I thank the gentleman for the time. Every time a President, Democrat or Republican, asks Congress to approve a trade deal, they give us these wild optimistic projections for how many jobs these deals are going to create. Sadly, this…
I thank the gentleman for the time.
Every time a President, Democrat or Republican, asks Congress to approve a trade deal, they give us these wild optimistic projections for how many jobs these deals are going to create.
Sadly, this administration is no different. President Obama has suggested that the Korea free trade agreement will create 70,000 new jobs. The record shows just how wrong that claim is.
In the 1990s, President Clinton suggested that NAFTA would create over 200,000 jobs. Well, here's the reality: Since NAFTA passed in December 1993, America has lost 5.15 million jobs. Lost 5.15 million manufacturing jobs. And 384,000 of these jobs were lost in my home State of North Carolina.
In 2005 President Bush claimed that CAFTA was a ``pro-jobs bill'' that would stem the tide of U.S. manufacturing job losses. But since CAFTA passed in September of 2005, America has lost 2.4 million manufacturing jobs.
Here we have roughly 9.1 percent unemployment in this country, due in no small part to the Washington elite jamming these job-destroying trade agreements down our throats.
Americans do not want more ``free trade.'' A recent NBC-Wall Street Journal poll showed that 69 percent of the American people believe that free trade has cost American jobs. The poll shows that 61 percent of Tea Party supporters believe that trade agreements have hurt this Nation.
It's time we started listening to the will of the American people and doing what is in the best interests of the American people, not in the best interests of the foreign nationals who desperately want to take our jobs.
Madam Speaker, I hope my colleagues on both sides of the aisle will show their true American colors and vote ``no,'' ``no,'' and ``no'' on these three trade agreements.
Madam Speaker, I would like to insert into the Record two letters opposing the Korean free trade agreement, one from the American Manufacturing Trade Action Coalition and another from the United States Industrial Fabrics Institute.
American Manufacturing
Trade Action Coalition,
October 7, 2011.
AMTAC Urges ``No'' Vote on KORUS
Dear Member of Congress: The American Manufacturing Trade
Action Coalition (AMTAC) urges you to vote NO on the U.S.-
South Korea Free Trade Agreement (KORUS). The agreement was
submitted to Congress on October 3, and a vote is expected in
both the House and Senate on Wednesday, October 12.
AMTAC strongly opposes KORUS for three main reasons:
the agreement is flawed in concept;
the terms of the agreement are unfavorable to key
industries such as textiles; and,
the textile and apparel provisions in the agreement are
unlikely to be adequately enforced.
These problems are why as many as an estimated 40,000 U.S.
jobs are expected to be lost in the first seven years after
implementation just as a result of textile concerns with the
agreement.
If Congress is serious about creating jobs, passing trade-
law enforcement measures like the stalled anti-currency
manipulation legislation, strengthening our ``buy American''
laws, and eliminating trade distortions caused by foreign
border-adjusted taxes should be targeted instead.
(1) KORUS Is a Continuation of a Job-Destroying U.S. Trade Policy
KORUS replicates a fatal flaw contained in almost every
free trade agreement (FTA) that the United States has
implemented: our FTA partners can (and do) sell more to us
than we to them. During the lifetime or our existing FTAs,
the United States has run a cumulative $2.1 trillion deficit
with our trade partners. This flaw drives up the U.S.
production shortfall manifested in our trade and current
account deficits that have destroyed so many middle-class
American jobs.
The disparity in market opportunities is immense for
several reasons. South Korea's population is less than one-
sixth of the United States. Its GDP of $986.3 billion is less
than 7 percent of the U.S. GDP of $14.6 trillion in 2010.
Despite the South Korean economy's smaller size, it is an
export superpower in many important industries such as autos,
electronics, and textiles.
With respect to textiles, South Korean has a highly
sophisticated, vertically integrated industry that is a
world-class manufacturer of even the most technical products.
In 2010, South Korea was America's 8th largest supplier of
textiles and apparel by volume. For just yarns and fabrics,
the largest component of the U.S. industry, South Korea is
America's 2nd largest source of imports.
In addition, South Korea has a long history of unfair
trading practices. Currently, there are 16 antidumping and
countervailing duty orders in place against U.S. imports of
goods from South Korea.
Moreover, despite its obligations under the World Trade
Organization (WTO), South Korea has been hostile to imports.
It has raised non-tariff barriers for those goods where there
is sizeable Korean production, autos being the prime example.
