Thursday, October 20, 2011

United States-Korea Free Trade Agreement Implementation Act

H.R. 3080, sent to the President on October 13, 2011, approves the free trade agreement between the government of the United States and the government of the Republic of Korea (Korea) that was signed on June 30, 2007, and modified by a later agreement on December 3, 2010. It provides for tariff reductions and other changes in law related to implementation of the agreement. The bill extends user fees collected by Customs and Border Protection (CBP) that expire under current law and would increase those fees. In addition, it establishes a reporting requirement for federal and state prisons for tax administration purposes and increases the penalties on tax preparers who did not comply with due-diligence requirements for the earned income tax credit. It also would shift some corporate income tax payments between fiscal years.
The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) estimate that enacting H.R. 3080 would reduce revenues by $31 million in 2012 and by about $7.0 billion over the 2012-2021 period. CBO estimates that enacting H.R. 3080 would increase direct spending by $53 million in 2012 but would decrease direct spending by about $7.0 billion over the 2012-2021 period. The net impact of those effects is an estimated reduction in deficits of $16 million over the 2012-2021 period. Pay-as-you-go procedures apply because enacting the legislation would affect direct spending and revenues.
Further, CBO estimates that implementing the legislation would cost $7 million over the 2012-2016 period, assuming the availability of appropriated funds. CBO has determined that the nontax provisions of H.R. 3080 contain no intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA), and would impose no costs on state, local, or tribal governments.
Under the United States-Korea free trade agreement, tariffs on U.S. imports from Korea would be phased out over time. The tariffs would be phased out for individual products at varying rates, ranging from immediate elimination on the date the agreement enters into force to gradual elimination over 10 or more years. According to the U.S. International Trade Commission, the United States collected about $660 million in customs duties in 2010 on $48 billion of imports from Korea. Based on expected imports from Korea, CBO estimates that implementing the tariff schedule outlined in the U.S.-Korea free trade agreement would reduce revenues by $158 million in 2012, and by about $7 billion over the 2012-2021 period, net of income and payroll tax offsets.
This estimate includes the effects of increased imports from Korea that would result from the reduced prices of imported products in the United States, reflecting the lower tariff rates. It is likely that some of the increase in U.S. imports from Korea would displace imports from other countries. In the absence of specific data on the extent of this substitution effect, CBO assumes that an amount equal to one-half of the increase in U.S. imports from Korea would displace imports from other countries.
James R. Langevin RI., stated on the house floor that "While I favor expanding global trade, I oppose trade agreements that lack key labor and environmental safeguards, thus allowing our trading partners to exploit regulations in their own countries that are far weaker than those in America." He added "I am also concerned that grave and ongoing human rights violations against labor leaders and human rights workers in Colombia are not fully addressed in this legislation. While the current administration and my Ways and Means colleagues continued negotiations to revise these trade agreements by incorporating international labor standards and environmental agreement compliance, I remain unconvinced that these provisions will be meaningfully enforced. Unfortunately, I do not believe these trade agreements meet the minimum requirements necessary to protect our workers from increased job losses, safeguard our environment, or convince me this is the right step for our nation."
Jeff Duncan of South Carolina pointed out that "Unfortunately, the Korean trade agreement that we're debating right now is deeply flawed, poorly negotiated, and will cost American jobs by picking winners and losers in the market place. The textile provisions alone in the agreement will cost Americans nearly 40,000 jobs over the next 7 years. Sadly, many of those jobs will be lost in my own state of South Carolina.
"While this agreement gives South Korean goods duty-free entry into the U.S. market, American exports to South Korea will still be subjected to a 10 percent Tax. That amounts to an automatic 10 percent tariff on certain US goods, putting our manufacturers at an immediate competitive disadvantage. Additionally, this agreement opens US markets to Korean goods, but doesn't guarantee the Korean market will be open for US goods."
The American Textile Industry sent a letter that stated:
As representatives of the domestic textile and apparel sector and its nearly 600,000 workers, we strongly urge you to oppose the U.S.-South Korea Free Trade Agreement (KORUS). In regards to textiles and apparel, the FTA is seriously flawed and will result in the continued outsourcing of valuable textile, apparel and other manufacturing jobs. With our nation struggling through one of the worst economic periods in its history, we believe the current agreement sends the wrong message to our workers and to American voters.
During the past forty years, Korea has developed a sophisticated industrial and apparel fabrics sector and, as a consequence, is the second largest exporter of textile yarns and fabrics to the United States. Although the U.S. textile sector is one of the most efficient and quality-driven producers in the world, the Korean economy presents virtually no export opportunities to Korea for U.S. textile producers. As a measure of this one-way trading relationship, the U.S. trade deficit in textiles and apparel totaled $708 million in 2009.
As a result, the textile industry asked the Obama Administration to make three fixes to the KORUS agreement in order to ensure that U.S. textile, apparel and fiber jobs were not outsourced to Korea and China. These fixes concerned (a) loopholes in the enforcement portions of the agreement that benefit China, (b) a tariff schedule that gives Korean exporters better terms than U.S. companies and (c) the exclusion of textile components in the agreement's rules-of-origin that advantage non-signatories to the agreement such as China.
These mistakes not only hurt our manufacturing workers but also damage our industry's ability to supply our military with essential goods for our men and women in uniform. In particular, Korea's producers get longer phase-out schedules than U.S. producers on a number of sensitive product lines that include products that are needed by the U.S. military. Damaging surges by Korean producers because of this inequitable arrangement will hurt U.S. companies that the military depends on for a number of important products.
An analysis by the Economic Policy Institute estimates that 159,000 good paying American jobs will be destroyed if the KORUS agreement in its present form passes Congress. Of that total, we estimate that between 9,300 and 12,300 jobs will be lost specifically in the U.S. textile and apparel sector as a result of legal KORUS trade. U.S. government figures show that approximately three additional jobs are lost to the U.S. economy for each textile job that is eliminated. In addition, U.S. job losses from illegal Chinese exports are not included and these would be significant. Total U.S. job losses because of the flawed KORUS textile text are expected to be at least 40,000 jobs.
"Since 1977, the real median hourly wage has decreased $.53 for workers in this country. In manufacturing, it has decreased $1.40. In the same timeframe, the U.S. has lost approximately 7 million manufacturing jobs, over 250,000 in the state of Indiana alone. These are middle class jobs, and each lost job means lost wages, lost health care, and lost retirement benefits for a family. It is getting harder and harder for America's working class to make it, and that is a shame. With the unemployment rate at 9.1%, we must do everything possible to create new jobs, and protect every single American job that exists. Congress should have a singular focus of promoting American workers and creating American jobs." said Peter Visclosky of Indiana. He added "Congress is going to pass three trade agreements that will cause a loss of jobs; necessitating the passage of a TAA package to train those whose jobs are being outsourced. What a terrible and wrongheaded policy. Further, the TAA package that Congress is considering would pare back the eligibility requirements and funding levels for displaced workers that were established in 2009. Are American workers less vulnerable to trade than in 2009? I find it ludicrous that we would choose to reduce this assistance when long term unemployment continues to plague millions of American families.
"All three of these agreements are similar to NAFTA, and we know, all too well, the effects of NAFTA. In 1993, before the enactment of NAFTA, we had a small trade surplus of about $1.6 billion with Mexico. NAFTA was enacted in 1994 and by 1995 that surplus had turned into a deficit of almost $16 billion. By 2007, this deficit had grown to a staggering $75 billion. These policies have displaced millions of jobs, and we cannot afford to aggravate the problem with more misguided trade agreements. Further, the jobs that aren't displaced are diminished through depressed wages and benefits."

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