U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

would “severely damage Wellman” and “the entire national base” of PSF producers. 327 It
noted that this FTA action “disregards, and in effect obviates, a standing antidumping order”
on imports of PSF from Korea and that it “disregards” the U.S. International Trade
Commission’s 2006 sunset review finding on the industry’s continuing vulnerability. 328
Wellman indicated that the FTA would augment Korea’s targeting of the U.S. market for
Korean producers’ excess PSF capacity, particularly because all other significant export
markets maintain effective restraints against these Korean exports. 329 It stated that the FTA
would create a tariff inversion that carries significantly negative, discriminatory effects for
U.S. producers, whereby the FTA would immediately eliminate the U.S. tariff on PSF but
phase out the 6.5 percent U.S. tariff on certain raw materials used in domestic production of
PSF over 10 years; the FTA, however, would eliminate the 5.9 percent Korean tariff on these
raw materials immediately upon its implementation.
The National Council of Textile Organizations (NCTO), a trade association representing
U.S. producers of fibers, yarns, fabrics, and finished textiles, stated at the Commission’s
hearing that the FTA would pose a real threat to the domestic industry, particularly in manmade
fiber yarns and fabrics, knit fabrics, socks, sweaters, shirts, and trousers, and that it
could significantly harm existing U.S. business and trade flows, particularly with CAFTA,
NAFTA, and Andean regions. 330 It noted that the FTA is the first agreement since NAFTA
where the FTA party has a large and developed vertically integrated textile sector that
exports significant quantities of textile goods to the United States. NCTO expressed concern
about the vulnerability of key U.S. textile sectors to dumped and undervalued goods from
Korea, given the “overexpansion” of Korean textile manufacturing capacity, and to
transshipments from China, where Korean textile firms have made significant investments.
NCTO expressed concern that the FTA would give Korea immediate duty-free access to the
U.S. market for many sensitive goods, including sweaters, brassieres, swimwear, man-made
fiber shirts and socks, certain man-made fiber filament and staple fiber yarns and fabrics, and
carded cotton yarn. According to NCTO, while the FTA would provide longer phaseouts for
most heavily traded rate lines providing for goods of a kind subject to U.S. safeguards on
imports from China, 422 of these rate lines would receive immediate duty-free market
access, thereby creating opportunities for Chinese transshipments in these sensitive goods.
NCTO noted that the FTA would include a strict yarn-forward rule of origin with no
loopholes, as well as strong Customs enforcement language, which it said is an essential
element in deterring illegal transshipments. NCTO expressed concern, however, over
whether Customs management has the willingness and determination to properly enforce
textile agreements. It noted that, while the U.S. government did not allow goods from the
industrial zones in Kaesong, North Korea, to gain market access under the FTA, the
agreement would allow for consultations with Korea on future access. NCTO stated that
textile production is a major component of these industrial zones, where, according to
Korean projections, more than 300,000 people will be working within 5 years of FTA
327 Bermish, testimony before the USITC, June 20, 2007.
328 In March 2006, the Commission completed its sunset review of the antidumping order on certain PSF
from Korea and Taiwan, finding that “the domestic industry is vulnerable to the continuation or recurrence of
material injury were the orders to be revoked” (USITC, Certain Polyester Staple Fiber from Korea and
Taiwan, March 2006).
329 According to Wellman, Korea’s PSF is currently subject to antidumping duties of 6.0–13.5 percent in
Japan; 5.7–10.6 percent in the EU; 3.4–32 percent in Mexico; and up to 34.7 percent in China. Bermish,
testimony before the USITC, June 20, 2007, 169.
330 Johnson, testimony before the USITC, June 20, 2007, 176.
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