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79–457—PDF 2011

S. HRG. 112–727 

U.S.-KOREA FREE TRADE AGREEMENT 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MAY 26, 2011 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

RUSSELL SULLIVAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1 

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 10 

ADMINISTRATION WITNESS 

Marantis, Ambassador Demetrios, Deputy U.S. Trade Representative, Executive Office of the President, Washington, DC .................................................... 3 

PUBLIC WITNESSES 

Rice, Errol, executive vice president, Montana Stockgrowers Association, Helena, MT ................................................................................................................. 5 

Lee, Thea, deputy chief of staff, AFL–CIO, Washington, DC .............................. 6 

Guertin, Timothy, president and chief executive officer, Varian Medical Systems, Palo Alto, CA .............................................................................................. 8 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 31 

Guertin, Timothy: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 33 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 10 

Prepared statement .......................................................................................... 37 

Lee, Thea: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 39 

Marantis, Ambassador Demetrios: 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 47 

Responses to questions from committee members ......................................... 51 

Rice, Errol: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 54 

Wyden, Hon. Ron: 

Memorandum from Majority Staff of the Senate Committee on Finance 

Subcommittee on Trade, dated January 25, 2011 ...................................... 58 

COMMUNICATIONS

Accuray Incorporated .............................................................................................. 85 

Advanced Medical Technology Association (AdvaMed) ........................................ 89 

American Apparel and Footwear Association (AAFA) .......................................... 98 

American Council of Life Insurers (ACLI) ............................................................. 103 

American Manufacturing Trade Action Coalition (AMTAC) ................................ 105 

National Cattlemen’s Beef Association .................................................................. 110 

National Council of Textile Organizations, et al. .................................................. 117 

U.S. Chamber of Commerce and U.S.-Korea Business Council ........................... 123 

(1) 

U.S.-KOREA FREE TRADE AGREEMENT 

THURSDAY, MAY 26, 2011 

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC. 

The hearing was convened, pursuant to notice, at 10:13 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus, 

(chairman of the committee) presiding. 

Present: Senators Kerry, Wyden, Carper, Cardin, Hatch, Grassley, Snowe, Thune, and Burr. 

Also present: Democratic Staff: Russ Sullivan, Staff Director; Gabriel Adler, Senior International Trade and Economic Advisor; 

Amber Cottle, Chief International Trade Counsel; Ayesha Khanna, 

International Trade Counsel; and Michael Smart, International 

Trade Counsel. Republican Staff: Everett Eissenstat, Chief International Trade Counsel; David Johanson, International Trade 

Counsel; and Maureen McLaughlin, Detailee. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The hearing will come to order. 

Confucius said, ‘‘The journey of a thousand miles begins but with 

a single step.’’ Today’s hearing marks the beginning of the end of 

our long journey towards implementing the U.S.-Korea Free Trade 

Agreement, or FTA. It is a journey that began with a single step 

more than a decade ago. 

In November 1999, I introduced a bill to authorize the negotiation of the U.S.-Korea FTA. At the time, Korea was emerging from 

the Asian financial crisis. It was fighting a faltering economy, high 

unemployment, falling wages. Yet I believed then—and I believe 

now—that it was essential for the United States to cement our alliance with this vital partner in the Asia-Pacific region. I believed 

a free trade agreement was the best way to do just that. 

We took another step on our journey when we formally launched 

the FTA negotiations in 2006. In that year, Korea was on its way 

to becoming one of the most highly developed countries in the 

world. Today, it has the world’s 15th-largest economy. U.S. goods 

and services exported to Korea in 2010 totaled over $55 billion. 

Last year, my home State of Montana exported more products to 

Korea than to any other country except Canada. 

Because of the potential the Korean market holds for U.S. jobs 

in our economy, I strongly supported taking the next step toward 

a free trade agreement. But, even when the negotiations began, we 

knew it would be difficult, and we stressed that Korea would need 

2 

to abide by world scientific standards by opening its market to U.S. 

beef and allow U.S. autos to compete on a level playing field. 

Later that year, I welcomed the United States and Korea negotiating teams to my home State of Montana. Over a Montana T-bone 

steak in Big Sky, I reiterated my support for the agreement, but 

I conditioned that support on Korea’s acceptance of safe and delicious Montana beef. 

The United States and Korea concluded our FTA negotiation in 

2007, but the agreement fell short in important respects. It failed 

to provide additional market access for U.S. beef and it failed to secure better access and better protections for United States auto 

manufacturers. 

Many of my colleagues on both sides of the aisle and in both 

Houses of Congress joined me in expressing strong concerns. Unfortunately, our two countries were unable to make progress addressing these concerns at that time, so our journey faltered. 

But late last year, our two countries took an important step to 

put us back on the path to implementation. In December, the 

United States and Korea announced an agreement that will help 

U.S. auto manufacturers increase their auto sales to Korea. Thanks 

to the persistence of Ambassador Kirk and you, Ambassador 

Marantis, the administration recently agreed that it would do what 

it takes to secure better market access in Korea for U.S. beef, and 

we identified two concrete steps to ensure continued progress. 

First, the administration agreed to increase funding for U.S. beef 

promotion in Korea. It will provide an additional $1 million this 

year for that purpose. The administration also welcomed the U.S. 

meat industry’s request for an additional $10 million in funding to 

promote U.S. beef sales to Korea over the next 5 years, and agreed 

to favorably consider that request when it makes its 2012 awards 

later this year. 

Second, the administration agreed to request consultations with 

Korea on fully opening the Korean market to U.S. beef. The administration will request these consultations as soon as the FTA enters 

into force, and, pursuant to the terms of our 2008 protocol governing beef imports with Korea, those consultations will take place 

within 7 days of the request. 

