By Sven Gorn
Gangnam Style – A South Korean pop song released by July 15 2012 spread over the Pacific and reached the US in less than two weeks. Gangnam Style is a funny, catchy pop song including a very unique dance move.
Gangnam Style live on NBC’s today show in New York (image: http://www.news.com.au)
Celebrities like Tom Cruise, Britney Spears, Maroon 5 and Nelly Furtado spread the word and shared the video in social networks. Additional it received attention by the media via CNN, the Wall Street Journal and the Financial Times. On August 20 PSY, the singer and producer of Gangnam Style, performed the song at the MLB game between the Los Angeles Dodgers and San Francisco Giants in front of 43,000 baseball fans.
Gangnam is a district of Seoul that is about half the size of Manhattan. It reflects the development of South Korea since the 70s. At that time Gangnam was nothing more than some forlorn homes surrounded by flat farmland and drainage ditches. Now it is one of the most popular areas in Korea. The average apartment in Gangnam costs about 716,000 USD, a sum for which an average Korean household needs to work 18 years for.
The U.S. and South Korea have a long history of strong political and economical relations. Since the end of the Japanese-Korean war, the U.S. had an important role in the South Korean economic development. In June 2007 the free trade agreement (know as KORUS FTA) between both countries was finalized and ratified by the U.S. congress in October 2011. The trade agreement went into effect by 15th March 2012. (MarketLine, for references see bottom line)
Estimations by the U.S. International Trade Commission show that the reduction of Korean tariffs and tariff-rate quotas will add approximately 10 to 12 billion USD to the annual Gross Domestic Product and around 10 billion to the annual merchandise exports to Korea. Under the FTA nearly 80 percent of the U.S. exports to Korea of consumer and industrial products become duty free. Within the next five years 95 percent of the bilateral trade will be duty free and the remaining tariffs will disappear within the next ten years.
Tariffs and quotas on agricultural products will be eliminated directly for a wide range of products. Nearly two-third of the Korean agriculture imports from the U.S. will be duty free. In the service sector the FTA will lead to better market access commitments for all major service sectors. It will open the foreign legal consulting services and provide a more secure access for the international delivery services. In the financial service area the FTA assures a higher transparency and a fair treatment for the supplier of financial services.
Both countries hold a strong trade relationship. In 2011 Korea was the 7th largest trading partner of the U.S. with a total trade volume of 100 billion USD. The total goods exports were 43.4 billion USD in 2011, which made Korea the 7th largest U.S. export partner. The imports from Korea had a total volume 56.6 billion USD which made Korea the 6th largest supplier of goods in 2011. (Office of the United States Trade Representative)
For South Korea the U.S. were the second largest export partner in terms of trade volume (56.6 billion USD, as mentioned) and accounted for 10.1 % of all exports, following China with (24.4%). On the other side the U.S. were third largest import partner and accounted for 8.5 % of the total import volume, following Japan (13%) and China (16.5%). (CIA Factbook)
U.S. trades in goods with South Korea (in billion USD), selected years
The U.S. typically exports products like industrial machinery, specialized instruments, civilian aircraft, transistors, semiconductor circuits, chemicals, corn & wheat, semiconductor circuits, iron and steel scrap to Korea. On the other side the mayor U.S. imports are motor vehicles & parts, cell phones, semiconductor circuits & printed circuit boards, machinery, iron and steel from Korea. (Fas.org)
The free trade agreement seems to be beneficial for both parties. Between 2005 and 2011 the trade volume between both countries increased from 69.4 billion USD to 100 billion USD. That is an increase of 6.28% per year (compounded interest rate). The reduction of tariffs and quotas will reduce costs for exporters and importers significantly in the next years and will lead to even higher trade volumes in the future. As the trade agreement just went into effect by March 2012 it might be too early to say that it was a success story. Nevertheless the FTA will lead to closer relations and higher benefits for both countries.
Fas.org. Federation of American Scientists. U.S. South Korean relations. November 28 2011. http://www.fas.org/sgp/crs/row/R41481.pdf.
News.com.au. PSY’s Gangnam Style is South Korean social commentary. September 20 2012. http://www.news.com.au/entertainment/music/psys-gangnam-style-is-south-korean-social-commentary/story-e6frfn09-1226477656128.
MarketLine (former DataMonitor), Country Profile Series South Korea – In-depth PESTLE insights, June 2012.
Office of the United States Trade Representative. Free Trade Agreement. http://www.ustr.gov/trade-agreements/free-trade-agreements/korus-fta
Office of the United States Trade Representative. Korea. http://www.ustr.gov/countries-regions/japan-korea-apec/korea
The World Factbook. Country Profile South Korea. September 12 2012. https://www.cia.gov/library/publications/the-world-factbook/geos/ks.html
U.S. Department of Commerce. Foreign Trade. http://www.census.gov/foreign-trade/balance/c5800.html