We would also note that while KORUS will give South Korean
goods duty-free entry into the U.S. market, U.S. exports to
South Korea will still be subjected to a 10 percent Value
Added Tax (VAT). Through their 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 their VAT rate above the
current 10 percent at any point in the future. It was a major
error on the part of our negotiators not to address this
inequity as part of KORUS, as border taxes are another
persistent example of foreign practices that place domestic
companies at a competitive disadvantage.
Finally, the agreement is geographically disadvantageous to
the United States. South Korea faces roughly the same
logistical challenges as its other Asian competition when it
exports to the United States. In contrast, the United States
must ship its exports of manufactured goods several thousand
miles across the Pacific Ocean to a market where our
competitors in China and Japan are right next door.
The disparity in market opportunity is one reason why the
United States ran a $10 billion trade deficit with South
Korea in 2010. Of that total, the U.S. ran a $10.6 billion
deficit in motor vehicles and motor vehicle parts and a $600
million deficit in textiles and apparel. It is also why the
U.S. textile industry and some other sectors expect few
export opportunities for their products under KORUS.
In the face of these unfavorable factors, KORUS will
eliminate U.S. tariffs on 95 percent of current trade in
industrial products within three years of implementation of
the agreement while not guaranteeing reciprocal U.S. access
to the South Korean market for key industrial products such
as autos and textiles.
With South Korea's current capabilities as a major producer
and exporter of industrial products, its close proximity to
China, and its traditional hostility to imports, KORUS will
hurt U.S. manufacturers and exacerbate our trade deficit.
No wonder the Economic Policy Institute predicts the KORUS
agreement will increase the total U.S. trade deficit with
South Korea by about $16.7 billion annually and displace
approximately 159,000 American jobs within the first seven
years after it takes effect.
(2) KORUS'S Textile Chapter Hurts U.S. Textile Manufacturers
The United States International Trade Commission (USITC)
estimates that U.S. textile and apparel output will decline
by the largest percentage of any sector as a result of KORUS
and cites expected increases in U.S. imports from South Korea
as the driving factor.
According to the U.S. International Trade Commission's
initial analysis of entering into an agreement with South
Korea, ``The largest gains for Korean exports to the United
States are anticipated in textiles, apparel, and leather
goods, and other manufacturing (e.g., chemicals and allied
products, electronics, and transportation).'' Various studies
cited in the 2007 USITC report on KORUS uniformly predict
declines in U.S. textile and apparel output ranging from 0.4
to 1.5 percent.
AMTAC estimates that 9,300 to 12,300 U.S. textile and
apparel manufacturing jobs are expected to be lost in the
first seven years after implementation as result of flaws in
the textile chapter of KORUS. Moreover, because U.S.
government figures show that approximately three additional
jobs are lost to the U.S. economy for each textile job that
is eliminated, the total estimated job loss climbs to nearly
40,000. It is also important to note that these figures do
not account for job losses as a result of a likely surge in
illegal Chinese transshipments via South Korea, which we
expect to be significant.
One highly sensitive market where South Korea competes
head-to-head with U.S. producers in the U.S. market is in
industrial textiles, a sector with employment of more than
25,000.
U.S. industrial textile manufacturers are particularly
concerned about this agreement and its impact 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. Many
companies participating in this supply chain also support the
military needs of our warfighters. Their ability to innovate
and responsively supply the military is dependent on an
overall healthy domestic market and industry.
Our principal concerns with the text include (1)
accelerated tariff phase-outs that
do not give U.S. producers time to adjust, (2) non-reciprocal
tariff phase-outs that favor the South Korean textile
industry in key products, and (3) exclusion of certain
textile components from the rule of origin.
The aforementioned reasons and others are why, as the auto
provisions of KORUS were being reopened, AMTAC and other
industry associations made a request to the Obama
administration in August 2010 that they also reopen the
textile and apparel chapter of the agreement to fix the
problems therein. Textile concerns, however, were never
raised with South Korea and these damaging provisions remain
unchanged.
Problematic Accelerated Tariff Phase-Outs
Contrary to the precedent established in the NAFTA, 86
percent of textile and apparel product lines are duty free
immediately under KORUS and an additional 10 percent will be
duty free on January 1 of Year 5 of the agreement. This is
the first time a large number of sensitive products from a
country with a large, sophisticated textile industry have
received immediate access to the U.S. market. Tariff phase-
outs for sensitive products have traditionally been a key
part of trade agreements in order to give companies time to
adjust business models and minimize large-scale potential job
displacement. For example, South Korea exports of polyester
fiberfill have entered the United States under anti- dumping
orders for the past 15 years. This dumping case passed two
sunset reviews, the last of which was successfully completed
prior to the end of the KORUS negotiations. Nevertheless,
KORUS immediately removes the U.S. duty on polyester
fiberfill, defeating the purpose of the anti-dumping rule and
defying logic of equitable trade negotiations.
