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

U.S. Exports
The impact of the FTA on U.S. exports of textiles and apparel to Korea, while large in
percentage terms, would likely be small in absolute terms. The Commission’s economy-wide
analysis of the long-term effects of tariff and TRQ liberalization estimates that U.S. exports
to Korea could increase by $130–140 million (85–92 percent) for textiles and by
$39–45 million (125–147 percent) for apparel. These results partly reflect the small volume
of U.S. exports of textiles and apparel to Korea ($150 million in 2006) and Korea’s small
share of U.S. exports of textiles and apparel (1.1 percent). 322 In addition, U.S. exports of
textiles and apparel to Korea face intense competition from China, which supplied 58 percent
($3.7 billion) of Korean imports of textiles and apparel in 2005. 323 U.S. textile industry
sources said they do not expect that the FTA would generate significant new export business
with Korea because consumers there have limited ability “to purchase finished goods made
in countries that pay high wages and have strong environmental, labor, and safety and health
standards” and because the textile sector there has historically benefited from extensive
support from its government. 324 The expected increase in U.S. exports of textiles and apparel
to Korea under the FTA is likely to be concentrated in goods for which the U.S. industry is
competitive, including certain man-made fiber filament yarns and tow; industrial and
specialty fabrics, including nonwoven, coated, and knit fabrics; and popular brand-name
apparel.
Views of Interested Parties 325
In its report, the Industry Trade Advisory Committee (ITAC) on Textiles and Clothing
(ITAC 13) stated that its members did not make a unified statement in support of or in
opposition to the U.S.-Korea FTA. 326 The report noted that the members representing textile
firms generally support the rules of origin for textiles and apparel under the FTA because the
rules would “ensure that the benefits of the agreement flow mainly to the signatory parties.”
The report stated, however, that these members expressed concern about the immediate
elimination of U.S. tariffs on numerous “sensitive” goods. The report added that the textile
members expressed concern about the ability of Customs to properly enforce FTA provisions
relating to transshipments, given Korea’s proximity to China. The report stated that the
members representing U.S. apparel firms that source and market globally expressed concern
that the FTA does not grant immediate duty-free treatment to all textile and apparel articles
and that the FTA rules of origin do not provide for sufficient flexibility to generate and
sustain trade and investment with Korea.
Wellman, Inc., Fort Mill, SC, a producer of PSF, stated at the Commission’s hearing that the
immediate elimination of the U.S. tariff on PSF (4.3 percent ad valorem) under the FTA
322 U.S. exports to Korea in 2006 consisted mostly of textiles ($99 million). U.S. apparel exports to Korea
rose rapidly from a small base during 2000–06 to $51 million; they included leather apparel, knit wool
blazers, and woven cotton pants.
323 Data on China’s share of Korea’s imports is from the WTO, “International Trade Statistics 2006.”
324 Johnson, testimony before the USITC, June 20, 2007, 176; and Foody, testimony before the USITC,
April 20, 2006, 35.
325 The views of the Travel Goods Association on textile travel goods (e.g., luggage) are presented in the
assessment for “leather goods and footwear” in this chapter of the Commission’s report.
326 ITAC (13) on Textiles and Clothing, Advisory Committee Report, April 27, 2007.
3-56