Capital Press

South Korea has been a bright spot in the U.S. dairy industry's export portfolio, and a new trade agreement with the country is expected to raise the bling factor.

The agreement to end some tariffs upon implementation and phase out others over 10 years was ratified by South Korea's National Assembly on Nov. 22.

"The date of the first tariff reduction is likely to be the first of the year," said Tom Suber, president of U.S. Dairy Export Council.

The pact with South Korea will bring another $380 million annually in dairy exports and add as many as 10,000 jobs, he said.

With South Korea's population, income and export growth potential, greater access to that market is a real prize, he said.

South Korea has 49 million consumers and a $1 trillion economy.

For the last 15 years, USDEC has been investing effort and checkoff dollars to court the South Korean market, and the growth in dairy exports has been strong, he said.

In the first nine months of this year, U.S. dairy sales were $174 million, up 85 percent from the same period in 2010. Sales for the entire year are on pace to approach $240 million, according to USDEC.

Cheese sales more than doubled this year, and the U.S. is Korea's top supplier with a share of 45 percent of the market. The U.S. is also the country's top supplier of whey proteins and lactose.

Despite South Korea's tariffs on U.S. dairy products at 36 percent, U.S. sales there are booming, said John Kelly, manager of international affairs for International Dairy Foods Association.

"It's been a significant market for a number of years," he said.

Korea's domestic dairy production was unable to supply its domestic market even before the 2010-2011 epidemic of foot and mouth disease reduced its herd, he said.

The free trade agreement is only going to build on the success the U.S. dairy industry has seen in Korea, he said.

That success has come from USDEC's long-term, integrated, market-development programs executed collaboratively with U.S. processors, Les Hardesty, a Greely, Colo., dairyman and chairman of USDEC, said in a press release.

A decade ago, dairy consumption in South Korea was rare, U.S. suppliers had little distribution in the country and awareness of the U.S. as a supplier was almost nonexistent, he said.

Shortly after USDEC was founded in 1995, the organization opened an office in Seoul. At that time, exports to the country averaged only $30 million a year.

"Our biggest obstacle wasn't just competition from other suppliers, it was also the historic lack of dairy in the diet," Suber said.

The road to raising consumer demand began with education programs, public relations, seminars and trade shows in South Korea. Since then, USDEC has conducted market research, product promotions, market access assistance and trade policy advocacy to continue the growth.

"The growth of the Korean market is a culmination of more than a decade of USDEC activities and with the newly passed free trade pact, prospects for continued growth look bright," he said.

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