U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

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textiles and apparel through 2005. 306 Although Korean production of textiles and apparel declined by 28 percent during the years 2000–2005, the textile and apparel sector is still a key source of economic activity in Korea, generating 9.6 percent of manufacturing jobs (274,000), 4.4 percent of manufacturing output, 4.6 percent of exports ($13 billion), and a trade surplus of $7.2 billion in 2005. 307 U.S. Imports The expected increase in U.S. imports of textiles and apparel from Korea under the FTA will likely be concentrated in man-made fibers and goods made of such fibers, for which Korea is a major world producer 308 and has a “proven advantage.” 309 U.S. tariffs range from 4.3 percent ad valorem for fibers to 8–8.8 percent for yarns, 12–14.9 percent for woven fabrics, 18.8 percent for socks, and 30 percent for sweaters. Korea was the seventh-largest supplier of U.S. imports of man-made fiber textiles and apparel in 2006 with an import share of 3.0 percent ($1.0 billion), but the fourth-largest for man-made fiber textiles (excluding apparel) with an import share of 5.3 percent ($611 million). 310 Korea is a major producer of polyester fibers, especially polyester staple fibers (PSF) and filaments, 311 accounting for 5.6 percent of world output of polyester fibers in 2005. 312 The FTA would immediately eliminate the U.S. tariff on imports of PSF from Korea, although U.S. imports of certain PSF from Korea would still be subject to a U.S. antidumping order, 313 and phase out U.S. tariffs on most polyester-filament yarns from Korea over 10 years. Korea is the largest foreign supplier of these inputs, accounting for 37 percent ($165 million) of U.S. imports of PSF and 24 percent ($33 million) of U.S. imports of nontextured filament yarn, including nontextured polyester filament yarn. The expected increase in imports of PSF and polyester filaments from Korea will likely displace domestic production of U.S. fiber manufacturers, which posted declines in shipments during 2000–05 of 25 percent in PSF, 39 percent in polyester textile filament, and 15 percent in polyester industrial filament. 306 KOFOTI, Textile and Fashion Korea, March 2007. 307 WTO, “International Trade Statistics 2006;” KOFOTI, Textile and Fashion Korea, March 2007; KOFOTI, “Industry Scoreboard,” March 2007; and USDOS, U.S. Embassy, Seoul, “2006 Updated Statistics for Korean Textiles and Apparel Sector (SEOUL 003613),” October 20, 2006. 308 Korea’s Minister of Commerce, Industry and Energy in 1998 introduced the Milano Project, which “offers special supports to research and development in design and apparel as well as yarn, dyeing, fabrication, textile machinery and synthetic fabrics” for the textile industry in Daegu, which reportedly has the largest synthetic fabric production and export complex in the world. Daegu (Korea), City of. “Milano Project.” 309 Korea reportedly has a proven advantage in melt spinning, a method of spinning filaments of manufactured fibers such as polyester. Mauretti, “The Outlook for Technical Textiles Worldwide,” July 13, 2006, 6. 310 The largest sources of U.S. imports of man-made fiber textiles (excluding apparel) in 2006 were China ($5.1 billion), Canada ($1.2 billion), and Mexico ($826 million). International Trade Administration, Office of Textiles and Apparel. 311 The Harmonized System divides man-made fibers into filaments (chap. 54) and staple fibers (chap. 55): Filaments are fibers in continuous lengths (e.g., miles long), while staple fibers are made from filaments cut into shorter lengths, depending on end use (e.g., 2–3 inches in length for blending with cotton). 312 The largest producers of polyester fibers in 2005 were China (51 percent of world output) and Taiwan (8.1 percent). The United States generated 5.5 percent of the world total. Fiber Economics Bureau, Fiber Organon, July 2006, 133. 313 The U.S. tariff on PSF, classified in HTS subheading 5503.20.00 (polyester staple fibers, not carded, combed, or otherwise processed for spinning), is 4.3 percent ad valorem. The U.S. antidumping duty order covers imports from Korea of PSF measuring 3.3 decitex or more in diameter, cut into lengths of one inch to 5 inches, and used as fiberfill in furniture, pillows, comforters, cushions, sleeping bags, and ski jackets. USITC, Certain Polyester Staple Fiber from Korea and Taiwan, March 2006, 3. 3-54
