The Republic of Korea – located in the southern half of the Korean Peninsula, bordered by the Sea
of Japan to the east and the Yellow Sea to the west, and conventionally referred to as South Korea
– was the seventh-largest textile and apparel exporter, holding a 2-percent share of the US$527
billion global market in 2009, the Korea Federation of Textile Industries (KOFOTI) reports. The
textile industry is a leading force in Korean economic development and a major source of foreign
exchange earnings.
Industry Profile
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.
Machinery Investments
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.
October/November/December 2011