Bureau of Economic, Energy and Business Affairs

1. Promoting Free Trade in a Challenging Time Erik J. Magdanz East Asia Trade Policy Bureau of Economic, Energy, and Business Affairs U.S. Department of State Bureau of Economic, Energy and Business Affairs U.S. Department of State

2. Benefits of Free Trade Agreements • Opening vital new export markets for American goods and services and level the playing field. • Strengthening economic opportunity, prosperity, and security. • Supporting democracy, good governance and rule of law. • Promoting strong labor and environment standards.

3. U.S. Export Growth: 2003 - 2007 (in billions) (in billions)

4. No Correlation Between Imports & Unemployment

5. Michigan Exports by Country

6. Michigan Exports by Product

7. U.S. Free Trade Agreements since 1994 • NAFTA – U.S./Canada/Mexico (1994) • U.S. – Jordan (2001) • U.S. – Australia (2001) • U.S. – Chile (2001) • U.S. – Singapore (2004) • U.S. – Bahrain (2006) • U.S. – Morocco (2006) • U.S. – Oman (2006) • U.S. – Peru (2007) Pending: • FTAs with Colombia / Panama / South Korea

8. U.S. FTA Partners in the Global Economy Percent of U.S. Exports, 2006 Percent of World GDP, 2006 To FTA Countries: 42.6% FTA Countries: 7.5% To Non-FTA Countries: 57.4% Non-FTA Countries: 92.5%

9. U.S. Trade with South Korea $48 billion Imports from Korea (in millions) $35 billion U.S. Exports to Korea

10. The U.S.-Korea FTA (KORUS) • Economic Opportunities: • Over the past 10 years, Korea’s average annual growth rate for trade has been 12.5%. • U.S. exports to Korea grew to $35 billion in 2007, a 53% increase over 2002. • KORUS FTA Eliminates Tariffs and Increases Access: • Nearly 95% of trade on consumer/industrial products duty-free within 3 years. Korea’s current applied tariffs on industrial goods average 6.2 percent while the U.S. is at 2.8 percent. • More than two-thirds ($1.9 billion) of U.S. farm exports duty-free immediately. • Increased access for U.S. autos • Geopolitical: Korea is a vital regional ally. The FTA would underscore the United States commitment of promoting strong economic growth in the region.

11. The KORUS FTA and Autos • Eliminates Korea’s 8% tariff on U.S. vehicles, reducing price of the average U.S. car in Korea by $4,000 to $7,500. • Eliminates discriminatory aspects of Korean auto taxes on the basis of engine size that disproportionately affect U.S. autos. • Ensures Korea will not adopt technical regulations that create unnecessary barriers to trade and will harmonize standards. • Creates an expedited dispute settlement mechanism, under which the U.S. tariffs on Korean cars – about $220 million in 2006 – will snap back if Korea violates any FTA provision. • In response to U.S. automakers, addresses several specific non-tariff barriers including vehicle emissions and safety standards.

12. Auto Imports See Significant Growth in Korea Other Auto-Related Information: • GM-Daewoo currently has 14% of the domestic auto market in Korea (approx. 140,000 autos/year). • Hyundai and Kia Motors investing $2 billion to build auto plants in Alabama and Georgia. Each plant to employ 2,000 workers and produce 300,000 cars/year.

13. United States Singapore Brunei Chile New Zealand Trans-Pacific Economic Partnership • TransPac Negotiations to Launch in early 2009

14. U.S. Trade with China

15. U.S. Trade with China $330* $321 (in billions) $288 $243 -$256 -$253* -$233 $197 -$204 (in millions) Growing Exports Positively Impacting Trade Deficit Imports from China -$163 $78* $65 U.S. Exports to China $55 $41 $34 * estimated

16. South Korea’s KOSPI Stock Index

17. China’s Shanghai Composite Index

18. Promoting Free Trade in a Challenging Time Erik J. Magdanz East Asia Trade Policy Bureau of Economic, Energy, and Business Affairs U.S. Department of State Bureau of Economic, Energy and Business Affairs U.S. Department of State