California Apparel News

The free-trade agreement between South Korea and the United States still isn’t a done deal, but already the textile provisions are mired in controversy.

Various U.S. textile and apparel manufacturing groups fear Korean yarns and fabrics will flood the American market when tariffs immediately disappear for 60 percent of sensitive textile and apparel products.

In an Aug. 4 letter addressed to U.S. Trade Representative Ron Kirk, six trade groups noted that over the last 40 years, South Korea has developed a sophisticated industrial and apparel industry and is a major textile exporter to the United States.

By volume, South Korea is the second-largest textile supplier to the United States and is the No. 1 provider of combed-cotton yarn, polyester flat yarn and polyester filament fabric, the letter said.

Signatories of the letter—which include the American Manufacturing Trade Action Coalition, the National Textile Association and the National Council of Textile Organizations—are asking that sensitive textile products often produced in the United States should receive the longest tariff phaseouts and that the phaseouts should be reciprocal. They also are asking for strict rules of origin and enhanced customs enforcement to prevent transshipment of goods from countries such as China.

But Julie Hughes, president of the United States Association of Importers of Textiles and Apparel (USA-ITA) in Washington, D.C., is wondering why the textile industry is complaining and why it is bringing up its concerns now.

“We were a bit surprised to see such a negative response to the terms in the Korea free-trade agreement,” she said. “From our perspective, the textile groups have gotten almost everything they wanted in the deal.”

She noted the accord has a yarn-forward provision, put forth by the textile industry, mandating that all yarns used in tariff-free items come from either South Korea or the United States. They cannot come from outside countries, such as China.

Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition in Washington, D.C., said the textile and apparel industries are addressing their issues now because President Obama attended the meeting of world leaders at the Group of 20 in Toronto and announced in late June he wanted to resolve the United States-Korea (KORUS) Free-Trade Agreement by early November and have the pact passed soon after. The free-trade agreement still must be approved by the U.S. Congress and the Korean National Assembly even though President George W. Bush signed it on June 30, 2007.

“We raised these same concerns during the Bush administration,” Tantillo said. “The agreement lay dormant for this two-to-three-year period and wasn’t moving at all until Obama attended the G-20 summit in June.”

Carol Guthrie of the U.S. Trade Representative’s office said the government is consulting with the textile industry “to understand their concerns.”

Beyond textiles

Textiles aren’t the only thing holding up the free-trade agreement. Autos and beef have been the major sticking points slowing the negotiated deal. Many Koreans don’t want to see a flood of U.S. autos and beef entering their market.

Under the free-trade agreement’s provisions, South Korea wouldn’t phase out completely its 40 percent tariff on U.S. beef for 15 years.

And the Korean market would still remain challenging for the U.S. auto industry after years of protective tariffs.

The United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) believes the auto provisions in the free-trade agreement must be renegotiated, considering that Korea sells about 790,000 autos in the United States every year compared with a mere 7,000 U.S. cars shipped to South Korea.

For its part, the textile industry is opposed to the quick tariff phaseout on sensitive goods while U.S. products entering South Korea will still be subject to a 10 percent value-added tax. Textile officials point out that polyester fiberfill coming from South Korea has been subject to an anti-dumping tax for the past 14 years. But under the free-trade agreement, polyester fiberfill entering the United States would not be subject to any tariffs.

“If you have a dumping duty in place, that indicates there has been unfair and illegal trading activity taking place,” said Tantillo, a former deputy assistant secretary of commerce for textiles, apparel and consumer goods under the Bush administration. “Why would you then come in and subsidize and condone that activity to make it even cheaper to ship that product through elimination of the duty? In other free-trade agreements where dumping duties were in place, those products were placed in the most sensitive tariff phaseout schedules, such as 10 to 15 years. That is a blatant illustration of our own government ignoring the reality of what is going on with U.S. manufacturers who are trying to compete with often highly unfair production and export practices.”

Free-Trade Facts bull; The United States-Korea Free Trade Agreement is one of the most significant free-trade agreements signed in the last 16 years because the South Korean economy is so large. Its gross domestic product in 2009 was $1.356 trillion, making it the 14th-largest economy in the world. bull; The Obama administration estimates the free-trade agreement would boost the United States’ gross domestic product by $10 billion to $12 billion a year through increased export of U.S. goods and services. In 2009, the U.S. gross domestic product was $14.3 trillion.bull; Some 96 percent of trade in consumer and industrial products would become duty-free within three years of the free-trade agreement taking effect. Most remaining tariffs would be eliminated within 10 years. However, goods shipped from the United States to Korea would be subject to a value-added tax.