We are still working towards breaking down all of Korea’s barriers to U.S. beef, but the administration’s commitments are important steps on this path. With these commitments and with this 

hearing, we are several steps closer to implementing the U.S.- 

Korea Free Trade Agreement. Once implemented, the FTA will increase U.S. exports to Korea by more than $10 billion annually and 

support at least 70,000 American jobs. 

As we move forward with the Korean FTA, as well as our FTAs 

with Colombia and Panama, we have a duty to help American 

workers meet the challenge of global competition. To do so, we 

must enact a robust, long-term extension of Trade Adjustment Assistance, or TAA, together with these FTAs. 

In the spirit of Confucius, let us work together to successfully 

conclude this journey. Let us reauthorize the Trade Adjustment Assistance program, and let us approve the U.S.-Korea Free Trade 

Agreement. 

3 

[The prepared statement of Chairman Baucus appears in the appendix.] 

The CHAIRMAN. Senator Hatch will be here shortly to give an 

opening statement, but in the interim let me introduce our witnesses. 

First, we have Ambassador Demetrios Marantis, Deputy U.S. 

Trade Representative for Asia and Africa. Demetrios served as my 

Chief Trade Counsel for several years, and he has been a strong 

advocate for American ranchers, farmers, and workers. Welcome 

back, Demetrios. It is always a pleasure to see you. I think you are 

one of the best public servants in our whole country. You work 

hard, and you are very effective. You do a great job. If all of America knew of what you do, they would be very proud of you. 

Next, we have Errol Rice, the executive vice president of the 

Montana Stockgrowers. Errol, you have been a great advocate as 

well of Montana ranchers. Thank you for traveling all the way from 

our hometown of Helena and joining us here today. 

Next, we have Thea Lee, deputy chief of staff with the AFL–CIO. 

Thea has testified before this committee several times—I would say 

many times—and we are happy to see you, Thea. Welcome back. 

You are very sharp, intelligent, and you have a great perspective. 

Finally, we have Timothy Guertin from Varian Medical Systems. 

Welcome, Timothy. I have been to your company several years ago 

and was very impressed with what I saw, all the products you 

manufacture. 

I would also like to give special welcome to Korea’s ambassador, 

Han Duk-soo, who is with us in the audience. Welcome, Mr. Ambassador. We are glad you are here for these hearings. 

According to our usual practice, I will have each witness introduce his statement for the record and each speak about 5 minutes. 

Ambassador Marantis? 

STATEMENT OF AMBASSADOR DEMETRIOS MARANTIS, DEPUTY U.S. TRADE REPRESENTATIVE, EXECUTIVE OFFICE OF 

THE PRESIDENT, WASHINGTON, DC 

Ambassador MARANTIS. Thank you. Good morning, Senator Baucus and members of the committee. It is a real honor for me to be 

back here to testify today about the U.S.-Korea Trade Agreement. 

We are here at a unique moment. Our economy is recovering, 

and exports of goods and services are up 17 percent. This export 

growth has already supported hundreds of thousands of additional 

American jobs. Within our grasp is the most economically significant trade agreement the United States has negotiated in nearly 

2 decades. This agreement will strengthen our trade and investment ties to Korea’s $1 trillion economy, and it will bind a key 

strategic ally closer to us and help us keep our edge over international competition. 

Most importantly, the U.S.-Korea Trade Agreement will create 

substantial export opportunities, establish strong enforcement provisions, and support tens of thousands of additional goods and services export-related jobs. 

When President Obama took office, many in this Congress had 

serious concerns about this agreement, especially relating to autos 

and beef. This administration shared those concerns. We heard 

4 

you, and we took action. We leveled the playing field by addressing 

nontariff barriers in Korea’s automotive safety and environmental 

regulations. We encouraged green technologies by accelerating tariff reductions on electric cars. We negotiated a tariff structure that 

will give American auto companies and their workers a chance to 

build more business in Korea before U.S. tariffs come down, and 

we negotiated a new special motor vehicle safeguard. 

On beef, U.S. exports are steadily increasing to Korea, but we 

share your concern, Senator Baucus, and those of your colleagues 

and our ranchers, about science-based access to South Korea’s beef 

market. That is why Ambassador Kirk sent a letter on May 4 stating the administration’s intent to request consultations under the 

2008 Beef Protocol, to discuss that protocol’s full application once 

the U.S.-Korea Trade Agreement enters into force. Like you, we 

welcome the U.S. Meat Federation’s plans to spend an additional 

$10 million in South Korea to promote U.S. exports to that market. 

With this important work behind us, today the administration 

and Congress are together poised to unlock the enormous economic 

potential and the enormous strategic benefits of that agreement. 

Under this agreement, South Korea, which is already our fifthlargest agricultural market, will eliminate tariffs on two-thirds of 

U.S. agricultural products immediately. Within 5 years of entering 

into force, this agreement will remove tariffs on over 95 percent of 

U.S. industrial and consumer goods products. 

This agreement will strengthen the United States’ role as an export powerhouse in services, guaranteeing access for our information and communications technology, express delivery, financial, 

and other services exports to South Korea’s enormous $580 billion 

services market. 

Underpinning these new export opportunities are the Korea 

agreement’s state-of-the-art provisions to protect and enforce intellectual property rights, reduce red tape, and eliminate regulatory 

barriers to U.S. exports. This agreement contains the highest 

standards for protecting labor rights, promoting the environment, 

and ensuring that key domestic labor and environmental laws are 

enforced. 

Taken together, these additional export opportunities mean more 

jobs for Americans. The tariff reductions on goods exports alone 

will lead to significant increases in U.S. exports to Korea that will 

support over 70,000 additional American jobs. More services exports will support tens of thousands of additional jobs, and fewer 

nontariff barriers and stronger rules will support even more. 

This administration is ready to move the U.S.-South Korea 

agreement forward as part of a comprehensive trade agenda that 

invests in our workers and invests in our economy. As we have 

stressed repeatedly, we must keep faith with our workers by renewing Trade Adjustment Assistance consistent with the objectives 

of the 2009 law. 

