Partnering with Korea Through KORUS FTA

11.30.2011

Jun, Woohyung

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1. Korean Economy

2. New Trade Era of FTA

3. Effects for Key Industries

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※ Source: The Bank of Korea,

Ministry of Strategy & Finance

 Area: 100,000km2 (108th)

 Population: 50 million (24th)

 GDP (nominal): $1,014 billion (15th)

 GDP (ppp): $1,459 billion (12th)

 Per Capita: $29,836 (26th)

 GDP Growth Rate: 6.2% (2010)

 Trade (2010): ▶ Export: $466 BN

▶ Import: $425 BN

 Foreign Exchange Reserves:

$307.2 billion (April 2011) * Short-Term External Debt: $135 BN (2010)

* Gross External Debt: $360 BN (2010)

 Inflation (CPI): 3.9% (Oct. 2011)

 Unemployment: 2.9% (Oct. 2011)

 Fiscal Balance (2010): Deficit (1.1% of GDP)

- Including Social Security Funds: Surplus (1.4% of GDP)

 National Debt: 31.9% of GDP (2010)

5 2010

6 7 8 9 10 11 12 1 2011

2 3 4

270

286 285

293 292 298

307

※ Foreign Exchange Reserves (US$BN)

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Key Strengths of Dynamic Korea

June 2010

Korea ranks 3rd .

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Short Time, Key Achievements

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Korean Companies in the Global Fortune 500

Samsung Electronics

40 38

495 475

69 67 LG

72 86 SK Holdings

87 82 Hyundai Motors

199 224 POSCO

Hyundai Heavy Industry

213 267 GS Holdings

305 245 KEPCO

355 378 362 329 Hanwha

367 247 Samsung Life Insurance

438 N.A. KoGas

441 N.A. S-Oil

471 N.A. Doosan Samsung

C&T

*Rankings in red, 20082009

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In effect Concluded Underway On the agenda

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),

USA

Canada, Mexico, GCC, Australia,

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

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

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KORUS FTA – Growing Partnership

China Canada Mexico Japan Germany U. Kingdom

* Source : World Trade Atlas

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

0 20,000 40,000 60,000 80,000

100,000

2004 2005 2006 2007 2008 2009 2010

42,849 41,343 43,184 45,766 46,377 37,650 49,816

28,783 30,586 33,654 37,219 38,365 29,039

40,403

US Export Korea Export

90,219

US$ million

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

7th Largest U.S. Trading Partner

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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

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

exports Average tariff of 11.2% Average tariff of 3.7% exports

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

General Benefit of KORUS FTA

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• 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 Trade Expected

•  Computers & Electronic Products •  Machinery •  Transportation Equipments •  Agricultural Products

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Tariff Elimination on Textile & Apparel Industry

products Ratio(%) Value(M$) Ratio(%)

Immediate 1,265 97.6 170 72

3years 7 0.5 32 13.4

5years 24 1.9 34 14.6

10years - - - -

Total 1,296 100.0 236 100.0

products Ratio(%) Value(M$) Ratio(%)

Immediate 1,387 86.8 1,654 61.2

3years - - - -

5years 149 9.3 504 18.6

10years 62 3.9 548 20.2

Total 1,589 100.0 2,706 100.0

Korean tariffs on US exports US tariffs on Korean exports

 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%

Sweaters of man-made fibers

 2010 Korea’s US Market share : 2nd (27.8%)

Woven fabrics of artificial filament yarn

Pile fabrics knitted or crocheted

 Immediate Tariff Elimination : 14.9%

 Competitive advantage in price comparing with developed countries

 Immediate Tariff Elimination : 32.0%

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

 Immediate Tariff Elimination : 17.2%

 Plus price rise of china product Increase of competitive advantage

 Rules of Origin : “Yarn Forward” Rule

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

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• U.S. Exports $3 Billion Agricultural Products to South 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 agricultural products

- Almonds, pistachios, wine, raisins, grape juice, orange juice, fresh cherries, frozen French fries, frozen orange juice concentrate, bourbon, Tennessee Whiskey and pet food

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• Market access to all major service sectors & services supplied both cross-border (such as through electronic means) as well as through a commercial 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 Korea’s expanding M&A market

Source: Mergemarket.com

Ranking Law Firm

Transac. Value 2010 2009 ($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

Top 10 Legal Advisory Services Provider in Korea’ M&A Market

Source: Bloomberg

M&A Activities in Korea

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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 domestic and foreign legal issues are mixed. FLC can share profits derived from such cases

•  Step 3: Within 5 Years of FTA - U.S. law firms are allowed to establish joint venture firms with Korean law firms

- For greater certainty, such joint ventures may employ Korean-licensed lawyers as partners or associations

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• Step 1: FTA in Effect - U.S. certified public accounts registered in the U.S. or accounting corporations organized under the U.S. law are allowed to supply accounting consulting services relating to U.S. or international accounting laws and standards 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 corporations

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