certain U.S. imports from South Korea have
obligations, worth approximately $110 million annually.
been subject to restrictions (tariffs and quotas) imposed by
Motor Vehicles
President Trump using authorities under Section 201 of the
U.S. and South Korean motor vehicle industries are major
Trade Act of 1974 (washing machines and solar panels) and
competitors. Such imports account for roughly 25% of U.S.
Section 232 of the Trade Expansion Act of 1962 (steel and
goods imports from South Korea. Auto trade was among
aluminum). South Korea, typically among the top five
the most contentious issues in the original FTA
suppliers of U.S. steel imports ($2.9 billion in 2021), was
negotiations, but the Detroit Three U.S. automakers
one of the first countries to negotiate a quota arrangement
ultimately supported the agreement. Under KORUS, the
with the Trump Administration, in lieu of the 25% steel
United States eliminated its 2.5% auto import tariff in 2016,
tariff. As a result, U.S. imports of South Korean steel are
and was originally to begin reducing its 25% light truck
subject to a quota equivalent to 70% of 2015-2017 imports.
tariff in 2019, gradually eliminating it by 2021. (The 2019
South Korean officials have urged the Biden
modifications extended the 25% truck tariff to 2041.) South
Administration to revisit the quota arrangement in light of
Korea’s 8% auto import tariff was reduced to 4%
less restrictive arrangements the Administration has
immediately and eliminated in 2016, and its 10% light truck
negotiated with the European Union and Japan. Section 232
tariff was immediately eliminated. Under KORUS, bilateral
import restrictions remain in place unless the President
tariffs on virtually all auto parts immediately dropped to
removes them. Section 201 restrictions are statutorily time-
zero. From 2011 to 2021, U.S. auto and parts exports to
limited and set to expire in February 2026 for solar panels;
South Korea tripled to $3.8 billion (albeit from a low base),
restrictions on washing machines expired in February 2023.
while U.S. imports increased by 76% to $27.1 billion.
Potential Questions Faced by Congress
Services
Economists generally view overall bilateral trade
Services trade was a priority in the KORUS FTA talks, as
balances as a poor metric for the success of FTAs. What
the United States sought greater market access for its highly
is the best way to evaluate the KORUS FTA? Has it
competitive services firms and South Korea hoped to
achieved congressional goals?
improve productivity in a sector that lags behind its
In certain areas, KORUS does not reflect the most
manufacturers. Commitments are on a “negative list” basis
recent U.S. negotiating positions, such as on digital
(i.e., they apply to all sectors except those specifically
trade. Would KORUS benefit from changes or updates,
exempted). Provisions prohibit discriminatory treatment,
and, if so, how should this be achieved? To what extent
local presence requirements, and market access limitations,
could IPEF initiative effectively such issues?
and require certain steps in the regulatory process. Industry-
specific commitments include the opening of South Korea’s
What are congressional priorities for the IPEF initiative
with respect to South Korea? How would it affect the
legal services sector; a financial services chapter, including
KORUS FTA and compare to other regional agreements
a provision to allow data flow transfers; and an annex on
like CPTPP?
express delivery. From 2011 to 2021, top U.S. exports gains
have occurred in telecom, computer and information
How can the United States balance domestic economic
services (+$1.2 billion), other business services (+$1.3
policy goals and increasing bilateral cooperation in key
billion), and financial services (+$813 million).
industries (e.g., EV batteries and semiconductors)?
2019 KORUS FTA Modifications
The United States continues to engage with South Korea
on its implementation of KORUS commitments. Does
The changes to KORUS negotiated in 2018 consisted
the executive branch have adequate resources and tools,
primarily of South Korean regulatory changes and U.S.
including the FTA’s mechanisms for consultation, to
tariff modifications, and were implemented in January 2019
address implementation and enforcement issues?
by the Trump Administration without action by Congress.
This In Focus was originally written by Brock R. Williams,
The KORUS FTA implementing legislation provides the
former CRS Specialist in International Trade and Finance.
President authority to modify the U.S. FTA tariff schedule.
Liana Wong, , Analyst in International Trade and
The negotiated modifications included, among other things
Financelwong@crs.loc.gov, 7-8067
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changing tariff commitments by extending the 25% U.S.
Mark E. Manyin, , Specialist in Asian
light truck tariff to 2041;
Affairsmmanyin@crs.loc.gov, 7-7653
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doubling the number of U.S. vehicle exports to South
Korea that can be imported with U.S. safety standards
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