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

In its report, the ITAC on Distribution Services for Trade Policy Matters (ITAC 5) stated that
the U.S.-Korea FTA contains “a serious deficiency with respect to the rules of origin for
textiles and apparel.” 334 The report stated that the committee opposes the yarn-forward rule
of origin in the agreement, stating that a yarn-forward rule “retards rather than promotes
textile and apparel trade” with U.S. FTA partners. The report added that the FTA contains
no additional flexibility such as a cumulation provision permitting the use of nonoriginating
inputs in the production of qualifying apparel and that the FTA contains a 10-year duty
phaseout for many key apparel categories. The report noted that the United States should
abandon “counterproductive” and “flawed” rules governing trade in textiles and apparel that
hinder trade and investment while doing nothing to improve the competitiveness of the U.S.
textile industry.
The Korea International Trade Association (KITA) in a written submission to the
Commission stated that there is no basis to claims made by the U.S. textile industry that
Korea would sell textiles and apparel in the U.S. market at below-market value following
implementation of the FTA. 335 KITA said Korea’s textile and apparel industry has shifted
from producing low-value, low-quality goods to producing high-end, high-technology, and
high-value-added goods. KITA also said the Korean government has taken steps to ensure
that transshipments of textiles and apparel from China or any other country do not become
a problem for any potential FTA partner. It stated that Korea has in place an advanced
customs administration system to prevent such acts, and is willing to work with the U.S.
government to prevent illegal transshipments under the FTA. In addition, KITA stated that,
upon implementation of the FTA, Korea’s textile exports will not compete directly with U.S.
goods, but with products from third-country markets.
Leather Goods and Footwear 336
Assessment
The U.S.-Korea FTA would likely result in a significant increase in bilateral U.S.-Korea
trade in leather goods and footwear (“leather goods”), 337 but likely have little effect on total
U.S. trade or production of such goods. The average U.S. tariff on Korean leather goods is
8.8 percent, while the average Korean tariff on U.S. leather goods is 6.2 percent. 338 The FTA
334 ITAC (5) on Distribution Services for Trade Policy Matters, Advisory Committee Report,
April 25, 2007.
335 Mun, written submission to the USITC, May 4, 2006.
336 The products covered in this assessment represent 100 percent of U.S. exports to Korea in the GTAP
“leather products” sector and 100 percent of U.S. imports from Korea in the GTAP “leather products” sector
for 2006.
337 Includes leather and leather goods, as well as footwear, travel goods (e.g., luggage, handbags, purses,
wallets, duffle bags, and briefcases), and other articles characteristic of the leather trade but also made from
materials such as textiles and plastics. Included are tanned hides and skins, leather, and composition leather
(HS headings 4104–4115); saddlery and harness (4201); travel goods (4202); articles of leather or
composition leather for industrial and technical uses (4204) or other uses (4205); footwear (HS chap. 64);
watch straps of nonmetallic materials (HS subheading 9113.90); and personal travel sets (9605.00). Excludes
leather apparel (4203), which is included with textiles and apparel.
338 Korea has a uniform “base rate” of duty of 5 percent for tanned hides and skins, leather, and
composition leather of HS headings 4104–4114; 8 percent for travel goods of heading 4202, leather articles
of headings 4201, 4204, and 4205, and waterproof footwear of heading 6401; and 13 percent for all other
footwear of HS chap. 64.
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