By Phil Eskeland
The Foreign Trade Division of the U.S. Census Bureau released the latest monthly trade statistics earlier today, revealing the annualized services trade data for 2017. The news with respect to U.S. trade with the Republic of Korea (ROK) was encouraging. Not only did the U.S. achieve record levels of services exports to South Korea of $23.2 billion in 2017 (on top of the record level in merchandise goods that we learned about last month), but the bilateral trade deficit in both goods and services between the two countries fell 41 percent from 2016 levels. As a result, the U.S. trade deficit with Korea in goods and services declined by $7.3 billion and the ROK fell to 9th place in terms of individual countries with a trade deficit with the United States. In contrast, the overall U.S. trade deficit with the rest of the world went up by 12.6 percent or $63.6 billion, including growing U.S. bilateral goods and services trade imbalances with China, Taiwan, Mexico, Italy, and Germany.
Since the Korea-U.S. Free Trade Agreement (KORUS FTA) took effect, the U.S. trade surplus in services with Korea has increased by 77 percent to a record $12.2 billion, in part, because U.S. service exports to the ROK grew from $16.7 billion in 2011 to $23.2 billion in 2017. One reason for the increase in U.S. service exports is the number of South Koreans who visit the United States continues to grow. International travel is considered a service export, so tourists or business travelers who come from overseas should be encouraged. While the U.S. has experienced an overall 1.8 percent decline in visitors from all over the world (mostly from Mexico, Great Britain, China, and Brazil), South Korea is the one major exception with a 17 percent increase of its citizens travelling to the United States for business or pleasure when comparing the first eight months of 2017 to the same time period in 2016. According to the International Travel and Tourism Office at the U.S. Department of Commerce, the typical South Korean visitor spent an average of $4,370 in the U.S. during 2016. As a result, South Korean travelers contributed $8.6 billion to the U.S. economy, helping to boost U.S. service exports.
Thus, as the Administration considers various trade policy actions that could affect South Korea, it should keep in mind the positive role the ROK has played in alleviating the main concern of President Trump with respect to lowering the bilateral trade deficit in favor of the United States. While there is no guarantee that this declining trend can be continued indefinitely, particularly in light of the tax cuts that were recently signed into law, Korea should be recognized as a strong U.S. ally not just on security matters, but also in the area of trade.
Phil Eskeland is Executive Director for Operations and Policy at the Korea Economic Institute of America. The views expressed here are his own.
Photo from the Republic of Korea’s photostream on flickr Creative Commons.