South Korean FTA Being Reworked

By James A. Morrissey, Washington Correspondent

  US and South Korean trade officials are meeting in Seoul, South Korea, this week in an effort to cobble together a free trade agreement (FTA) that can win approval from the US Congress and Korean farmers. The agreement initialed last month must formally be signed by June 30 in order to be considered under the president’s trade promotion authority, also known as fast track. Under fast track, Congress must approve or disapprove of trade agreements without amending them. It is generally felt the South Korean FTA cannot win approval without being considered under the fast track procedures.

Since the full text of the draft agreement was made public May 24, a wave of opposition has developed from textile, automobile and pharmaceutical manufacturers; rice farmers; and organized labor; among others, in spite of US Trade Representative Susan C. Schwab’s claim that the FTA will “ bring concrete benefits to US manufacturers, service providers, farmers, ranchers and workers as well as the people of Korea.”

At a hearing conducted by the US International Trade Commission (ITC), which is required to assess the potential economics effects of the agreement on the US industry, Cass Johnson, president of the National Council of Textile Organizations (NCTO), warned that US textile manufacturers are “ worried and concerned about a number of aspects of the Korean FTA, and the impact it will have on an industry already under enormous pressure in the global marketplace.” His concerns stem from the fact that South Korea has a well-developed textile industry that enjoys considerable support from its government, and US manufacturers do not expect to have many export opportunities as a result of the agreement. In addition, NCTO believes the FTA could harm existing US business and trade flows from the Central America-Dominican Republic FTA, North America FTA and Andean regions, where US manufacturers benefit from the country-of-origin provisions in those agreements

NCTO is particularly concerned about the fact that tariffs will be removed from a number of sensitive apparel products. Johnson told the ITC that NCTO members were angered to learn that, contrary to past agreements, 87 percent of textile and apparel tariff lines, covering more than 50 percent of 2006 trade, will be given immediate duty phase-outs. The list includes sweaters, brassieres, swimwear, man-made fiber shirts, certain man-made fiber filament and staple yarns, and fabrics and carded cotton yarn.

NCTO also is questioning whether there will be effective Customs enforcement to prevent illegal transshipments from other countries. Noting that funding for Customs textile and apparel enforcement is being reduced, Johnson said: “Customs’ retreat on textile enforcement is especially troubling in regards to Korea, because Korea has been the target of serious Customs enquiries during the recent past and has been a major transshipment point from Chinese products since almost the time since China was first put
under quota over 20 years ago.”

It is unclear at this point whether the negotiators in Seoul will address textiles issues before signing the final agreement.