Imports currently supply 41 percent of the U.S. market for PSF. 314 The import share of the U.S. market for polyester textile filament and polyester industrial filament in 2005 was 22 percent and 33 percent, respectively. 315 In fabrics, the expected growth in U.S. imports from Korea will likely be concentrated in knit and woven industrial and specialty fabrics and will likely displace domestic production of such fabrics. Korea was the third-largest source of U.S. fabric imports in 2006 with 11 percent ($953 million) of the total, reflecting significant positions in knit fabrics (27 percent import share or $203 million) and specialty fabrics (13 percent or $116 million). Korean producers reportedly are expanding output of industrial and specialty fabrics that use information technology and biotechnology for use in tire-cord fabrics and engineering, construction, and medical applications. 316 Industrial fabrics include high-strength reinforcements, textile reinforcements, and laminated sheet goods that use the textile reinforcements to make them stronger. The fabrics are used in awnings, tents and mobile shelters, signs and banners, tarpaulins, commercial roofing membranes, health-care mattress and seating covers, truck covers, conveyor belting fabrics for package handling and treadmills, and geotextiles for water-containment linings and erosion control. 317 Regarding apparel, the FTA would give Korea immediate duty-free access to the U.S. market for tariff lines covering 60 percent of U.S. apparel imports from Korea and phase out tariffs on the remaining Korean goods over 5 years (20 percent of total) or 10 years (20 percent). Korea is a key supplier of U.S. imports of hosiery and man-made fiber gloves and shirts. 318 Imports supply approximately 75 percent of the U.S. apparel market by value, based on the landed duty-paid value. A trade source contends that apparel production still based in the United States tends to follow niche domestic markets, to respond to government procurement incentives (e.g., the Berry Amendment), 319 or to serve quick response needs of the domestic market. 320 The expected increase in imports of apparel from Korea under the FTA could displace domestic production slightly, as well as U.S. production-sharing trade with preferential free trade partners, where U.S. and other firms make apparel from U.S. yarns and fabrics and import the apparel into the United States free of duty under NAFTA and CAFTA-DR. 321 314 Bermish, testimony before the USITC, June 20, 2007. 315 Fiber Economics Bureau, Fiber Organon, February 2006, 29. 316 KOFOTI, “Special Report: Korean Textile and Clothing Industry,” March 2007. The “2015 vision plan” introduced by Korea’s Ministry of Commerce, Industry and Energy in November 2005 features the development of advanced industrial textiles. KOFOTI, “Industry Scoreboard,” March 2007. 317 American Manufacturing Trade Action Coalition, written submission to the USITC, April 2006. 318 The “2015 vision plan” introduced by Korea’s Ministry of Commerce, Industry and Energy in November 2005 features the development of infrastructure for digital, intelligent fashion apparel technologies like “smart clothing” that will include state-of-the-art dyeing and processing technologies. KOFOTI, “Industry Scoreboard,” March 2007. 319 The Berry Amendment (10 U.S.C. 2533a) requires the Department of Defense to give preference in procurement to U.S.-made goods, including apparel, tents and tarpaulins, and fabrics, including all fibers and yarns used in them and goods made from them. CRS, “The Berry Amendment: Requiring Defense Procurement to Come from Domestic Sources,” April 21, 2005. 320 Burke, written submission to the USITC, March 24, 2006. 321 One U.S. industry source stated that the FTA would grant Korea immediate duty-free access to the U.S. market for 60 percent of the textile product categories that it identifies as sensitive, including those covered by the U.S.-China Textile Bilateral Agreement, threatening both U.S. domestic sales and U.S. coproduction relationships in the NAFTA/CAFTA region. Tantillo, “U.S.-Korea Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects,” written submission to the USITC, June 27, 2007. 3-55
