As part of a larger trade mission to Southeast Asia, employees from Zions Bank in Utah and Idaho visited South Korea in April. The trade mission was led by Idaho Governor C.D. “Butch” Otter and included representatives from 17 businesses and industries. The mission was a resounding success and offered an informative means to assess business opportunities in that part of the world, along with providing insight into local business practices and government regulations. In addition, it helped Zions Bank expand its personal relationships with the financial institutions there that are part of its correspondent banking network.
Trade with South Korea
As the 15th largest economy in the world and the fourth largest in Asia, South Korea’s GDP grew an impressive 0.9% in the first quarter of this year. Its purchasing power is ranked 12th and it is one of the fastest growing developed countries in the world. In a sign of the strength of its economy, Fitch Ratings Agency recently upgraded its rating for South Korea to ‘AA-’. In recent years, its economy moved away from a centrally planned, government-directed investment model toward a more market-oriented one. In 2009, it was the tenth largest importer in the world and its economy relies heavily on imports, including natural resources.
South Korea was the seventh largest trading partner for the U.S. in 2012, according to Census Bureau data, with exports and imports totaling $101 billion. Idaho exported a total of $600 million to the country in 2012, with computers and electronic products leading the way, followed by food items, machinery, paper, chemicals and agricultural products. Utah’s exports to South Korea totaled approximately $240 million in 2012 and included chemicals, food items, computer and electronic products and transportation equipment.
On a recent visit to the U.S., South Korean President Park Geun Hye said, “Korea is firmly committed to free trade, to economic openness, for creativity can never thrive in a closed economy. We will make the Korea-U.S. alliance even stronger.”
The U.S.-Korea free-trade agreement became effective on March 15, 2012, providing numerous opportunities for U.S. exporters to sell more goods, services, and agricultural products to customers in South Korea. The U.S. International Trade Commission estimates that the reduction of Korean tariffs and tariff-rate quotas on goods has added $10 billion to $12 billion to annual U.S. GDP and around $10 billion in annual merchandise exports to Korea. Industries that export to South Korea include semiconductors, industrial products, food, agriculture, and printing products, according to the Commerce Department. Under the FTA, almost 80 percent of U.S. consumer and industrial product exports to Korea are now duty free, and nearly 95 percent will become duty free within five years, with most remaining tariffs eliminated within 10 years. For agricultural products, the FTA has eliminated tariffs and quotas on a broad range of products, with almost two-thirds (by value) of Korea’s agricultural imports from the U.S. now duty free. U.S. exports, including aircraft, autos, wines, soybeans and orange juice, rose 4.1 percent in the first 12 months after the FTA took effect, according to customs data from the South Korean Embassy in Washington.
The FTA has increased access to the Korean market and ensured that there is greater transparency and fair treatment for U.S. suppliers. The agreement addressed nontariff barriers in a wide range of sectors and includes strong provisions covering competition policy, labor and environment policies, and transparency and regulatory due process. The FTA has also provided U.S. suppliers with greater access to the Korean government procurement market.
The South Korean Financial Services Industry
The relatively young banking sector in South Korea was established in 1950. It has significantly evolved and grown over the last few years through consolidation and mergers. The country currently has approximately 15 commercial banks and a small number of specialty banks, as well as 20 branches of foreign banks. Zions Bank actively forms and maintains strong relationships with Korean banks through SWIFT—a network of participating banks that facilitates the transmission of financial information in a highly secure environment. Letters of credit remain a popular payment instrument and are frequently used for export sales to South Korea. As trade between the U.S. and Korea has increased since the FTA was enacted, Zions Bank has strengthened its commitment to continually update and maintain sufficient correspondent relationships to meet the needs of our business clients. The recent trade mission to South Korea in particular and Southeast Asia in general allowed representatives from the bank to deepen and expand these relationships and to better assess the financial stability of the institutions in the correspondent banking network with which we interact and do business.
Zions Bank’s participation in the trade mission to Southeast Asia serves as yet another example of our commitment to initiating and improving our banking relationships throughout the world. We are constantly looking for ways to better assist the businesses in Utah and Idaho in expanding their export opportunities and improving their profits.