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Administration Moving On South Korea Free Trade Pact

James A. Morrissey, Washington Correspondent

As the Obama administration restarts its efforts to get congressional approval of a free trade agreement (FTA) with South Korea, textile manufacturers, workers and their supporters in Congress are calling for major revisions in the pact's textile provisions.

A FTA with South Korea (KORUS) was signed by the Bush administration June 30, 2007, but Congress has never ratified it primarily because of objections from U.S. auto manufacturers and beef exporters. In June of this year, President Barack Obama directed U.S. Trade Representative Ron Kirk to initiate new discussions with South Korea in an effort to resolve outstanding issues. While the primary focus of the new discussions is on beef exports and auto imports, U.S. textile interests are seeking to correct what they say are "damaging errors" where textiles are involved.

A letter to Kirk signed by five textile associations and the labor organization representing textile and apparel workers claims that the textile chapter in the agreement will result in "a massive one-way flow of South Korean textiles, apparel and home furnishings" and will result in extensive job losses.

The organizations zero in on three areas of the KORUS that they say need to be renegotiated - the tariff phase-out schedule, the rules of origin and Customs enforcement.

The organizations say the proposed tariff phase-out schedule is unacceptable, charging that the current agreement "exposes sensitive portions of the textile industry to immediate phase-outs with South Korea, which is simply a recipe for rapid job losses and plant closings in the United States." The letter also charges that the tariff treatments as currently written are non-reciprocal and benefit South Korean producers. The organizations say U.S. textile and apparel tariffs are relatively high and will require a gradual phase-out.

The organizations call for major changes in the rules of origin. They point out that sewing thread, narrow fabrics and pocketing fabrics - all in plentiful supply in the United States - are not covered by the rules of origin. They say allowing these components to be sourced in non-participating countries is a departure from previous agreements.

The organizations contend that the Customs enforcement model is "deeply flawed."  They note that South Korean textile manufacturers have made major investments in Chinese production and that South Korea has "a long history as a transshipment route for Chinese textile and apparel products." This history, they say, calls for rewrite of the customs enforcement provisions in the agreement.

In addition, the organizations say that KORUS will give goods from South Korea duty-free access into the United States while U.S. exports will be subject to a 10-percent value-added tax.

The letter was signed by the American Manufacturing Trade Action Coalition, the National Council of Textile Organizations, the National Textile Association, the U.S. Industrial Fabrics Institute, the American Fiber Manufacturers Association and the Service Employees International Union.

Members of the Congressional Textile Caucus also expressed their concerns about KORUS. A letter to Kirk on behalf of the caucus, signed by the co-chairmen, Rep. John Spratt, D-S.C., and Rep. Howard Coble, R-N.C., stated the existing agreement places domestic manufacturers at "a distinct disadvantage by allowing a massive flow of highly technical industrial textiles from Korea with few opportunities for reciprocal export of U.S. products."

The caucus letter cited the same concerns as the textile organizations outlined with respect to the tariff cut schedule, customs enforcement and the rules of origin, and said: "While we recognize that the current free trade agreement framework was negotiated by the previous administration, we want to voice our strenuous objections to the tariff phase-out schedule. Since the purpose of this agreement is to provide fair and equitable treatment to all parties, the United States simply cannot accept an agreement that places U.S. manufacturers and workers at such a blatant disadvantage."

August 10, 2010

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