The U.S. free-trade deal with South Korea kicks off Thursday, and American manufacturers like Profile Products are eager to profit from the level playing field.
NEW YORK (CNNMoney) -- When a company in Illinois shipped 800 tons of green, stringy, wood fibers to South Korea on Tuesday, its foreign distributor was slammed with the usual $2,100 tariff.
Starting Thursday, that amount is now zero.
That's because of the long-awaited free-trade agreement between the United States and South Korea which went into effect Thursday. Similar tariffs on 95% of traded goods will be phased out over the next five years, part of the biggest U.S. trade deal since the North American Free Trade Agreement began in 1994.
For small companies like Profile Products in Buffalo Grove, Ill., that means a better chance to compete in the world's 13th largest economy -- and increased sales.
Stronger exports might lead the 200-employee Profile Products to add 10 jobs to plants in Mississippi and North Carolina, CEO John Schoch said. The company creates erosion-controlling substances. With South Korea's many construction projects and increased fixation with golf, which unsettles lots of dirt, erosion has become an issue.
The free-trade deal is encouraging another Illinois company to give South Korea another try.
Sandra Westlund-Deenihan's voice shakes with frustration when she recalls her experience trying to land her first deal there in 2010. Her Schaumburg, Ill., company, Quality Float Works lost out on a $65,000 contract to a large manufacturer because she had to raise prices to accommodate for an 8% tariff. Her German competitors had the advantage of a free-trade deal between South Korea and European Union member nations.
"They were able to compete, and they took my design! I was so mad," she said. "You can't compete when you have 8% tacked on. It doesn't sound like a lot, but people are watching every dollar. And that can separate you from getting the job."
The experience hasn't deterred the family-owned Quality Float Works, which makes floating metal balls used for various purposes in agriculture, plumbing and the oil and gas industry. Westlund-Deenihan and her son have since taken half a dozen trips to South Korea to meet with potential business partners. They haven't initiated any deals yet, though, waiting for the sound of Thursday's starting gun.
But last week she did hire two additional employees to help cut and shape metal sheets and expects to hire up to four more in the next year. The South Korean deal played a significant role in her decision to expand to 26, Westlund-Deenihan said.
"We can certainly compete with other companies as long as we're playing by the same rules," she said. "They acknowledge quality, and it's important to have 'Made in America' stamped on our products. It holds weight."
The free-trade deal is already causing Analytical Graphics in Exton, Pa., to experience increased Korean interest for its software, which models and analyzes space and defense systems. Although it has provided the occasional software license since 1993 to the Korea Aerospace Research Institute, that country's NASA, the firm now does that for several Korean agencies.
"It makes it easier for government agencies in Korea to justify going outside the country to buy products," said Deep Damle, the company's vice president of international sales.
White House analysts have estimated the market for South Korean government contracts at $100 billion.
And Damle said the software designer won't stop there. He expects to take more frequent trips to the city of Daejeon to expand into the civilian contractors market, which helps launch South Korea's satellites.
|AT&T cuts prices again|
|How a marijuana ad went up in smoke|
|Chrysler orders donated Vipers destroyed|
|Boeing reports wing cracks on Dreamliners|
|The bull market at 5: Not old yet|