Economic Bulletin | KDI 경제교육·정보센터

KDI 경제교육·정보센터

Economic Information and Education Center

Policy Issue

5th Anniversary of the Korea-US FTA

Data about the five years of the Korea-US FTA presented how mutually beneficial the FTA has been as Korea ran surpluses in goods trade, while the US benefited from services and FDI.Trade in goodsTrade in goods jumped 8.8 percent as of the end of 2016 compared with five years ago at the beginning of the trade deal. This shows how successfully the trade deal has worked since both countries saw their total trade in goods decline amid slowing down global trade, which fell an average of 2.0 percent during the 2012-2016 period. Both countries expanded their market shares: Korean markets for US products increased from 8.5 percent to 10.6 percent over the five years, and US markets for Korean products rose from 2.6 percent to 3.2 percent. Korean exports of automobiles and plastics surged, and US exports of automobiles and liquefied petroleum gas (LPG) escalated.Balance of trade in goodsKorea’s trade surplus with the US decreased in 2016 after growth began to slow down in 2014. Trade surpluses decreased due to falling automobile exports, which are attributable to overseas production, and deficits in aeronautics components and semiconductor integrated circuits. Trade in servicesTrade in services between the two countries increased 22.9 percent in 2016 compared with 2011. US exports of services increased 17.66 percent, and Korean exports of services rose 4.73 percent. The US ran surpluses in services trade backed by strong travel and intellectual property rights, and surpluses grew 54 percent compared with five years ago (US $6.93 billion → US $10.65 billion).Foreign direct investment (FDI)FDI between Korea and US hit a record high in 2016 at US $21.9 billion, going up 15.3 percent from 2011. A total of US $51.18 billion worth of Korean FDI in the US has been made for the 2012-2016 period, during which Korean FDI in the US continues an upward trajectory . The US has been the most important destination for Korean FDI, and a total of US $18 billion worth of investments, the highest ever and an increase of 66.9 percent compared with the previous year, was made in 2016, due to large scale investments in services, such as wholesale and retail businesses, and insurance services. Korean FDI in US manufacturing rose 45 percent for the past five years. According to the US Bureau of Economic Analysis, jobs created due to Korean FDI amounted to 47,000 in 2014, rising 30 percent compared with 36,000 in 2011. US FDI has been the most important foreign direct investment since 2013, taking up the largest portion of the total FDI in Korea, and investment has been moving from manufacturing to IT related services.

Mar 2017