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Textile Makers Voice Concern Over US-Korea Free Trade Agreement

James A. Morrissey, Washington Correspondent

Five leading textile and fiber trade associations have expressed their "widespread concern" over the pending free trade agreement (FTA) with South Korea, saying it will open the door for potentially damaging Korean imports and will not create any significant market opportunities for US exports. The US-Korea FTA, negotiated by the Bush administration in 2007, is awaiting further action by Congress and the Obama administration.

The comments by the trade associations were submitted in response to a request from the US Trade Representative (USTR) for stakeholder views on the Korean agreement and those that have been negotiated with Colombia and Panama. US textile manufacturers, for the most part, support the Panama and Colombia agreements.

USTR Ron Kirk said he has received more than 500 comments on the agreements and  that the information will help him determine how to move forward.

The letter to the USTR, signed by the National Council of Textile Organizations, the American Manufacturing Trade Action Coalition, the National Textile Association, the US Industrial Fabrics Institute and the American Fiber Manufacturers Association, expresses concerns about the export potential of a large, integrated Korean textile and apparel industry, the level and timing of tariff cuts in the agreement, the potential for illegal transshipments as a result of ineffective US Customs enforcement and the threat to regional agreements such as the North America FTA, the Central America-Dominican Republic FTA and the agreement with the Andean nations.

"The US textile industry is concerned that Korea, as a top supplier to the US market in more than 20 textile and apparel categories, poses a real threat," the letter says. "Overall, Korea was our sixth largest supplier of textiles and apparel by volume in 2008, and it is our fourth largest supplier of textiles.  These concerns are magnified by the fact that Korea has a proven history of both dumping man-made fiber products in the US market and of transporting goods from China where Korean firms have made significant investments."

The associations also cited a problem with Korea's value-added tax system (VAT), under which US exports must pay a 10-percent VAT at the border on exports entering Korea, while Korean exporters receive a 10-percent tax rebate on their exports to the United States. The associations say this amounted to an $8 billion disadvantage for US producers in 2008.

Textile manufacturers are concerned that tariffs on 87 lines of textile products constituting 50 percent of 2006 trade will be phased out immediately. They say this was agreed to "despite the fact that the USTR knew full well from US International Trade Commission reports and industry advisors that Korea posed a real and immediate threat in these product areas.

"With respect to customs enforcement, the associations say they are concerned whether Customs Service management has the "willingness and determination" to properly enforce textile agreements, saying that the agency has failed to hire additional textile enforcement personnel despite the fact that more positions have been authorized and funded by Congress. The associations say textiles have the highest fraud rate of any industrial commodity, accounting for 40 percent of all trade fraud, and "South Korea has proven to be an epicenter of such activity."

The filing concludes by saying, "We expect to see a significant increase in the US trade deficit and the loss of more textile and apparel jobs as a consequence of this flawed agreement."

September 22, 2009