The Impact of Cumulative Provisions of Origin Rule in the EU-Vietnam FTA on the Korean Textile Industry

Abstract

Purpose - The purpose of this study is to estimate how much the Korean textile industry can benefit from the trade creation and diversion effect in the EU market against the market monopoly of Chinese textile products through the conclusion of the EU-Vietnam FTA. Design/methodology/approach - This study examines the textile export competition structure of Korea, China, and Vietnam in the EU textile market by using the Trade Specification Index and the Export Similarity Index. Also, it conducts the in-depth interviews with eight experts in textile-related industry so as to identify expected changes in the international textile production structure. Findings - In terms of trade creation effects, it may form a trade-generating line cycle structure that leads to the export effect on the EU’s textile-producing capital goods, as well as the expansion of Vietnam’s exports of clothing products and South Korea’s exports of textiles and intermediate goods. Furthermore, the trade diversion effect may be able to operate a function that prevents a country’s market monopoly to some extent in accordance with shifted from Chinese textiles that dominated the European low-medium items market to Korean textile. Research implications or Originality - Cross-accumulation is a good way to change the terms of the FTA’s country of origin relatively easily. In this regard, using the cross-accumulation model of the EU-Vietnam FTA, we can consider further cross-accumulation with countries where South Korea and Vietnam have jointly signed FTA.