TAA is a key component of President Obama’s trade policy and 

has been integral to Democratic and Republican trade agendas for 

nearly half a century. We look forward to working with this committee to renew TAA, as well as to reauthorize expired trade preference programs and to unlock the benefits of this historic trade 

agreement with South Korea. 

5 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Mr. Ambassador, very, very much. 

As I said, you have done a great job. 

[The prepared statement of Ambassador Marantis appears in the 

appendix.] 

The CHAIRMAN. Mr. Rice, thank you. I see you have brought your 

family back here. 

Mr. RICE. Absolutely. Thank you, Chairman Baucus. 

The CHAIRMAN. That is great. 

STATEMENT OF ERROL RICE, EXECUTIVE VICE PRESIDENT, 

MONTANA STOCKGROWERS ASSOCIATION, HELENA, MT 

Mr. RICE. Good morning, Chairman Baucus and members of the 

committee. Thank you for the opportunity to speak to you on behalf 

of the members of the Montana Stockgrowers Association regarding 

the U.S.-Korea Free Trade Agreement. My name is Errol Rice, and 

I am a 5th-generation Montana rancher. I currently serve as the 

executive vice president of the Montana Stockgrowers Association, 

one of the Nation’s oldest and historically significant cattle ranching organizations, established in 1884. 

Ranchers must have access to the additional demand for beef 

from consumers that live outside of the United States. Ninety-six 

percent of the world’s population lives outside the borders of the 

U.S. A global economic system is a fundamental reality that must 

be met with a rural American consensus in support of free trade, 

which we believe is a central pillar to this country’s economic and 

geopolitical strength. 

Exports create jobs. According to Cattlefax, fed steers have been selling near $115 per 100-weight, or roughly $1,495 per head. Of 

that, Cattlefax estimates that exports have added a minimum of 

$145 per head in value as opposed to not having exports. Our competitiveness depends on profitability and attracting the next generation of ranchers back into the business. Today, Korea is one of 

the largest export markets for Montana and American beef. 

In 2010, we exported nearly $518 million worth of our product, 

which is a 140-percent increase in sales over 2009. This added $25 

in value to each of the 1.3 million head of steers and heifers grown 

and marketed from Montana in 2010. This agreement achieves a 

major breakthrough in phasing out Korea’s 40-percent tariff on our 

wholesome beef cuts. In 2010, we were met with over $200 million 

in tariffs on our beef being exported to Korea. 

The Korea-U.S. Free Trade Agreement, upon implementation, 

would lend $15 million in tariff benefits to our product in the first 

year alone, and roughly $325 million in tariff reductions annually 

once fully implemented. According to the U.S. International Trade 

Commission, annual exports of U.S. beef could increase by as much 

as $1.8 billion once the agreement is fully implemented. 

While Korea is a strong export market for U.S. beef, we have 

also faced unscientific restrictions. Montana ranchers believe that 

our trading partners should abide by sound science and international standards. That is why we appreciate very much the efforts by you, Chairman Baucus, to move us toward that goal. 

Under the agreement that he negotiated with the administration, 

the U.S. Department of Agriculture will consider favorably a $10- 

6 

million request from the U.S. Meat Export Federation to educate 

Korean consumers about the safety, quality, and value of U.S. beef. 

He secured a commitment from Ambassador Kirk to hold consultations with Korea on the full application of the 2008 U.S.-Korea 

Beef Protocol. 

Recognizing international science-based standards such as those 

set by the OIE is very important. It not only creates less market 

volatility, but it also encourages the safest and most prudent production practices. 

Montana is leading the way to provide technologically advanced 

traceability solutions for northern tier high-quality ranch-level certified calves. Two hundred and fifty thousand Montana calves were 

uniquely certified beneath our private Verified Beef Traceability 

Solutions in 2010. Nearly 50,000 Montana calves were exported in 

the form of high-quality beef to Korea. 

China is the only major market still closed to U.S. beef and represents one of the largest potential growth markets for ranchers. 

We think a public and private sector approach to beef traceability 

can drive market expansion opportunities in China much faster. 

Last week, MSGA was fortunate to be able to participate in the 

2011 Asia-Pacific Economic Cooperation Trade Ministers meeting 

in Big Sky, MT. This was a tremendous opportunity to offer 

thought leadership and to discuss our cutting-edge approaches to 

global beef innovation to meet demand. It spawned greater information sharing and interconnectedness as a definite outcome that 

will bond together more effective trade partners who are committed 

to a rules-based trading system. 

Our ranch families’ livelihoods depend on exports, which are the 

most dynamic and vibrant opportunities for long-term sustainability. 

I appreciate the opportunity that we have been granted to 

present our testimony today, and we look forward to working with 

you throughout the course of this process to secure passage of this 

crucial agreement. 

The CHAIRMAN. Thank you, Mr. Rice, very much. 

[The prepared statement of Mr. Rice appears in the appendix.] 

The CHAIRMAN. Ms. Lee? 

STATEMENT OF THEA LEE, DEPUTY CHIEF OF STAFF, 

AFL–CIO, WASHINGTON, DC 

Ms. LEE. Good morning, Chairman Baucus, members of the Finance Committee. Thank you very much for the invitation to testify 

today on behalf of the 12.5 million working men and women of the 

AFL–CIO on the very important topic of the U.S.-Korea Free Trade 

Agreement. 

I agree with Ambassador Marantis that the Korea Trade Agreement is potentially the most economically significant U.S. trade 

agreement negotiated since NAFTA, but I disagree somewhat on 

the exact kind of economic significance that it is likely to have. 

South Korea is a dynamic, industrial export powerhouse and a 

major trading partner for the United States, with a well-developed 

industrial strategy and a domestic market that is highly protected 

from imports through a variety of measures, including both tariff 

and nontariff barriers. 

