Capitol Comments

Congress finally seals the deal on long-awaited trade pacts

By Jessica Franken, INDAu2008Director of Government Affairs | November 11, 2011

Meanwhile, uncertainties about the government's FY 2012 budget leaves industrial wipes rule supporters a little nervous.

Just one day after a White House jobs bill was derailed in the Senate, Congressional lawmakers on October 12 attempted to show thoroughly disenchanted voters that they are capable of playing nice. They passed the long-delayed free trade agreements with South Korea, Colombia and Panama by substantial bipartisan margins. President Obama called passage of the measures, which U.S. officials estimate will increase exports by as much as $13 billion, "a major win for American workers and businesses."

While the agreements with Colombia and Panama are expected to have limited economic impact, the one between the U.S. and South Korea (KORUS) links America to the world's 14th-largest economy, making it the most significant accord since the 1994 North American Free Trade Agreement.The U.S. International Trade Commission predicts it will increase annual U.S. exports by $10-11 billion by removing tariffs on over 95% of U.S. industrial and consumer goods during the first five years.

A number of American industries are expected to see meaningful increases in exports to Korea including makers of agricultural goods, automobiles, electronics, medical devices, paper products, machinery, chemicals, building products and environmental goods.However, it also is anticipated to bring a surge in imports, with certain parts of the U.S. textile industry expected to be some of the hardest hit. Several domestic textile groups, in fact, were among the pact's most vocal detractors, arguing that eliminating the traditionally high U.S. tariffs on textile and apparel imports will create a deluge of these products from Korea, which is already one of the largest sources of U.S. knit and specialty fabrics. They also decried the agreement's weak customs enforcement, which they say will allow for billions of dollars of Chinese goods to be illegally shipped through Korea to the U.S.

For INDA members, this is something of a mixed bag. For example, U.S. imports of Korean polyester staple fibers (PSF) are expected to increase significantly, although U.S. officials announced September 30 that certain imports of PSF from Korea will still be subject to a U.S. anti-dumping order. At the same time, when it comes to nonwoven roll goods, the KORUS may offer more opportunity than threat. The U.S. is already highly competitive with Korea, having exported nearly $27 million worth of nonwoven roll goods (Harmonized Tariff Schedule 5603) to the Asian nation in 2010 versus some $20 million in Korean imports. This is despite the fact that U.S. shipments going to Korea face 8% duties while Korean exports to the U.S. face none.

This trade deal, therefore, stands to improve our industry's already strong position since all but three categories of U.S. nonwoven roll good exports to Korea will see their duties go to zero as soon as the KORUS is implemented. In fact, a 2007 ITC report predicted the greatest increases in U.S. textiles and apparel exports to Korea are "likely to be concentrated in goods for which the U.S. industry is competitive, including...industrial and specialty fabrics, including nonwoven, coated and knit fabrics..."

Meanwhile, although less economically significant than Korea, Colombia is the third largest market in Central and South America, with U.S.-Colombia trade totaling nearly $28 billion in 2010 and U.S. exports accounting for $12 billion of that amount. Currently, most American exports to the South American nation face tariffs as high as 20%, while virtually all Colombian imports enter the U.S. duty-free under unilateral preference programs. In this deal, 80% of U.S. consumer and industrial exports and 100% of textiles and apparel going to Colombia will become duty-free immediately. This means that the 15% duties Colombia charges on U.S. nonwoven roll goods will become a thing of the past on day one. Even better, Colombia is already a significant export destination with the U.S. sending some 3.4 million kilograms worth more than $15 million in 2010.According to the ITC, Colombia offers export opportunities for a number of other key industrial sectors as well, including chemicals, plastic products, machinery, oil and gas equipment, pollution control equipment, food and beverage processing equipment and more.

Most agree the impact of the Panamanian deal will be minor due to the small size of that country's market, although the White House points out that Panama is one of Latin America's most rapidly expanding economies, growing 6.2% in 2010, with similar forecasts through 2015. U.S. exporters are expected to be the main beneficiaries of the Panama deal since most of that country's products already enter the U.S. duty-free under various trade preference programs, while less than 40% of U.S. goods enjoy similar status.

The timeline for implementing the three pacts is somewhat unclear. The Korean government must still ratify its agreements, and all three U.S. trading partners must still make the necessary legal changes to conform to the treaties' obligations, a process that could take anywhere from three months to a year or more.To learn more about all three FTAs, visit: http://www.ustr.gov/FTA.



Industry fears efforts to rein in government spending could delay EPA wiper rule
A September 19 article in the environmental policy publication Inside EPA describes industry's mounting concern that Capitol Hill's current frenzy to cut federal spending could inadvertently delay the Environmental Protection Agency's decades-old "industrial wiper rule."

Currently, Congressional appropriators are working to complete all 12 fiscal year 2012 appropriations measures before a stopgap "continuing resolution" that is currently funding the government expires on November 18. Recent proposals from the Republican-controlled House and Democratic-led Senate, however, suggest deep divides, particularly when it comes to the 2012 EPA budget.A House Republican overall spending bill approved this summer, for example, called for slashing the EPA budget by some 18% from 2011, while a Senate Appropriations Committee proposal released this October would cut the agency's spending less than 1% from the year before.

These kinds of broad discrepancies have left wiper rule supporters a little nervous about the fate of a rulemaking process that has already taken 25 years to date. As reported earlier this year, EPA officials recently accelerated the timeline for completing the wipes rule and are now aiming to publish a final regulation by summer 2012.However, that time table, agency staff cautioned, is largely dependent on maintaining its current level of resources in 2012.

INDA has decided not to sit idly by and has developed a letter that its members can send to House and Senate lawmakers to explain why funds should be provided to make sure the wiper rule is finally resolved.To request a copy of this letter, contact INDA Government Affairs director Jessica Franken at 703-521-0545 or at jfranken@inda.org.

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