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U.S. International Trade Commission
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This report was prepared principall
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CONTENTS-Continued Chapter 3. Secto
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CONTENTS—Continued Chapter 5. Imp
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CONTENTS-Continued Chapter 7. Liter
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CONTENTS-Continued Tables—Continu
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Abbreviations and Acronyms 3G third
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Abbreviations and Acronyms—Contin
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Abbreviations and Acronyms—Contin
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vehicles) would likely be diverted
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Sector-specific Assessments The U.S
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total increased fish imports from K
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Korea would likely limit the impact
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Intellectual property rights (IPR):
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sector barriers. 5 These merchandis
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Table 1.1 U.S.-Korea FTA: Location
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Table 1.2 Korean tariff rates on im
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Table 1.4 U.S.-Korea FTA: Summary o
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observed GDP for model regions). Th
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Box 2.1 Interpreting the model resu
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Table 2.1 U.S.-Korea FTA: Simulated
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2-8 This page has been updated to r
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Figure 2.2 U.S-Korea FTA: Simulated
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As shown in figure 2.2, the largest
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2-14 This page has been updated to
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Economy-wide Impact of Implementing
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Grain (Wheat, Corn, and Other Feed
Page 58 and 59: Korea imported 3.8 million mt of wh
Page 60 and 61: U.S. oilseed product exports to Kor
Page 62 and 63: Table 3.2 U.S. oilseed product expo
Page 64 and 65: Table 3.3 Animal feed exports to Ko
Page 66 and 67: consumed domestically by the U.S. l
Page 68 and 69: ates. For corn starch, the United S
Page 70 and 71: quota rates have been effectively e
Page 72 and 73: Noncitrus Fruit 87 Views of Interes
Page 74 and 75: 3-20 Table 3.9 U.S.-Korea trade and
Page 76 and 77: Korean grapes are much more costly
Page 78 and 79: Potato Products 122 Assessment The
Page 80 and 81: ate is 304 percent ad valorem. 141
Page 82 and 83: Other Vegetables 162 Assessment The
Page 84 and 85: U.S. exports of other fresh and pro
Page 86 and 87: tariff concessions that could accru
Page 88 and 89: Dairy Products 215 Similarly, the p
Page 90 and 91: TRQ for food whey, 223 based on cur
Page 92 and 93: potential changes in trade based so
Page 94 and 95: Figure Figure 3.1 Korea: Beef and v
Page 96 and 97: Views of Interested Parties The inc
Page 98 and 99: are subject to the same food safety
Page 100 and 101: enefit under the provisions of this
Page 102 and 103: Box 3.2 Potential price and quantit
Page 104 and 105: 50 percent, while the vegetable jui
Page 106 and 107: and major supplier, and U.S. tariff
Page 110 and 111: U.S. Exports The impact of the FTA
Page 112 and 113: passage. NCTO indicated that, even
Page 114 and 115: In its report, the ITAC on Distribu
Page 116 and 117: of the U.S. footwear market, with C
Page 118 and 119: of these producers. 362 RPFMA noted
Page 120 and 121: prohibit improper inducements by ph
Page 122 and 123: Machinery, Electronics, and Transpo
Page 124 and 125: U.S. exports of auto parts would be
Page 126 and 127: imports from and exports to Korea.