7 

We run chronic and large trade deficits with Korea, mainly in 

autos and advanced technology products. Last year’s deficit was 

about $10 billion, with our deficit in autos actually exceeding our 

overall deficit and the deficit in advanced technology products at 

$6.4 billion. 

The Korea FTA commits both countries to reducing their tariffs 

and some nontariff barriers over a period of several years, but it 

also contains major new protections for multinational corporate investors in the areas of investment policy and services. 

It is our view that the combination of increasing investment protections for multinational corporations, locking in lower tariffs 

while, despite the best efforts of our negotiators, leaving in place 

many nontariff barriers—or at least leaving open the possibility 

that new ones will be put in place and will be hard to address 

through the measures that are included in the trade agreement— 

those, taken together with a weak rule of origin that is included 

in the agreement, will likely lead to the loss of tens of thousands 

of good jobs in the United States, mainly in the manufacturing sector. 

The Economic Policy Institute has estimated that the loss of jobs 

could be on the order of 159,000 jobs, if in fact the post-FTA trade 

trends that we have had with past trade deals apply in the case 

of the South Korea trade agreement. We know that the ITC has a 

different view, has put forward different estimates, but we also 

have a lot of experience with ITC projections in the past, and in 

our view they have not been accurate. If you look back at NAFTA 

in particular and China’s accession to the World Trade Organization, the ITC projections were wildly inaccurate and in the wrong 

direction. 

Given the precarious state of our economy and our labor market 

in particular, this seems to us like bad timing and a bad idea, and 

we call on Congress to oppose the Korea trade agreement. We appreciate and very much welcome the Obama administration’s important initiative to renegotiate the auto market access provisions 

of the agreement to address the lopsided bilateral trade in assembled autos between the United States and South Korea. 

While the newly negotiated auto provisions certainly represent a 

significant improvement over the earlier version of the agreement, 

they do not by any means address all the concerns we had raised 

with respect to market access more broadly, or with other parts of 

the agreement, namely the investment provisions and the rule of 

origin. 

Passage of the Korea trade agreement is often urged as part of 

the Obama administration’s plan to boost job creation through increasing exports. While the AFL–CIO strongly supports the goal of 

increasing net exports, we do not believe that passage of the Korea 

trade agreement is likely to serve this end. As Paul Krugman, 

Nobel laureate, and others have pointed out, bilateral trade agreements do not in general lead to large, 1-sided increases in outward 

net exports, but rather growth in 2-way trade. This deal, in our 

view, is even more likely to result in a growing bilateral trade deficit. 

There are additional concerns that are addressed in my written 

testimony in much more detail. The need for a labor action plan as 

8 

was negotiated with Colombia to bring Korea’s labor laws into compliance with ILO standards prior to implementation of the agreement—and, if you read my testimony, there are some very significant areas in which Korea’s labor laws fall short of international 

standards. These are areas that are very important to our Korean 

counterparts, the unions there, and that we would like to see addressed prior to implementation of the agreement. 

The second piece, the weak rule of origin, allowing, in the case 

of autos—which is one of our most important bilateral trade sectors—up to 65 percent of autos exported from either Korea or the 

United States to be foreign content. In the case of Korea, that is 

likely to be, a large part of it, from China. We think that on principle, the benefits of free trade agreements should go to the parties 

of the agreement that have signed the commitments on labor 

rights, intellectual property rights, investment, market access, reciprocal market access, and not to third parties, so we object to the 

weak rule of origin. 

We are concerned about the Kaeso ̆ng Industrial Complex, the 

processing zone which is on the border between North and South 

Korea. I know there are provisions in the agreement to prevent 

products from Kaeso ̆ng entering into the United States, but in my 

testimony I outline some of the concerns, because this is of enormous significance to us because the working conditions in Kaeso ̆ng 

are among the worst in the world. 

Fourth, there are concerns with investment services, and also 

timing. I think it was just in the paper today that it is possible 

that the Korean parliament is not going to act on the Korea FTA 

for quite some time, and we think that is important. 

So let me just say in closing that we are concerned about doing 

anything that would put at risk good jobs in the manufacturing 

sector after so many years of devastating losses. We do look forward to working with the Congress, with this committee, with the 

administration to put forward a new trade model that would address these issues, and we also urge you, as you said, Chairman 

Baucus, in your opening remarks, to act expeditiously to pass the 

Trade Adjustment Assistance before the FTAs are put into place. 

I thank you for your time. I look forward to your questions. 

The CHAIRMAN. Thank you, Ms. Lee, very much. 

[The prepared statement of Ms. Lee appears in the appendix.] 

The CHAIRMAN. Senator Hatch has arrived. Senator, would you 

want to give your statement now? 

Senator HATCH. I will be happy to wait until after Mr. Guertin. 

The CHAIRMAN. All right. 

Mr. Guertin, you are next. Then we will turn to Senator Hatch. 

STATEMENT OF TIMOTHY GUERTIN, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, VARIAN MEDICAL SYSTEMS, PALO 

ALTO, CA 

Mr. GUERTIN. Well, let me begin by thanking you, Senator Baucus, Ranking Member Hatch, and the members of the Finance 

Committee, for holding this hearing today on the U.S.-Korea Free 

Trade Agreement. My name is Tim Guertin. I serve as president 

and CEO of Varian Medical Systems. We at Varian strongly supVerDate Nov 24 2008 20:41 Mar 01, 2013 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 R:\DOCS\79457.000 TIMD
9 

port the efforts to expand market access for U.S. medical device 

products abroad through new trade agreements. 

I am happy to summarize my written testimony, which has already been submitted to the committee. 

