The United States-Korea Free Trade Agreement (KORUS) and Its Impacts on China's Textile and Apparel Exports to the United States

This study is an empirical evaluation of the impact of the U.S.-Korea Free Trade Agreement (KORUS) on China's textile and apparel (T&A) exports to the United States, with special focus on potential trade diversion effects of the agreement. On the basis of estimated export similarity index and trade elasticity of substitution values for T&A products of China and South Korea, trade diversion caused by the KORUS is predicted to most strongly affect China's apparel exports (in HS Chapters 60-63). The KORUS may also affect China's exports in other T&A categories (in HS Chapters 51, 52, 56, 57 and 59), but results suggest the effects will be limited. This study contributes to understanding the T&A-specific sectoral impacts of the KORUS and suggests a need to reconsider the competitiveness of China's T&A exports in the era following elimination in 2005 of Multi-Fiber Arrangement quantitative trade restrictions.