Page 128 and 129: Passenger Vehicles 433 Assessment U
Page 130 and 131: Table 3.16 Korean passenger vehicle
Page 132 and 133: import activities have continued
Page 134 and 135: Box 3.4 Automotive-related FTA Prov
Page 136 and 137: access. The FTA affirms the parties
Page 138 and 139: gaining U.S. market share regardles
Page 140 and 141: keep the products out.” 492 Mr. B
Page 142 and 143: these vehicles to Korea. The commit
Page 144 and 145: Brown expressed concern about the r
Page 146 and 147: goods; and high-technology medical,
Page 148 and 149: device pricing, reimbursement, and
Page 151 and 152: CHAPTER 4 Impact of Market Access P
Page 153 and 154: elative to GDP than do China, Japan
Page 155 and 156: services as a substantial improveme
Page 157 and 158: Box 4.2 Financial services: Competi
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Summary of Provisions Chapter 13 of
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national treatment, full establishm
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Box 4.4 Competitive conditions in t
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and cross-connect links 70 are more
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Box 4.5 U.S. legal services trade w
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establish offices in Korea to provi
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Box 4.6 Competitive conditions in t
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equirements and foreign ownership r
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CHAPTER 5 Impact of Trade Facilitat
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publication and administration of t
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Views of Interested Parties In its
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Summary of Provisions This chapter
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use of TBTs to protect Korea’s au
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conformity assessment procedures el
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FTA Chapter 15-Electronic Commerce
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Views of Interested Parties The U.S
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quantities as to be a substantial c
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that such transshipment could imped
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Box 6.1 Foreign investment in Korea
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in the FTA. The awards made by any
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Table 6.1 U.S.-Korea FTA: Industry
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(ITAC 5) report cited as particular
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Section C of Chapter 11 and the lac
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practices, and violations of consum
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FTA Chapter 17—Government Procure
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Both the United States and Korea ar
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8) 87 also expressed support for th
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Box 6.2 Recent conditions of IPR pr
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protection to life of the author pl
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Views of Interested Parties A numbe
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GPHA stated in testimony before the
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Box 6.3 Labor market conditions in
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FTA Chapter 20—Environment 131 As
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trade measures are the least disrup
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FTA Chapter 22-Institutional Provis
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Views of Interested Parties The Ind
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CHAPTER 7 Literature Review and Sum
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7-3 Table 7.1 Model, liberalization
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terms. Much of the increase in U.S.
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Liberalization generated small incr
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Sander Levin, Member of the U.S. Ho
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Regarding footwear and travel goods
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Korea’s establishment as a region
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The California Table Grape Commissi
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order activity, and facilitate expa
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At the Commission’s hearing, Mr.
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Information Technology Industry Cou
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With respect to tariff and nontarif
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deterring illegal transshipments. I
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PhRMA identified what it views as t
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the TIA stated that it supports the
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access to the market. The Council a
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United States, Spain, Chile, Brazil
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Bibliography Advanced Medical Techn
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AT&T. “AT&T Reaction to Free Trad
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______. “Korea-U.S. Free Trade Re
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______. “Country Finance: South K
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Global Trade Information Services I
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International Labor Organization (I
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Jones, Laura E. Executive Director.
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Lee, Hyunok, and Daniel A. Sumner.
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Nam, In-Soo. “Helio's Losses To W
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Powers, Mark. Northwest Horticultur
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Smith, Brad. American Council of Li
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U.S.-Korea Business Council (USKBC)
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______. “Korea, Republic of Oilse
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U.S. International Trade Commission
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Ward, David. American Council on Ed
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APPENDIX A Request Letter from USTR
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APPENDIX B Federal Register Notices
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pwalker on PROD1PC71 with NOTICES 2
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APPENDIX C Hearing Participants
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ORGANIZATION AND WITNESS: PANEL 1 (
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APPENDIX D U.S.-Korea FTA: Chapter-
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fees and charges on trade in goods
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determines the tariff classificatio
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The transparency provisions would a
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necessary duties within 1 year of i
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technical regulation or conformity
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procedures), and practices of a par
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aviation, fisheries, or maritime ma
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of standards and criteria and on te
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of the FTA that impose unilateral o
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use of electronic authentication in
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parties’ rights and obligations u
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establishment of Uniform Domain-Nam
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government to take appropriate meas
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environmental laws. 102 In the U.S.
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not limited to, policies on commerc
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Economic indicators 2002 2006 Popul
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Table E.1 Leading U.S. exports to K
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APPENDIX F GTAP Model
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Updating the GTAP Database The curr
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Key Assumptions Agency. 4 The price
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Table F.2 U.S.-Korea FTA benchmark
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Measuring the Impacts of the FTA an
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General Effects of Trade Agreements
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APPENDIX H Tariff Equivalents in Ko
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Previous Literature The method for
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For the purposes of this report, a
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Table H.1 Tariff equivalents in Kor
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APPENDIX I Services Nonconforming M
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Table I.1 U.S.-Korea FTA: Korean se
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APPENDIX J Description of Possible
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are in effect import prices, and th
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APPENDIX K Overview of Agricultural
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Additionally, although current regu
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About This Report The United States
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U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

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