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

passage. NCTO indicated that, even if these zones were never granted FTA status, the
likelihood exists of significant transshipments from the zones to the United States.
The American Manufacturing Trade Action Coalition (AMTAC), a trade association
representing a wide range of industrial sectors, including textiles and apparel, stated in a
written submission to the Commission that, given Korea’s current capabilities as a major
producer and exporter of industrial goods, the FTA will be a “major blow” to the U.S.
manufacturing base, especially for textiles and apparel. 331 It expressed concern over Korea’s
history of using unfair trading practices and questioned whether U.S. Customs would be able
to monitor and enforce the FTA. According to AMTAC, given Korea’s proximity to China,
where production costs are much lower, China will have an enormous incentive to take
advantage of Korea’s zero-duty access to the U.S. market through illegal transshipments and
false documentation. AMTAC noted that the FTA would present unique concerns beyond
those associated with previous FTAs such as CAFTA-DR, where the free trade partners
generally were apparel assemblers with limited textile capabilities. AMTAC stated that the
FTA would grant Korea immediate duty-free access to the U.S. market for 60 percent of the
textile product categories that it identifies as sensitive, including those covered by the U.S.-
China Textile Bilateral Agreement, threatening both U.S. domestic sales and U.S.
coproduction relationships in the NAFTA/CAFTA region. AMTAC indicated that the FTA
tariff phaseout schedule would likely undermine the U.S.-China Textile Bilateral Agreement
and create increased potential for illegal transshipments in the region. AMTAC also stated
that Korea has limited ability to consume finished goods manufactured in the United States
and that it expects to see a significant increase in the U.S. trade deficit and the loss of more
textile and apparel jobs in the United States as a result of the FTA.
The American Apparel & Footwear Association (AAFA), a national association representing
apparel and footwear companies and their suppliers, stated in a written submission to the
Commission that it supports passage of the FTA but expressed concern that the “restrictive
and cumbersome” rules of origin and “less-than-ambitious” tariff phaseout schedule for
textiles and apparel would provide little incentive to further develop trade with Korea in
textiles and apparel. 332 It noted that “well over one-half” of current U.S.-Korea apparel and
textile trade would receive less than immediate and reciprocal duty-free treatment. AAFA
expressed concern about the FTA short-supply provision, noting that there are currently no
fibers, yarns, or fabrics designated as not commercially available in the FTA region or to
include items already designated in short supply under other U.S. trade programs. AAFA
also noted that the FTA would place quantitative limits on the volume of fabrics and apparel
made of short-supply inputs that would be eligible for FTA preferences. AAFA also
indicated that the absence of “cumulation” provisions that permit integration of inputs among
U.S. FTA partners would limit opportunities to create new markets for U.S. textile and
apparel exports that flow through FTA partners (such as garments made with U.S. fabric in
Guatemala exported to Korea). AAFA viewed the apparel and textile provisions in CAFTA-
DR as a model that would have worked well in the U.S.-Korea FTA because, according to
AAFA, CAFTA-DR provisions are designed to create export opportunities for U.S. textile
firms and provide the region with the tools it needs to effectively compete: cumulation, a
“robust” short-supply list, a single transformation rule of origin for key goods, a yarn-
331 Tantillo, “U.S.-Korea Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects,”
written submission to the USITC, June 27, 2007.
332 Lamar, “Re: U.S. International Trade Commission Inv. No. TA-2104-24 (May 7, 2007)–U.S.-Korea
Free Trade Agreement,” written submission to the USITC, June 27, 2007.
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