Varian Medical Systems is the world’s leading producer of medical technology and software for treating cancer with radiation 

therapy, radiosurgery, proton therapy, and brachiotherapy. Varian’s technology provides hospitals and clinics around the world 

with the tools they need to treat tens of thousands of cancer patients each day. We focus on three main areas of production: oncology systems, X-ray products, and security and inspection products. 

Varian manufactures 90 percent of our products in the United 

States—specifically in Utah, California, and Nevada—and invests 

significantly in research and development in these States. Varian 

employs more than 3,000 people here in the U.S. and more than 

5,500 people globally. The jobs created here in the U.S. are highpaying, high-quality jobs that depend on access to foreign markets. 

Often our technology is developed in conjunction with leading cancer institutes, such as the Huntsman Cancer Institute of the University of Utah, to create breakthroughs in cancer treatment. 

The advances we have created in cancer treatment and the superiority of our technology have spurred the demand for our products 

internationally. As a net exporter, 53 percent of our $2.4-billion 

business is exported. In addition, Varian’s X-ray products business, 

headquartered in Salt Lake City, UT, is the premier independent 

supplier of X-ray tubes and flat-panel image detectors in the world. 

Nearly 700 employees in Utah work to produce X-ray products 

for many major diagnostic equipment manufacturers to be used for 

mammography and CT scanning, as well as industrial security 

screening and inspection equipment that helps facilitate trade 

through our ports and our land borders. 

While on a recent trade mission to the Republic of Korea, Commerce Secretary Locke and several members of Congress devoted 

time to seeing Varian’s technology, treating cancer patients at 

Seoul National University Hospital. SNUH, a long-time partner of 

Varian, provides some of the most cutting-edge cancer treatments 

available to those stricken with this terrible disease. The Varian 

linear accelerators that perform radiotherapy treatments at SNUH 

were manufactured in California and Utah, and then installed and 

serviced by a team of technicians in Seoul, providing jobs on both 

sides of the Pacific. 

Korea is an extremely important market for Varian, as well as 

other United States medical technology exporters. In fact, last year 

Varian had more than $34 million in orders from Korea. We were 

able to place Varian technology in the hands of oncologists in Seoul 

thanks to the existing beneficial trade relationship between the 

United States and Korea. Varian is very supportive of KORUS and 

the potential for an increase in exports and the related U.S. jobs 

it could sustain and create by expanding our market in Korea. 

We applaud the agreement for being the first free trade agreement to specifically address issues related to the medical device industry in distinct provisions of the agreement. KORUS outlines 

processes and procedures related to transparency in both the regulatory approval process and pricing of medical devices. 

10 

Varian and other U.S. medical device companies will also benefit 

from the elimination of the existing tariff barriers that are currently in place for our technology. KORUS, when implemented, will 

eliminate an 8-percent tariff on Varian’s exports. 

Without the KORUS FTA, U.S. medical device manufacturers 

are at a distinct disadvantage with respect to our foreign competitors, as other nations establish free trade agreements with Korea. 

This agreement also recognizes the importance of U.S.-developed 

intellectual property. Varian supports KORUS’s provisions that set 

forth high standards for intellectual property protection. We are 

often disadvantaged in countries where the patent enforcement 

rules do not reflect the standards of protection found under U.S. 

law. 

It is my hope that patients in Korea and all over the world will 

continue to benefit from the collaborative innovation that occurs 

due to our mutually beneficial trade relationship. KORUS helps us 

in this effort by further opening the Korean market to U.S. exports 

of innovative medical technologies such as ours. 

Thank you. I would be pleased to answer any questions you 

might have. 

The CHAIRMAN. Well, thank you, Mr. Guertin, very much. 

[The prepared statement of Mr. Guertin appears in the appendix.] 

The CHAIRMAN. Senator Hatch? 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Well, thank you, Mr. Chairman. I welcome all of 

the witnesses here today. Today is the last of three hearings on our 

pending trade agreements. I want to thank Senator Baucus and his 

staff for the steadfast leadership that helped to get these agreements to where they are today. 

With today’s hearing, we are one step closer to seeing our trade 

agreements with Colombia, Panama, and Korea become a reality. 

In many ways, the Korea FTA is the gold standard for trade agreements. This agreement levels the playing field for American goods 

and services in an economy worth over $1 trillion. The FTA incorporates state-of-the-art intellectual property rights protections, significantly expands service sector market access, opens the large agriculture market, and offers new market access for American manufacturers. 

Now, this FTA adopts the most advanced regulatory nontariff 

barrier and investment provisions of any FTA and champions the 

rule of law which is so critical to an effective and fair rules-based 

trading relationship. The Korea FTA provides an impressive foundation upon which to build our future FTAs, including the TransPacific Partnership. 

The administration has set a goal of doubling exports in 5 years. 

Quick approval of this agreement will help us reach that goal. For 

Utah, South Korea is already an impressive market, importing 

more than $294 million of goods from Utah in 2009. Implementation of the agreement will help boost Utah’s exports even more, as 

over two-thirds of our exports to Korea will become duty-free immediately, and it will help all other States as well. 

11 

The sectors that will immediately benefit from the agreement’s 

tariff cuts reflect Utah’s economy, including computers and electronics, metals and ores, machinery, agriculture, and services. But 

the benefits of this agreement for Utah go far beyond just reducing 

tariffs. By adopting the strongest intellectual property rights, regulatory reforms, investment protections, and transparency provisions, the Korea FTA will ensure that Utah’s companies, farmers, 

and workers realize the full potential of the South Korean market, 

as will every other State in the United States, 

By protecting the ideas of Utah’s and other entrepreneurs in our 

society and providing a level playing field, Utah will be in a good 

position to double our State’s exports again over the next 5 years. 

