The Proposed U.S.-South Korea Free Trade Agreement (KORUS ...

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free. The average applied U.S. MFN tariff on apparel imports is 11.5% with a
maximum tariff of 32%, and 3.3% of the tariff lines entering duty free. 71
The average South Korean applied tariff on textiles is 9.2% with a maximum of
13% and 0.3% of tariff lines entering duty free. The average South Korean tariff on
apparel is 12.6% with none entering duty free and with a maximum tariff of 13%. 72
The KORUS FTA, would eliminate South Korean tariffs immediately on 77% (by
value) of U.S. exports of textiles and apparel and would phase out tariffs on 13%
over three years and the remaining 10% over five years. 73
The KORUS FTA, with some exceptions, would use the yarn-forward rule of
origin for apparel imports; that is, apparel made from yarn or fabric originating in
either the United States or South Korea would be eligible for duty-free treatment
under the FTA. The FTA also includes a special safeguard provision whereby, if
imports of textiles or wearing apparel to one KORUS FTA partner country from the
other increases at such a rate as to cause or threaten to cause serious injury to the
domestic industry of the importing country, the importing country can suspend
further reduction of tariffs, or it can increase the duty on the imported product to (the
lesser of) the MFN rate applicable at the time the action was taken or the MFN duty
that was in force when the FTA went into effect. The safeguard action can be in
place for two years with a possible extension of two years but no more than a total
of four years. However, the importing country will have to compensate the exporting
country by making additional trade liberalizing concessions equivalent in value to the
additional duties expected to result from the safeguard action. The concessions
would be limited to textiles and apparel unless the two countries agree otherwise.
The USITC has estimated that, if implemented, the KORUS FTA would over
time lead to an increase in U.S. imports of South Korean textiles of $1.7 billion
to$1.8 billion and of apparel of $1.0 billion to $1.2 billion, with the major portion of
the increase being diverted from other countries. The USITC also has estimated that
KORUS FTA would lead to an increase in U.S. exports of textiles of $130 million
to $140 million and of apparel of $39 million to $45 million to South Korea. 74
The KORUS FTA would allow some fibers, yarns, and fabrics originating out
side of the United States and South Korea to become eligible for preferential
treatment if the product is not available domestically in commercial quantities in
either country. The agreement also provides for the establishment of a Committee
on Textile and Apparel Trade Matters to raise concerns under the FTA regarding
mutual trade in these products.
The textile and apparel industry appears split on their views of the KORUS FTA
according to the Industry Trade Advisory Committee on Textiles and Clothing
71 World Trade Organization. Tariff Profiles 2006. Located at [http://www.wto.org].
72 Ibid.
73 USITC. p. 3-52.
74 Ibid. p. 3-53.