In the U.S. technical textile market, South Korea has
emerged as the number one exporter of advanced textile
reinforcements, and this sensitive tariff line is scheduled
for immediate tariff phase out. U.S. industrial textile
producers have already lost significant market share to South
Korean manufacturers, and this FTA will do significant harm
to the industrial textile industry and greatly diminish the
sustainability of our fragile domestic supply base.
Socks are another sensitive product where most tariff lines
go to zero immediately. South Korea was the 6th largest
exporter of socks to the United States in 2010 by volume,
shipping more than 152 million pair.
Non-Reciprocal Tariff Phase-Outs
The agreement also provides South Korea with a more
generous and expedited tariff elimination schedule than what
is afforded U.S. producers and exporters for certain
products. One example is para-aramid fiber, which is used to
produce tough, flame-retardant fabrics for industrial and
military applications including body armor. Under KORUS,
South Korea will be allowed to export aramids to the United
States with immediate duty free treatment. U.S. producers do
not get duty free access to the Korean market as South Korea
is allowed to phase out its tariff to be duty free on January
1 of Year 5. This puts U.S. manufacturers at a direct
disadvantage.
Job-Destroying Loopholes in Rule-of-Origin
The rule of origin is a critical element of any free trade
agreement because it defines which products qualify for
preferential treatment and whether countries not party to the
agreement will receive benefits. The KORUS contains a ``yarn
forward'' rule of origin. While we support a basic yarn
forward rule, certain specific exemptions to the product
origin rules under KORUS are very problematic.
In essence, the rule applies only to the component that
determines the tariff classification of the apparel or home
furnishing good (in other words, the main or essential
fabric) plus certain visible lining fabrics. Applying origin
rules in this manner means that key component yarns, threads
and fabrics are not adequately covered under the rule of
origin and therefore do not have to be of U.S. or South
Korean origin. This conflicts with the majority of our recent
agreements including CAFTA-DR, Peru, Colombia and Panama
which apply the yarn forward rule beyond just the essential
character fabric.
Under KORUS, components including sewing thread, pocketing
and narrow fabrics, all of which are in plentiful supply from
U.S. producers, are allowed to come from anywhere. This
allows third parties, such as China, to benefit without
making any market concessions of their own. Domestic
producers of these types of component yarns and fabrics
provide thousands of U.S. jobs, which will be put into
jeopardy if KORUS is implemented.
(3) High Likelihood of Massive Customs Fraud Due to Inadequate
Enforcement Provisons
In addition to the flaws in the textile chapter of KORUS,
there is strong evidence that Customs' ability to enforce
this agreement will be ineffective.
Due to South Korea's history of transshipment paired with
significant cross-border investment with China, upgraded
customs enforcement provisions are essential to prevent
large-scale customs fraud under KORUS. China already exports
nearly $4 billion annually in textiles and apparel to South
Korea, and South Korea was labeled by U.S. Customs as a major
transshipment point for Chinese exporters when quotas were
in place.
Instead of strengthening enforcement, however, the customs
language in KORUS was significantly weakened compared to
other high risk agreements such as the Singapore PTA.
Key enforcement provisions that were dropped under KORUS
include the ability for U.S. Customs to (1) seize goods from
repeat offenders, (2) reduce South Korea's access if it does
not enforce the rules of the agreement, and (3) deny
fraudulent companies import privileges for several years.
The substandard customs provisions in the KORUS leave the
U.S. textile industry and its workers vulnerable to large-
scale illegal imports from China through South Korea. As a
result, the industry fully expects Chinese textile exporters
to be a primary beneficiary of KORUS.
In addition to its direct threat to the U.S. market, the
specter of increased illegal transshipments likely to be
generated by KORUS represents a significant attack on the
hemispheric textile production structure encouraged by U.S.
policy for the past three decades.
The KORUS threatens to damage the Western Hemisphere
because South Korea's textile and apparel exports are
expected to surge and displace orders currently being sourced
in the region. When finished product orders are lost by
manufacturers in the Western Hemisphere, U.S. mills also lose
the orders for the yarns and fabrics that go into garments
and made-up articles.
The potential loss of business is enormous. As a result of
trade preference programs and the NAFTA/CAFTA/Peru FTAs,
nearly two million textile and apparel workers in those
regions produce garments, home furnishings, and the textile
components incorporated into those products. The U.S. textile
and apparel industry is a critical link in the supply chain.
We export more than $12 billion a year to our preferential
partners in the Western Hemisphere, predominantly in
components such as yarns, threads, and fabrics. This trade
accounts for more than 60 percent of total U.S. textile and
apparel exports.