Ruth Stephens, executive director of U.S. Industrial Fabric Institute.
David Denney, Star Tribune
U.S. industrial textiles industry sees a threat in Korea trade pact
- Article by: SUSAN FEYDER
- Star Tribune
- November 19, 2011 - 10:02 PM
Specialty fabrics serve an array of markets -- everything from awnings to auto airbags to protective gear for soldiers and firefighters.
Unlike apparel textiles, the U.S. specialty fabric business has continued to grow, but according to industry trade associations it may now be threatened by the new Korea-U.S. free trade agreement (KORUS).
The U.S. International Trade Commission, a bipartisan federal agency, estimates KORUS will lead to increased U.S. textile exports to South Korea. The Industrial Fabrics Association International (IFAI) takes a different view, noting that under the agreement recently approved by Congress, goods from South Korea would enjoy duty-free entry into the U.S., while U.S. exports to Korea would be subject to a 10 percent value added tax (VAT). The measure also would allow South Korea to raise its VAT rate above 10 percent.
Ruth Stephens, executive director of the U.S. Industrial Fabrics Institute (USIFI), says U.S. negotiators erred because KORUS places domestic companies at a competitive disadvantage. USIFI is part of IFAI , a Roseville-based trade group with more than 1,800 member companies.
QHow big is the specialty fabric industry -- what are the sales trends?
AThe world market is estimated at $126 billion in 2011 -- $29 billion of that in the U.S. Sales growth in the U.S. is about 1.5 percent to 2 percent a year and there are about 250,000 workers. What everybody thinks about in the textile industry is apparel that has basically been moved offshore. The industrial and specialty side of the business in the U.S. hasn't had a lot of competition, until recently.
Some areas are seeing fast growth, for example, the base fabric used in road construction, erosion control, (and) spoil containment in landfills. The areas with the least growth are awnings and building products, like flat-roof membranes. There's now potential for growth is the safety market, like gear for firefighters. The only reason that has slowed was because cities have been dealing with budget cutbacks. But there are innovations left and right in this area, and cities want the products.
QWhat fueled growth of the U.S. industry?
AWe have a history of being the innovators. In global markets U.S. products are sought after because they are cutting-edge. We are getting competition from Europe on high-end products. The industry there gets a lot of government support.
We've also used this slow economic time to make our industry more productive. Companies have invested in automation. If you go into a mill, you'll find that the looms are threaded automatically and inspection is all done automatically by computer. Those things have helped us stay ahead of the game.
QWhy is KORUS such bad news for your industry?
AIt's a lesson in how the U.S. has done free trade agreements since World War II. The U.S. was sort of the big brother helping other countries get back on their feet after the war. Almost every trade agreement we've done since then uses that philosophy. Unfortunately with South Korea, you're now dealing with a country that's a very sophisticated textile producer, one that is not in need of U.S. support. In 2010 we had a trade deficit of more than $700,000 with South Korea in textiles.
QIf it's such a bad idea, why did Congress approve it?
ATrade agreements aren't about trade. They're about politics and power struggles. Right next to South Korea is North Korea. I believe that had a big influence on the timing of the passage [because the U.S. wants to keep South Korea as an ally].
Another reason is that the portions of this agreement that deal with agriculture and the automotive products will result in job creation opportunities in the U.S. Washington is all about jobs right now. The government's analysis of the trade agreement found there should be export opportunities in agriculture and automotive sectors while several market segments could be hurt, including textiles.
QWhen does it go into effect and how long will it take to impact your industry?
AThe Korean government still has to pass it. After that, it would take four to six months to implement. We know that South Korea, with government support, has built up textile production capacity. We know there will be a flood in the U.S. market of some types of fabrics. Within a couple years the industry here could lose 5,000 to 7,000 jobs. As for the long term, we expect to see a lot of consolidation in our industry here. We'll find ways to lower our prices as much as we can. Companies here will need to find new products and new markets where there's not as much competition.
Susan Feyder • 612-673-1723
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