Specialty fabrics industry loses as Congress passes KORUS FTA

15 Oct '11

4 min read

The U.S. specialty fabrics industry, a thriving textile sector in the U.S., took a direct hit Wednesday when the House and Senate majority voted in favor of the Korea-U.S. free trade agreement (KORUS).

Under the win/lose terms of KORUS, South Korean goods will immediately enjoy duty-free entry into the U.S. market; but U.S. exports to South Korea will still be subjected to a 10 percent Value Added Tax (VAT). Through its VAT system, South Korea will be allowed to maintain what amounts to a permanent 10 percent tariff on U.S. exports to their market.

Moreover, South Korea has complete freedom to raise its VAT rate above the current 10 percent at any point in the future. According to Ruth Stephens, Executive Director of the United States Industrial Fabrics Institute (USIFI), "It was a major error on the part of U.S. negotiators not to address this inequity as part of KORUS, as border taxes are a persistent example of foreign practices that place domestic companies at a competitive disadvantage."

USIFI is a division of the Industrial Fabrics Association International, a trade group with over 1,800 member companies which has represented the U.S. specialty fabrics industry for nearly 100 years. The world market for specialty fabrics is estimated at $126 billion in 2011--$29 billion of that in the U.S. In fact, this is one segment of the domestic textile manufacturing base which now thrives thanks to continuous technical innovation.

USIFI commended the 151 House of Representative Members and 15 Senators who understood the serious disadvantage to U.S. manufacturing and voted "no" on the U.S.-Korea Free Trade Agreement (KORUS) last night, Oct. 12, 2011. Both bodies of Congress ratified the agreement; the House vote was 278 to 151 and the Senate vote was 83 to 15.

Unfortunately, says Stephens, no one is looking at the free trade agreement results data. The claim that enormous numbers of U.S. jobs will be created by the passage of this agreement is unfounded, based on government results data collected since past trade agreements such as NAFTA and CAFTA were implemented. Free trade partners can (and do) sell more to the U.S. than vice versa. During the lifetime of the country's existing free trade agreements the U.S. has run a cumulative $2.1 trillion deficit with our free trade partners.

According to Stephens, "The specialty fabrics industry is particularly concerned because Korea has a very sophisticated, vertically integrated industrial textile industry, recently receiving massive government financial support to build extra manufacturing capacity."

The impacts of KORUS on the extended domestic supply chain for coated and laminated membranes used in industrial and military applications such as fuel cells, oil booms, rapidly deployable shelters/tents, radar attenuating covers, safety and protective gear, and many more advanced applications, including automotive fabrics are expected to be extensive.

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