California Apparel News

Passage of free-trade agreements with South Korea, Colombia and Panama had been expected to be approved by Congress before recessing for summer vacation Aug. 8. But now that is in doubt.

Several factors are clouding quick passage of the three free-trade pacts, which have been languishing for several years over cantankerous issues that range from beef and auto imports to labor concerns.

Even though most of these concerns have been resolved, one major hurdle is passage of the Trade Adjustment Assistance program, a $1 billion retraining program for U.S. workers who may lose their jobs because of these new free-trade agreements.

The Obama administration is pushing hard to reinstate this retraining program, which expired in February, before the free-trade agreements move forward. But Republicans have shied away from the retraining program’s expensive price tag, especially during a time of pinched budgets and debate over the nation’s debt ceiling.

“The only thing that is hanging them up [from] moving everything forward is the TAA [Trade Adjustment Assistance],” said Cass Johnson, president of the National Council of Textile Organizations, a trade group in Washington, D.C. “But reports have been positive in the last week that it is close to being resolved.”

Once a retraining program is back on firm ground, the free-trade pacts will be sent to the Senate Committee on Finance and the House Ways and Means Subcommittee on Trade, where final adjustments are to be made in a process called mock markups. These are committee debates, usually taking one week, on any changes that need to be made to the agreements. “If any member of Congress has an idea about what should be tweaked, this is their chance to do it,” said Brenda Jacobs, a trade-law and policy expert at law firm Sidley Austin in Washington, D.C.

The free-trade agreements would then be sent to the White House, which would probably introduce them as a package to the House and Senate for an up-or-down vote, meaning there would be no further debate on them.

At the earliest, introduction could be made sometime in early July, but the Senate is on break July 4–10, and the House is in recess July 18–24.

Still, some are optimistic that something can be done by the end of July. “I think there is enough time to get them passed by the August recess,” noted Nicole Bivens Collinson, president of trade and legislative affairs at the Washington, D.C., office of law firm Sandler, Travis & Rosenberg. “I may be a lone ranger, but I believe it is still possible.”

Sidley Austin’s Jacobs is more cautious. “September is a safer bet, but clearly the goal is to get this done by recess or at least introduce it,” she said.

For Julie Hughes, president of the U.S. Association of Importers of Textiles and Apparel, July is looking iffy. “I would be shocked if it is passed by the end of July,” she said. “I think they will take it up this year but not sure they will do it this summer.”

U.S. Trade Representative Ron Kirk has been circumspect about the trade agreements’ timetable, but he has insisted the Obama administration is pushing for their passage.

Kirk, speaking June 20 in Baltimore at the annual U.S. Conference of Mayors, said he felt the job-retraining program was close to being resolved, which was crucial for moving forward.

Carol Guthrie, a spokesperson for the Office of the U.S. Trade Representative, said the office is “working steadily with our partners in the House and Senate toward the informal markups that need to be held before the Korea, Panama, and Colombia agreements are formally submitted.”

Once the final trade agreements are submitted, Congress has 90 days to approve or reject them.

Friends with trade benefits

While most of the action is playing out in Washington, D.C., government representatives have been on the road assuring the business community that the Obama administration is definitely backing these agreements.

Bryant Trick, the USTR’s deputy assistant trade representative for Korea, and Joshua Pierce, Korea desk officer at the U.S. Department of Commerce, were in Torrance, Calif., on June 16 to address members of Women in International Trade. The following day, they talked at a gathering at law firm Bryan Cave in downtown Los Angeles.

The two primarily discussed the benefits of the U.S.-Korea Free Trade Agreement and how U.S. exports to South Korea, our seventh-largest trading partner, would increase by $9 billion to $11 billion a year.

The United States used to be South Korea’s No. 1 trading partner, but since 2003, the United States has fallen to fourth place, after China, Japan and the European Union.

Under the Korea free-trade agreement, 95 percent of the tariffs imposed by the United States and South Korea would be eliminated immediately. This is good news for U.S. textile importers because South Korea is a major fabric producer and a top supplier to the United States, ranked No. 2, behind China.

Last year, apparel manufacturers brought in $460.2 million of Korean fabric, compared with $1.14 billion in Chinese fabric.

The Colombia free-trade agreement would be a boon for apparel importers as well as exporters. Over 80 percent of U.S. exports of consumer and industrial products to Colombia would become duty-free immediately, with remaining tariffs phased out over 10 years.

Colombia has the third-largest economy in Central and South America, and the free-trade agreement should increase U.S. exports by $1.1 billion.

Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association in Arlington, Va., notes that Colombia is a great sourcing location for U.S. companies because of its history of apparel production and proximity to the United States.

“Of all the countries in that region, they probably have the most sophisticated needle,” he said. “Colombia is an option to China.”

Colombia’s free-trade agreement got a clearer path to passage after U.S. Trade Representative Kirk announced recently that the South American country had met certain milestones to address labor concerns and protect labor leaders. Colombia established a law setting criminal penalties for employers who undermine the rights of workers to organize and bargain collectively or who threaten workers’ labor rights and progress toward hiring 100 new labor inspectors. Colombia has promised to hire an additional 380 labor inspectors by 2014.

Panama’s free-trade agreement would see 87 percent of tariffs eliminated immediately, with the rest phased out over 10 years.