Negotiators Reach Agreement On KORUS Trade Pact； Textile Groups Express Concerns

On Friday, December 3, United States Trade Representative (USTR) Ron Kirk and South Korean Minister for Trade Kim Jong-hoon concluded negotiations on the U.S.-Korea Free Trade Agreement (KORUS), with Kirk stating: "We've made substantial progress in our discussions. It's time now for the leaders to review this progress before we move forward."

According to the Obama administration, the agreement is expected to boost U.S. exports by $10 billion to $11 billion and support 70,000 U.S. jobs. While U.S. auto makers have been singled out among the beneficiaries of the pact, the manufacturing sector as a whole stands to benefit from the elimination of tariffs on more than 95 percent of industrial and consumer products within five years of ratification of the agreement. Customs enforcement and rules of origin — points that have been of major concern to the U.S. textile industry — are also addressed, according to USTR spokesperson Carol J. Guthrie.

"Under the agreement, many textile tariffs are eliminated immediately in the US and in Korea. There is a 10-year timetable for phaseout of duties for U.S. imports of some sensitive textile products," Guthrie stated, noting that the schedule is in line with timetables for other manufactured goods. "In addition, the agreement contains a special textile safeguard allowing the United States to re-impose tariffs on certain goods should Korean textile import surges damage/harm domestic producers. The agreement also contains strict customs enforcement provisions. U.S. and Korean customs authorities are authorized to undertake a variety of enforcement actions where textile exporters are breaking the rules — up to and including denying entry for suspect goods. Finally, the agreement contains stringent rules of origin," she concluded without providing details of those rules.

However, the protections described by the Office of the USTR are relatively general in nature, and organizations representing the U.S. textile industry are concerned that certain specific provisions they had requested for inclusion may not be included in the agreement that will be presented to Congress. With regards to duty phase-outs for sensitive textile products, these groups charge that 60 percent of these products will become duty-free immediately and only 10 percent of these products are scheduled for a 10-year tariff phase-out period. There also are concerns that the customs enforcement language will not adequately protect the U.S. textile industry from fraudulent activity, particularly activities such as transshipments of Chinese goods through South Korea.

The final text of the agreement that is posted on USTR's website dates from 2007, when the original agreement was written, and there was no clarification from USTR about the inclusion of the specific provisions requested by these groups as of the publication deadline for Textile World 's e-newsletter for December 7.

In a statement provided by the American Manufacturing Trade Action Coalition (AMTAC), the organization said that based on the information that is currently available, including reports that only the automotive provisions of KORUS have been modified, it would have to oppose agreement.

"AMTAC will obviously study the final text, but, if the flaws that industry identified in the agreement were not fixed, then this deal could offshore tens of thousands of additional U.S. manufacturing jobs," said Auggie Tantillo, AMTAC's executive director.

National Council of Textile Organizations (NCTO) President Cass Johnson also expressed concerns about the strength of the provisions related to textiles. He noted that there is a general lack of support and manpower to adequately enforce U.S. Customs regulations, and said rules of origin — which he said are generally in compliance with textile industry requests — still must be enforced by Customs. He also mentioned that KORUS is the first agreement negotiated by USTR that provides for immediate duty phase-outs of the majority of sensitive products, and pointed out that higher tariffs generally for textiles and apparel compared with most manufactured products make the called-for immediate phase-outs "a much bigger hit, particularly when the product is sensitive."