Now, I am very pleased that Tim Guertin would join us this 

morning. Tim is the CEO of Varian Medical Systems, a world leader in manufacturing medical devices and software. By protecting 

Varian’s intellectual property rights as well as reducing tariffs and 

other barriers that inhibit Varian from selling its products in 

Korea, this FTA will strengthen Varian and its workforce. Varian 

employs workers around the world, including almost 700 in my 

home State of Utah, so I am especially interested to hear about 

how this agreement has impacted your company. I have been very 

interested in your testimony here today. 

As I noted earlier, today is our last hearing on the three pending 

trade agreements. Although the Korea FTA is certainly the most 

economically significant, it is critically important that the President submit all three agreements. Achieving approval of all three 

agreements remains my number-one trade priority. Why that has 

not yet happened remains a mystery to me. I do not understand 

the President’s excuses for further delay. 

Lack of support is not the issue. Once submitted to Congress, 

these agreements will gain strong bipartisan support. Economic 

concerns are not the issue. We all agree that these agreements will 

provide a sorely needed economic boost to the economy and that, 

if we do not act, other nations will take these markets away from 

us. 

Foreign policy is not the issue. We all agree that Colombia, Panama, and South Korea are key regional allies and that approving 

these agreements will help strengthen our alliances. Yet, the President will not submit these agreements to Congress. Now, let us be 

clear. Failure to submit the agreements cedes foreign markets to 

our competitors. Failure to submit these agreements sends a 

chilling signal around the world that the United States may not be 

a trusted ally on trade. 

Failure to submit these agreements is tantamount to a failure in 

leadership. Further delay imperils the recent gains made toward 

consideration of the pending trade agreements. If we do not have 

the opportunity to vote on these agreements this summer, I am 

afraid we never will. 

So, Mr. Chairman, please do not let the summer slip by—or Mr. 

President. And the chairman, too. But Mr. President in particular, 

do not let the summer slip by before sending these agreements to 

Congress. The American people and our allies, I do not think they 

can wait any longer. So, we need to do this. 

Thank you, Mr. Chairman. 

12 

The CHAIRMAN. Thank you, Senator. We will do our best to make 

sure they do not slip by. That could be very unfortunate. 

Senator HATCH. I know you will. 

The CHAIRMAN. This is the opportunity that we are looking for. 

[The prepared statement of Senator Hatch appears in the appendix.] 

The CHAIRMAN. Ambassador Marantis, as you well know, I condition my support on the Korea FTA on our getting better access for 

American beef in Korea. I worked hard to get that. I thought it was 

very important, for several reasons. One is because, at an earlier 

date, Korea did agree to much greater access, but then backed off. 

Second, our beef is safe. It meets scientific standards. If Korea 

agrees to take more beef, then that means we might have more leverage on China, Japan, and other countries to also take American 

beef, which meets scientific standards. 

So could you tell us, please, the degree to which you think this 

agreement will help U.S. beef exporters in Korea? 

Ambassador MARANTIS. Thank you, Chairman Baucus. A lot of 

us here ate a lot of delicious Montana beef last week at Big Sky 

at the APEC conference. This agreement is terrific for U.S. beef in 

that it will reduce the 40-percent tariff progressively over a period 

of 15 years and will allow, as Errol said, our ranchers and our exporters to build on the impressive growth in sales to Korea of U.S. 

beef, which grew by 140 percent last year. 

But we share the concern, Senator Baucus, that you raised with 

respect to achieving full access, not just in Korea, but also throughout the region, including in China and Japan. That is why Ambassador Kirk sent you a letter committing to request consultations 

with Korea under the 2008 protocol to discuss its full application 

once the FTA enters into force. We thank you for all of the work 

that you have done and look forward to our continued cooperation 

together. 

The CHAIRMAN. Thank you. 

I want to also thank Mr. Rice and the Montana Stockgrowers, because not all organizations were as vigorous and as forwardleaning as the Montana Stockgrowers in getting agreement by the 

administration to pursue greater access through both seeking the 

consultations once the agreement is admitted into force—looking 

toward full access, all ages, all cuts—and also the roughly $11 million in beef promotion. So I would just be interested in your reaction of the degree to which you think this is going to help American 

beef producers. I am also interested in your point about traceability, perhaps marketing and getting a brand, of course of Montana beef, in Korea. 

Mr. RICE. Well, again, Chairman Baucus, I would echo the sentiments of Ambassador Marantis in thanking you for your tenacious 

insistence on getting a beef deal as we move this agreement forward. The importance of this beef deal really benefits me as a 5thgeneration rancher. It benefits all the Montana ranchers that you 

are very well-acquainted with in investing in Korean consumers to 

showcase the healthfulness and the quality of our high-quality 

Montana and U.S. beef products. 

As the ambassador had articulated, the phasing out of the 40- percent tariffs on our products allows us to now take that $200 milVerDate Nov 24 2008 20:41 Mar 01, 2013 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 R:\DOCS\79457.000 TIMD
13 

lion that we were paying in tariffs and allows us to reinvest that 

back into the Montana family farms and ranches to ensure longterm sustainability for meeting this global food security challenge, 

which was a very evident theme at the recent APEC conference in 

Big Sky, MT. As you are well-aware, Chairman Baucus, the average age of the rancher in Montana is 57.8 years old, and we have 

to find opportunities to reinvest back into the next generation, into 

the fabric of rural Montana. 

With regards to the traceability comments, we believe that we 

have private sector solutions that can help us move this traceability discussion forward as we continue negotiations with China. 

We believe that this, in the form of a public/private partnership, 

can really move us forward, and we would be eager to work with 

you and your staff on some ideas that we had in moving that forward. 

The CHAIRMAN. That sounds pretty interesting. As a matter of 

fact, it sounds exciting. When you mentioned that I thought, hey, 

this is something new, something great. I think it would really advance the ball. I want to work with you to help make that happen. 

Mr. RICE. Absolutely. Absolutely. 

The CHAIRMAN. Thank you very much. 

