Korea-U.S. FTA a boon to airline, textile industries

Increase in trade volume to boost air cargo revenue; removal of high tariffs on textiles to help raise market share


The airline and shipping industries are among those expected to benefit the most from the free trade agreement between Korea and the United States due to an increase in two-way cargo shipments.

The FTA will also be a boon to the Korean textile industry, mostly made up of small and medium-sized businesses, as the U.S. tariff on textiles, which goes up to 32 percent, will be removed.

America’s average import duty is 1.5 percent, but the average tariff for textiles is 13.1 percent.

“Because we will have cost-competitiveness against our rivals Taiwan, China and Japan, the FTA will not only increase our exports but also enhance our brand image,” an official at the Korea Federation of Textile Industries said.

“The domestic textile and apparel industry will shift to a more high value-added production system that relies more on industrial textile products thanks to the Korea-U.S. FTA.”

According to analyses by state-funded think tanks in August, the textile industry will see an annual average trade surplus of $81 million over 15 years once the FTA takes effect, with exports increasing $105 million and imports gaining $24 million on average each year.

The Korea Institute for Industrial Economics and Trade projects that under the free trade pact, Korea’s textile exports to the United States will surge by an annual average of $183 million for the next 10 years, while imports should rise by $25 million.

Key export items to the United States include knitwear such as sweaters, socks, synthetic resin and men’s shirts. Major import items are synthetic fiber materials such as cellulose acetate and animal fiber materials.

Korea’s textile exports to the United States last year amounted to $1.22 billion and imports $360 million, recording a trade surplus of $850 million.

Textile exports to the United States have decreased from $4.31 billion in 1989.

After the removal of textile quotas in 2005, competition with Chinese, Turkish and Indian companies intensified. Korean-made textiles’ market share in the U.S. shrank from 1.8 percent in 2006 to 1.4 percent in 2007, 1.2 percent in 2008, 1 percent in 2009 and 0.9 percent last year, according to the U.S. Department of Commerce.

Air carriers and shipping companies are upbeat about the anticipated increase in trade volume between the two countries, although they were cautious in giving actual estimates.

“We expect the demand for air cargo to increase as the FTA will expand the trade volume between Korea and the United States,” a Korean Air official said.

“But as for now, it is difficult to project how much.”

The Incheon International Airport Corporation forecast air cargo shipments to the U.S. to increase by 2.6 percent next year.

Korean Air is likely to benefit from the FTA more than Asiana Airlines as air cargo to the U.S. takes up a much bigger share compared to that of Asiana’s.

Korean Air’s cargo volume from Korea to the United States amounted to 84,579 tons last year, and 69,063 tons from the United States to Korea.

North American destinations accounted for 42 percent of Korean Air’s cargo revenue last year.

By Kim So-hyun (sophie@heraldcorp.com)