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Partnering with Korea Through KORUS FTA 11.30.2011 Jun, Woohyung


1. Korean Economy 2. New Trade Era of FTA 3. Effects for Key Industries

2


 Foreign Exchange Reserves:

 Area: 100,000km2 (108th)

$307.2 billion

 Population: 50 million (24th)  GDP (nominal): $1,014 billion

(15th)

(April 2011)

* Short-Term External Debt: $135 BN * Gross External Debt: $360 BN

(2010)

(2010)

 GDP (ppp): $1,459 billion (12th)  Per Capita: $29,836 (26th)  GDP Growth Rate: 6.2%  Trade

(2010):

286

(2010)

285

▶ Export: $466 BN

307

298 293

292

270

▶ Import: $425 BN

※ Foreign Exchange Reserves 5 2010

6

7

8

9

10

11

12

1 2011

2

 Inflation (CPI): 3.9%

(Oct. 2011)

 Unemployment: 2.9%

(Oct. 2011)

(US$BN)

3

4

 Fiscal Balance (2010): Deficit (1.1% of GD P)

- Including Social Security Funds: Surplus (1.4 % of GDP) ※ Source: The Bank of Korea, Ministry of Strategy & Finance

 National Debt: 31.9% of GDP

(2010)

3


Key Strengths of Dynamic Korea

June 2010

rd Korea ranks 3 .

4


Short Time, Key Achievements

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Korean Companies in the Global Fortune 500 *Rankings in red, 20082009

40  38 69  67 Samsung E LG lectronics

72  86 SK Holdi ngs

87  82 Hyundai Motors

199  224 213  267 305  245 GS Holdi KEPCO POSCO ngs

355  378 362  329 367  247 438  N.A. 441  N.A. 471  N.A. 495  475 Hyundai Heavy Hanwha Samsung Life KoGas Doosan Samsung S-Oil Industry Insurance C&T

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Korea will enter into FTAs with 2/3 of the world markets.

In effect Chile (April ’04), Singapore (March ’06), EFTA (Sept. ’06), ASEAN (Goods - June ’07 / Service s- May ’09 / Investment - Sept. ’09), India (CEPA) (Jan. ’10), EU (July. ’11), Pe

ru (Aug. ’11),

Concluded

Underway

On the agenda

USA

Canada, Mexico, GCC, A ustralia, New Zealand, Columbia, Turkey

Japan, China, Korea-China-Japan, MERCOSUR, Turkey, Russia, Israel, SACU

Source: www.fta.go.kr, Ministry of Foreign Affairs and Trade

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KORUS FTA – Growing Partnership 7th Largest U.S. Trading Partner China

Canada

Mexico

Japan

Germany

U. Kingdom

Korea : Two-way trade volume reached over 90 billion USD in 2010 US$ million

90,219

100,000 80,000 60,000

30,586

33,654

37,219

42,849

41,343

43,184

45,766

46,377

37,650

2004

2005

2006

2007

2008

2009

40,000 20,000

40,403

38,365

28,783

29,039

US Export 49,816

Korea Export

0 2010

* Source : World Trade Atlas

Korea = 5th largest market for U.S. agricultural goods Korea = 2nd largest market for U.S. services in Asia Korea = 10th largest market for U.S. information technology 8


General Benefit of KORUS FTA exports

Average tariff of 11.2%

exports

Average tariff of 3.7%

Tariff Elimination by the KORUS FTA within 3 years Nearly 95 percent of bilateral trade in consumer a nd industrial products will become duty-free 


within 10 years Almost all other tariffs will be eliminated


Overall Benefits of the KORUS FTA (USITC, 2007) U.S. GDP growth: $10.1~11.9 billion U.S. Merchandise Exports increase: $9.7~10.9 billion

President Obama More than 1% Increase of U.S. Exports Create 250,000 Well-paying jobs in the US 9


• California is Korea’s #1 Trade Partner • Korea is California’s 5th Largest International Market • $2.1 Billion Increase in Exports to Korea Expected • 42,000 New Job Creation in Tra de Expected •  Computers & Electronic Products •  Machinery •  Transportation Equipments •  Agricultural Products

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Tariff Elimination on Textile & Apparel Industry Korean tariffs on US exports

US tariffs on Korean exports

products

Ratio(%)

Value(M$)

Ratio(%)

1,265

97.6

170

72

3years

7

0.5

32

13.4

5years

24

1.9

34

10years

-

-

1,296

100.0

Immediate

Total

products

Ratio(%)

Value(M$)

Ratio(%)