Ms. Lee, I know you are opposed to this agreement. Are there 

some good points to this? What about the labor provisions? Are 

they not a little stronger? Don’t they have to be negotiated out before the agreement is fully entered into force? Does that help? 

Ms. LEE. Thank you, Chairman Baucus, for the question. We certainly did support the improvements in the labor and environment 

chapters that were incorporated into the Korea agreement, the May 

10th deal, which did strengthen the commitments that both countries made to meeting the ILO standards, making sure that they 

are enforcing their labor laws effectively and that they are not 

weakening their labor laws in order to increase trade or attract investment. 

So those are important provisions. However, we also have said, 

and we said at the time that those were negotiated, that it is important that countries bring their labor laws into compliance by 

ILO standards prior. The labor chapter is not that powerful a 

mechanism; it is not going to completely change or overhaul a 

country’s labor laws unless we want to be bringing challenges on 

day one of entering into the agreement. 

So we would like to see good faith on the part of the Korean government to address some of the concerns, particularly with respect 

to irregular workers and with the jailing of workers who exercise 

their right to demonstrate or to strike under obstruction of business penalties. So there are certain key issues that are problematic 

that we would also like to see our government build on and 

strengthen the May 10 provisions, particularly with respect to enforceability and dispute resolution. 

The CHAIRMAN. All right. But, as with Mr. Guertin—my time is 

up and I am not asking for a response—these FTAs do help, say 

with respect to Varian, enforcement of intellectual property provisions compared with no FTA, for example. I would assume the 

same is also true of the labor provisions. If we did not have these 

labor provisions compared with no FTA, workers’ rights in Korea 

14 

would be less protected than they are with the agreement. I assume that is correct? 

Ms. LEE. Yes. It is an improvement over the status quo. 

The CHAIRMAN. The status quo. Yes. 

Ms. LEE. But it comes in a package with market access and—— 

The CHAIRMAN. And it could be better. All right. Thank you. 

Senator Hatch? 

Senator HATCH. Well, thank you, Mr. Chairman. 

I appreciate all of you and your testimony here today. 

Ambassador Marantis, I hope you would agree with me that the 

deficit and our Nation’s debt pose a fundamental risk to American 

prosperity and our future. I hope you would also agree with me 

that our dire fiscal picture demands sacrifices across programs and 

across the government so that we as a country can again live within our means. I think you would agree with that. 

Ambassador MARANTIS. Yes. 

Senator HATCH. All right. 

I also hope you would agree with me that, unlike in 2009 when 

a Democratic Congress and the Obama administration were focused on stimulus programs and increased spending, today the 

Congress and the administration recognize that we have a spending problem, although we may disagree on the solution. 

So, as we wrestle with getting our spending under control and 

approach the debt ceiling limit, all programs and all spending, it 

seems to me, have to be examined carefully to protect the taxpayers and to ensure that every program achieves its purpose in 

the most cost-effective manner or be considered for elimination. 

Now, should the TAA program be treated differently than the 

rest of the government spending programs? Should it not be subject 

to restraint of growth and cuts as well? 

Ambassador MARANTIS. Senator, the TAA program has been an 

incredibly cost-effective program for helping workers manage the 

transition to globalization and helping workers train to be able to 

take advantage of the opportunities presented in the new economy. 

Senator HATCH. Well, fine. But don’t you think that that should 

be a subject of examination and restraint of growth and cuts if necessary, just like everything else has to be? 

Ambassador MARANTIS. The administration strongly supports renewal of the 2009 TAA program which, when it was negotiated, 

was designed to address many of the concerns that the GAO and 

others had raised about the 2002 program. So the administration 

is very comfortable working with Congress to seek renewal of the 

2009 program. 

Senator HATCH. Well, Ambassador Kirk is fond of reminding us 

that extending a robust TAA program keeps faith with the American workers. Which American workers? Exactly which workers is 

Ambassador Kirk talking about, and how does piling on more debt 

keep faith with American workers, all of whom are going to be 

taxed more? And what about the workers who lose their jobs due 

to lost export opportunities caused by further delay in implementing the Korea agreement? Does such a delay keep the faith of 

those workers, farmers, and ranchers and others who will benefit 

from this free trade agreement? 

15 

Ambassador MARANTIS. Sir, regardless of whether or not we pass 

or do not pass a trade agreement, globalization continues. Trade 

marches on, and employment patterns shift. That is why it is important that we have a robust TAA program in place, because it 

helps workers manage that transition should their jobs move or 

should they lose their jobs because of increased imports. 

It has been an integral part of the bipartisan trade consensus 

since 1963, over successive Republican and Democratic administrations and successive Republican and Democratic Congresses, and 

we are anxious to work with you and Chairman Baucus to ensure 

renewal of TAA consistent with the objectives of the 2009 program. 

Senator HATCH. Well, it seems to me that TAA has nothing to 

do with these free trade agreements. These three agreements are 

going to produce jobs in this country, and they are going to produce 

wealth in this country, and they are going to help us to do better 

in this country. People have opportunities because of them. 

Ambassador MARANTIS. Senator, these agreements are incredible 

job-creating and job-producing agreements. 

Senator HATCH. Right. 

Ambassador MARANTIS. But again, regardless of whether or not 

the FTAs go into force, the forces of globalization and the forces of 

job churn exist. That is why it is so important that we get TAA renewed to help workers manage the transition that happens. 

Senator HATCH. Well, I would appreciate it if we could get some 

exact figures of who is going to be hurt by these three trade agreements. I do not see anybody going to be hurt. I think we only benefit from these trade agreements. It seems to me, to hold them up 

because of TAA—now, it may be very important to pass TAA. It 

may be that you can make a tremendous case for that, and that 

labor can make a tremendous case for that. I do not know. 

