Abstract

A Study on the Effects of KOREA-USA FTA on the Export of Textiles and Apparel to USA
- Focused on Trade Performance & Analysis of Agreement -

Lee, Suk-dong
Department of International Commerce & Logistics,
The Graduate School, Pukyong National University

Today the world is competitively incorporated in the new world trade order, called "FTA". Aiming at the hub of FTA, Korea entered into FTA agreement with EU in 2011 and USA in 2012, which can be explained as unavoidable step to enjoy the preemption effect.
Facts this paper is trying to demonstrate are that the textiles and apparels in Korea-USA FTA agreement are not "the beneficiary items" and that there are heavy obligations imposed on exporters and so that it is difficult to operate "various systems" in the agreement. Analysis of the trade performance between two countries in two years before and after that FTA agreement show that the fabrics are not the beneficiary items. Unlike most of the previous studies, this paper will focus on the problems of various system.

The first problem is in providing information about fabric production facility of our country. Out of all countries with whom the United States made FTA agreement, Korea ranks the second, after Singapore, for providing information concerning each person engaged in the production textile & apparel goods. Regarding this problem, it is necessary to discuss and either extend or abolish the period of providing the information through the committee on Textile and Apparel Trade Matters that both countries agreed to establish and to review the pending issues about textile and apparel.

Secondly, there is a problem in securing the exceptional quantity of materials to mend for insufficient raw materials of textile.
For the last three years after the agreement, there hasn''t been any discussion about the exceptional materials for insufficient raw materials of textiles from HS 50 to 60 and HS from 61 to 62, even though they agreed to provide for 5 years within annual limit of 100 million SME. The inconsistency was due to complicated domestic situation of each country after the FTA agreement.

Thirdly, there is a problem in permitting the outward processing in Korean peninsula (Gaeseong Industrial Complex). In the agreement, there is a saving clause to discuss outward processing again within 1 year after FTA agreement, but it will be established only after considering the denuclearization progress of North Korea, environment of the outward processing, labor and management conditions, and other situations including international regulations. However, in this case, Korea has to follow the judgment of the United States which is leading the sanctions against North Korea, and even if this is allowed, there are some tasks in proceeding to obtain legislative approval (National Assembly ratification by both countries) for the agreement. It seems like this system was selected to finish the FTA agreement between Korea and the United States faster, and it would be hard to gain the approval due to several conditions such as problems of human rights, denuclearization progress etc.

FTA is just a way to get incorporated in the new world economy order, not the solution. Even in the global FTA era, it is still important to have the competitiveness in exports, managing price, quality, design and the supply chain management to reduce the logistics costs. The implication in this study is that it is necessary to avoid illogical agreement like Korea-USA FTA textile agreement in the future. Finally, this paper intends to emphasize that FTA begins with the principle of reciprocity between both parties, unlike WTO bounded tarrifs that operates on the principle of General Most-Favoured-Nation Treatment, and so that the economic benefits are available only when preemption effects are provided.