South Korea: Raising The Textile And Apparel Industry's Standing
South Korea's textile and apparel industry is proliferating and well on its way to becoming a global leader.
Sarah C. Thomasson, Associate Editor
In 2008, 6,035 textile and apparel companies operated in South Korea, accounting for 10.3 percent of the country's total manufacturing activity, KOFOTI reports. The textile and apparel industry employed 174,000 people that year, representing approximately 7 percent of total employees in the manufacturing sector; and produced goods worth US$35.2 million won, accounting for 3.2 percent of the country's manufactured goods.
According to KOFOTI, the country's textile and apparel exports in 2010 totaled US$13.9 billion - representing 3 percent of South Korea's total exports and a 19.5-percent increase over the previous year. In that year, textile material exports increased 39.7 percent to US$1.1 billion; yarn, 34.5 percent to US$1.6 billion; fabric, 18.9 percent to US$8.5 billion; and textile products, 7.8 percent to US$2.7 billion. South Korea's main export market is China, which in 2010 accounted for 19.8 percent or US$2.8 billion of South Korea's total textile and apparel exports. Other significant export markets include Vietnam, which accounted for 11.2 percent or US$1.6 billion of the country's total textile and apparel exports; the United States, 8 percent or US$1.2 billion; and Indonesia, 7.9 percent or US$1.1 billion. Specifically, the country ranks first in knit man-made fiber exports, holding a 16.7-percent global market share; polyester filament fabric, with 27.6 percent; and tire-cord textiles, with 38.2 percent.
South Korea's textile and apparel imports have increased significantly since 1990. In 2010, imports of those items totaled US$9.9 billion - representing 2.3 percent of the country's total imports and a 34-percent increase over the previous year. KOFOTI reports that in that year, textile material imports increased 16.3 percent to US$245 million; yarn, 48.4 percent to US$2.2 billion; fabric, 30.4 percent to US$1.6 billion; and textile products, 30.9 percent to US$5.8 billion. South Korea imports most of its textiles and apparel from China, which in 2010 accounted for 54.2 percent and US$5.4 billion of South Korea's total textile and apparel imports. Other significant import markets include Vietnam, which accounted for 8.6 percent or US$849 million; Indonesia, 4.7 percent or US$471 million; and Japan, 4.1 percent or US$410 million.
South Korea has increased its machinery investments considerably in parallel with its increasing textile and apparel production. The 2009 and 2010 International Textile Machinery Shipment Statistics reports of the Switzerland-based International Textile Manufacturers Federation indicate that the country's imports of short-staple spindles increased 650 percent in 2010 over 2009; false-twist spindles, 380 percent; shuttleless looms, 179 percent; and flat knitting machinery, 101 percent. According to the Association of Italian Textile Machinery Manufacturers, Italy's textile machinery exports to South Korea in 2010 were worth 13 million euros. In the first half of 2011, exports were worth 10 million euros, representing a 90-percent increase over first-half 2010 exports. Statistics from the Swiss Mechanical and Electrical Engineering Industries' Textile Machinery Division show that Switzerland's textile machinery exports to South Korea in 2010 were worth 28.4 million Swiss francs, and in the first half of 2011, exports were worth 13.3 million Swiss francs, representing a 25.6-percent increase over first-half 2010 exports.
The German Engineering Federation (VDMA) Textile Machinery Association reports that Germany's textile machinery exports to the South Korean market are small in comparison to other markets; however, in 2010, those exports increased substantially over 2009. Weaving machinery exports were worth approximately 2.8 million euros in 2010, more than 14 times greater than 2009 exports; knitting machinery exports were worth approximately 17.9 million euros, a 369-percent increase; spinning machinery, approximately 19.7 million euros, a 73-percent increase; and finishing machinery, approximately 12.2 million euros, a 43-percent increase.