1,387

86.8

1,654

61.2

3years

-

-

-

-

14.6

5years

149

9.3

504

18.6

-

-

10years

62

3.9

548

20.2

236

100.0

1,589

100.0

2,706

100.0

Immediate

Total

Immediately eliminate Korean tariffs on 72 percent (by value) of U.S. exports of textiles and apparel - Phase out tariffs on 13 percent over three years and the remaining 15 percent over five years

 

Immediately eliminate tariffs on 61 percent of Korean textiles and apparel - Phase out tariffs on 19 percent over five years - The remaining 20 percent of U.S. tariffs will be phased out in 10 years

 

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Synthetic Staple Fibers of Polyesters Immediate Tariff Elimination : 4.3%  2010 Korea’s US Market share : 2nd (27.8%)  

Woven fabrics of artificial filament yarn Immediate Tariff Elimination : 14.9%

Competitive advantage in price comparing with developed countrie s

Pile fabrics knitted or crocheted Immediate Tariff Elimination : 17.2%

Plus price rise of china product

 Increase of competitive advantage

Sweaters of man-made fibers Immediate Tariff Elimination : 32.0%

Inferior to China, Vietnam in price But superior in Quality and Design

Rules of Origin : “Yarn Forward” Rule

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•  Passenger Car Tariff Elimination: Immediate eli mination from 8% to 4% & phase out by 5thyr •  Light Truck: Immediate elimination of 10% tariff •  Electric Vehicles: Korea immediately reduce fro m 8% to 4% & phase out by 5th year

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•  U.S. Exports $3 Billion Agricultural Products to S outh Korea Annually •  Korea is 5th Largest Market for U.S. Agricultural Products •  Immediate Duty-Free Access: - Wheat, Corn, Soybeans for crushing - Hides & skins, cotton, corn gluten feed and meal, and a broad range of high-value ag ricultural products - Almonds, pistachios, wine, raisins, grape juice , orange juice, fresh cherries, frozen French fri es, frozen orange juice concentrate, bourbon , Tennessee Whiskey and pet food 14


â€˘â€ˆ Market access to all major service sectors & serv ices supplied both cross-border (such as through electronic means) as well as through a commer cial presence - Legal Consulting Services - Accounting Services - Financial Services - Education Services - Health Care Services - R&D Services

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•  U.S. Financial Institutions: - Have full right to establish or acquire financia l institutions in Korea - May establish branches of banks, insurance c ompanies, asset managers - Have the right to supply cross-border financia l services

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International law firms are taking advantage of Ko rea’s expanding M&A market M&A Activities in Korea

Top 10 Legal Advisory Services Provider i n Korea’ M&A Market Ranking 2010 2009

Source: Mergemarket.com

Transac. Value

Law Firm

($100M)

1

1

Kim & Chang

192

2

3

Bae Kim & Lee

111

3

4

Shin & Kim

104

4

9

Linklaters (UK)

71

5

2

Lee & Ko

58

6

5

Yulchon

42

7

24

Shearman & Sterling (US)

39

8

17

Allen & Overy (UK)

28

9

N/A

Ashurst (UK)

27

10

50

Morgan, Lewis & Bockius(US)

24

Source: Bloomberg

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•  Step 1: FTA in Effect - U.S. law firms are allowed to establish representative offices (Foreign Legal Consultant Offices) in Korea, and attorneys licensed in the U.S. can provide legal advisory services regarding U.S. law and public international law •  Step 2: Within 2 Years of FTA - FLC offices are allowed to enter into specific cooperative agreements with Korean law firms - FLC offices are able to jointly deal with cases where do mestic and foreign legal issues are mixed. FLC can sh are profits derived from such cases •  Step 3: Within 5 Years of FTA - U.S. law firms are allowed to establish joint venture fir ms with Korean law firms - For greater certainty, such joint ventures may employ Korean-licensed lawyers as partners or associations 18


•  Step 1: FTA in Effect - U.S. certified public accounts registered in the U.S. or accounting corporations organized under the U.S. law ar e allowed to supply accounting consulting services rela ting to U.S. or international accounting laws and standard s through offices established in Korea - U.S. certified public accountants registered in the U.S. are allowed to work in Korean accounting corporations

•  Step 2: Within 5 Years of FTA - U.S. certified public accountants registered in the U.S. are allowed to invest in any Korean accounting rporations

co

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Partnering-With-Korea-through-KORUS-FTA  

11.30.2011 Jun, Woohyung 2. New Trade Era of FTA 3. Effects for Key Industries 2

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