On Nov. 29, South Korea confirmed its interest in joining the Trans-Pacific Partnership (TPP). U.S. Trade Representative Michael Froman issued a statement in support of Korea joining the TPP, but reiterated that this will only occur after negotiations among current TPP members have concluded. This means Korea would join the TPP on terms negotiated and agreed to by the other members – a group that includes the United States, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
On a related matter, Australia and Korea finalized details of a free trade agreement this week. The agreement calls for tariffs on Australian beef to be subject to a 15-year phase-out similar to that included in the Korea-U.S.-FTA. But with the Korea-Australia agreement expected to take effect in 2015 (three years later than the Korea-U.S. FTA), U.S. beef would still have a tariff rate advantage until 2030, when tariffs on Australian beef will be eliminated. Australia had sought a “catch-up” provision that would have put Australian beef on the same tariff reduction/elimination schedule as U.S. beef, but this was not included in the agreement.
These events help to illustrate an important point: Korea’s entry into the TPP would offer little upside for the U.S. red meat industry, while extending significant benefits to key competitors. U.S. beef would not only lose its tariff rate advantage over Australian beef more quickly, it would also lose its tariff rate advantage over beef from TPP members – mainly New Zealand and Canada, but also Mexico to a limited degree – that currently have no free trade agreement with Korea. Korea’s entry into the TPP would also allow Canada and Mexico to join the United States, EU and Chile as suppliers on track to achieve zero-duty access for pork. Tariffs on chilled U.S. pork are being phased out over 10 years, and Canada is the United States’ primary competitor in Korea’s chilled pork market.
Media reports surrounding the Australia-Korea agreement also make reference to “beef and dairy safeguards” that go beyond those included in the Korea-U.S. FTA. USMEF will offer further updates on these issues when the full details of the Australia-Korea agreement are available for review.