Free Trade Agreements
South Korea has been aggressively pursuing free trade agreements (FTAs) in efforts to strengthen international cooperation and trade and to increase its exports. The country has benefited from FTAs signed with the Association of Southeast Asian Nations (ASEAN), European Free Trade Association (EFTA), Chile, Singapore and India. It also has signed FTAs with Peru and the European Union; and is in negotiations to sign FTAs with countries including Canada, Australia, New Zealand, Mexico, Colombia and Turkey. South Korea also is exploring initiating FTA talks with China and re-initiating talks with Japan.
The pending Korea-United States FTA (KORUS) will undoubtedly affect South Korea's textile and apparel industry. Both the U.S. and South Korean governments view the FTA as an extension of an already important economic relationship that would provide a means by which the two trading partners can address and resolve issues. KORUS is the United States' first FTA with a major Asian economy and the first since the North America Free Trade Agreement with a country that has a large developed textile sector that exports significant amounts of textile products to the United States. South Korea is the fifth-largest exporter of textile products to the United States, reports the United States-based National Council of Textile Organizations (NCTO); and the 10th-largest market for U.S. textile and apparel exports, reports the U.S. Department of Commerce's International Trade Administration.
According to the Obama administration, KORUS will strengthen trade and investment ties to South Korea, establish strong enforcement provisions, create export opportunities, support export-related jobs and enhance U.S. competitiveness. The U.S. textile and apparel industry's reaction to KORUS, however, has been mixed. Proponents of KORUS say the agreement would create jobs and reduce trade barriers, making it easier for U.S. companies to export their goods overseas. Opponents charge that rather than creating jobs, the FTA would result in continued outsourcing and destroy jobs, because U.S. and Korean textile products are not treated equally under the agreement and removal of certain textile enforcement measures would enable significant illegal duty-free transshipments of Chinese-made goods. Additionally, KORUS requires the United States to reduce tariffs more quickly than South Korea, and opponents are concerned this does not allow U.S. suppliers the chance to adapt, and would favor the Korean industry in key products.
South Korea President Lee Myung-bak has indicated the agreement is in line with his long-term economic and strategic goals to revitalize the South Korean economy and promote economic growth. KORUS would benefit South Korea by giving it access to a much larger market; allowing its goods duty-free entry into the United States; and helping the country preserve its share in the U.S. market in the wake of growing competition from emerging East Asian producers. KOFOTI expects South Korea's textile exports to increase 25 percent during the first year of the agreement.
KORUS was passed by the U.S. Congress and signed by President Barack Obama in October of this year. President Lee and his country's ruling Grand National Party are attempting to get the FTA bill ratified in the South Korean National Assembly, but face strong opposition from several parties over inclusion of an investor-state dispute settlement provision allowing U.S. investors to file damage suits against the South Korean government under international rather than domestic law. The parties are concerned the provision could counteract laws protecting the socially vulnerable, such as small and medium enterprises, and are requesting that President Lee call on President Obama to begin renegotiations over the issue. As of TW Asia's press time, the bill was deadlocked in the National Assembly.
The Industry's Future
South Korea's textile industry has been facing increased competition in the global textile market, resulting from factors including the end of the global textile quota system in 2005 and recent changes in the global economic environment characterized by escalating raw material prices and the appreciation of its currency, the won, as well as the global proliferation of FTAs. Also, textile industries in developing countries with low labor and production costs are growing rapidly and offering goods at more competitive prices.
Minister of Knowledge Economy Choi Joong-Kyung has announced the 2011 Policy Package to Boost the Textile & Fashion Industry, which is intended to promote the industry through joint private-government initiatives. The plan includes strengthening research and development; increasing manpower; promoting South Korean brands; establishing regional business infrastructures; and taking advantage of FTA opportunities.
KOFOTI Chairman Ro Hee Chan has implemented similar strategic projects for 2011, which include employing new technologies to create value-added textiles for an expanded range of markets; raising publicity of the textile industry domestically; and increasing exports by strengthening international cooperation and trade. KOFOTI anticipates these projects will help the textile industry achieve its 2011 goal of US$15.3 billion in textile exports. South Korea is aiming to become the fourth-largest textile exporter and seventh-largest apparel exporter globally by 2015.
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