Senate, House Committees Approve FTAs Following Mock Markups

Last week, the Senate Finance Committee and the House Ways and Means Committee held mock markup
sessions for free trade agreements (FTAs) between the United States and Colombia, South Korea and
Panama. Both committees approved the pacts, which were signed in 2006 and 2007 and are expected to
be submitted by the Obama administration for congressional approval in the near future, but there
is partisan disagreement regarding the issue of whether or not to include within the U.S.-Korea FTA
(KORUS) extension of Trade Adjustment Assistance (TAA) for workers, businesses and farmers impacted
by increased trade.

TAA was created in 1962 and subsequently amended in 1974 and 2002. In 2009, the program was
further expanded as part of the Recovery Act, and the 2009 provisions expired in February of this
year. In negotiations involving the Obama administration and House and Senate leaders to extend
TAA, provisions have been reduced to 2002 levels and in some areas have been reduced even below
those levels, with complete expiration of the program slated at the end of 2014. Democrats in
Congress want to tie the extension to KORUS, while Republicans want TAA to be treated in separate

At the same time, there is widespread bipartisan support for the three FTAs, which are seen
as instruments to increase U.S. export trade, and leaders of both committees have warned that while
the United States delays implementation of these agreements, the U.S. jobs they purportedly will
create will go instead to workers in other countries and regions that have signed FTAs with these
countries — most notably, the European Union, which has just implemented a FTA with South Korea;
and Canada, whose FTA with Colombia will be implemented in August.

The Senate Finance Committee, with its Democratic majority, approved the agreements with the
inclusion of the TAA extension in KORUS; while the House Ways and Means Committee, with its
Republican majority, approved them without the TAA extension, and there was no provision made for
moving TAA forward. Votes in both committees were divided along partisan lines. At present, it is
not clear whether the House will ultimately support the Obama administration’s objective of
presenting a package for approval that includes both the FTAs and TAA.

The U.S. textile industry has issues with KORUS but supports the Colombia and Panama pacts.
The National Council of Textile Organizations (NCTO) has been quite vocal in its opposition to
KORUS, charging that rather than creating jobs in the textile and apparel industry, that FTA will
destroy jobs — as many as 40,000 jobs directly and indirectly tied to textiles and apparel, but
also 159,000 jobs overall — because U.S. and Korean textile products are not treated equally under
the agreement and the removal of certain textile enforcement measures will enable significant
illegal transshipments of Chinese-made goods.

“It is disconcerting that at a time of economic uncertainty that the U.S. Congress is
choosing to move forward on the Korea FTA which is a flawed trade agreement that will cause
significant jobs losses in the U.S. textile and apparel sectors,” said NCTO President Cass Johnson.
“Our industry is one of the few that has continued to add jobs over the last year. The Korea FTA
puts these jobs and future jobs in serious jeopardy,” he said, referring to the 2,500 direct and
7,500 indirect jobs created in the sector in the last year.

“We urge members of Congress who are concerned about textile jobs in their districts to vote
‘No’ on this agreement,” Johnson added.

U.S. retailers and importers have a slightly different viewpoint regarding KORUS, and both
the National Retail Federation (NRF) and the American Apparel & Footwear Association issued
statements supporting all three FTAs and urging quick passage of legislation that would implement

“Making it easier for U.S. companies to export their goods overseas creates U.S. jobs,” said
NRF President and CEO Matthew Shay. “That puts more spending power into the hands of American
families and increases consumer demand in a way that is a win-win for both the United States and
our trading partners. Congress needs to complete work on this legislation and allow these
agreements to take effect as soon as possible to let our business and workers begin to benefit from
their provisions.”

Shay further noted that approval of these FTAs “will break a logjam on trade legislation in
Congress that has blocked a number of other important trade bills from moving forward,” mentioning
in particular renewal of the Generalized System of Preferences program. “We are hopeful that
Congress is ready to become fully engaged on trade and will work aggressively to further expand
trade opportunities and make it easier for retailers to import merchandise to meet U.S. consumer
demand,” he continued.

“The U.S. apparel and footwear industry is able to maintain its competitive edge in the
global marketplace when we reduce barriers to trade,” said AAFA President and CEO Kevin M. Burke.
“Along with the passage of the pending free trade agreements, we look forward to immediate and
retroactive renewal of the Andean Trade Preferences Act (ATA), the Generalized System of
Preferences (GSP), and Trade Adjustment Assistance (TAA). Creating certainty and opportunities for
growth will enable our industry, and the more than one million U.S. workers we employ, to continue
delivering quality, safe, and affordable clothing and shoes to hardworking American families.”

July 19, 2011