But it does not appear to be a reason to stop these three trade 

agreements, other than you would use these three trade agreements as leverage. That is a heck of a way to treat our allies, these 

hemispheric partners of ours who are so important, especially when 

you consider there is as much as $13 billion in positive trade 

through these three trade agreements. 

So it is hard for me to understand why the big fight over these 

three trade agreements. That does not mean that you could not 

make a case that we are losing jobs, but we are going to lose a heck 

of a lot of jobs if these agreements do not go through. I think the 

administration ought to take that into consideration. 

Ambassador MARANTIS. Senator, we are as anxious as you are to 

move these agreements as quickly as we can, given the great 

job—— 

Senator HATCH. But you are holding them up because of the 

TAA, and TAA does not seem to apply in these three instances. 

Now, why would we not go after American jobs and worry about 

TAA, if it is legitimate, at a later date? Then I think you might be 

able to make a pretty good case. Why do we not work on that separately? I am not against that. I am certainly against it with regard 

to these three free trade agreements. Why would we not do that? 

Ambassador MARANTIS. Senator, we are anxious to move forward 

on a comprehensive trade agreement, a trade package, as quickly 

as possible, that includes the FTAs, TAA, and renewal of our exVerDate Nov 24 2008 20:41 Mar 01, 2013 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 R:\DOCS\79457.000 TIMD
16 

pired trade preference programs as well, and we are anxious to 

work with you as quickly as possible to accomplish all of those 

goals which are fundamental to the President’s trade agenda. 

Senator HATCH. But you cannot do it if we do not pass these free 

trade agreements. You cannot get there. 

Ambassador MARANTIS. I think we can work together and work 

on all of these issues, and do so in tandem. As we proceed on the 

trade agreements, we can proceed on TAA, and we can proceed on 

renewing our expired trade preference programs. We hope to work 

very closely with you and Senator Baucus, congressional leadership, and the Ways and Means Committee to accomplish those objectives. 

Senator HATCH. My time is up, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

And I might say, my view is that, either they all pass, or none 

of them passes. That is because we have Republicans and Democrats, we have the House and the Senate, and it is a compromise, 

I think, that is necessary. It is going to be all or nothing. I am not 

going to get into the sequence yet because that has to be worked 

out, but I do think generally, generically, they all have to pass this 

year. 

Senator Carper? 

Senator CARPER. Thanks, Mr. Chairman. 

To our witnesses, welcome. You have all done an exceptional job 

in presenting your testimonies today. Thank you so much for those 

testimonies and for being here. 

I just want to say, in response to the comments raised by our 

ranking Republican, Senator Hatch, the reason why, Senator, I 

think it is important for us to more or less do these together is, 

there is a fair amount of job creation that is going to inure to us 

in this country from the adoption of an agreement like this. There 

are going to be some people who are going to be displaced, and 

there are going to be some people whose economic future will not 

be brightened. 

In the spirit of the Golden Rule, treating other people the way 

we want to be treated, I think we have an obligation to those people to say, we are not forgetting you. We are not going to throw 

you under the bus; we are going to take your interests and your 

families’ interests in consideration to make sure we look out for 

you, too. So, I would just lay that at your feet. 

A friend of mine, a guy named Clyde Prestowitz, who is actually 

from Elsmere, DE, a trade economist—some of you know him— 

spoke to a group of us a couple of years ago about free trade agreements. He told us a story of talking to one of his counterparts in 

South Korea who was complaining about some of the provisions in 

the then-agreed to free trade agreement between the U.S. and 

South Korea. And Clyde Prestowitz, my friend, said to his South 

Korean friend, ‘‘What are you complaining about? You will find a 

way to get around these provisions anyway.’’ The guy from South 

Korea thought about this for a minute, and he said, ‘‘Yes, you are 

right.’’ That is what he said: ‘‘Yes, you are right.’’ How can we 

make sure he is not right? 

Mr. Ambassador, take it away. 

17 

Ambassador MARANTIS. Senator Carper, he is not right. The 

trade agreement has extensive and robust provisions on dispute 

settlement that are designed to deal with any instance of noncompliance. We negotiated—it was a difficult negotiation—with the 

Koreans, and they negotiated this agreement in good faith. 

I have every expectation that the Korean government will live up 

to the obligations that it committed to, and that, should there be 

a problem, we will enforce and we will use the provisions of the 

Korea-U.S. Trade Agreement’s dispute settlement provisions to ensure that what we sign, those provisions are enforced and we get 

the benefit of the bargain. 

Senator CARPER. All right. Thank you. 

Our chairman, Senator Baucus, focused a lot of his questions and 

comments on beef. Now, the old question, ‘‘Where’s the beef?’’—in 

Delaware and in Maryland and the Delmarva Peninsula, the beef 

is in poultry houses. The beef are in poultry houses. For every person who lives in Delaware, there are over 300 chickens. The same 

is true on the Maryland side of Delmarva. 

You mentioned in your testimony, Mr. Ambassador, immediately 

upon entry into force, the U.S.-South Korea Free Trade Agreement 

eliminates tariffs on two-thirds of American agricultural exports to 

South Korea. I am not going to ask about the beef, but I would certainly like to ask about the poultry. 

Ambassador MARANTIS. Sure, Senator Carper. The agreement is 

great for poultry. For, I think, our more important export to South 

Korea, frozen leg quarters, the agreement eliminates the 20- 

percent tariff in 10 annual increments over a period of 10 years. 

Senator CARPER. All right. 

How about the necks? 

Ambassador MARANTIS. Necks? 

Senator CARPER. I am kidding. [Laughter.] 

It is the necks we are trying to sell. But people buy the claws, 

they buy the beaks, the feathers. We still have a hard time moving 

the necks. So, if you can find somebody around the world who 

wants that, we will say, God bless you. [Laughter.] 

I have a serious question. Not that poultry is not serious. A question on intellectual property. U.S. innovation is critical to keeping 

our business competitive and to creating jobs. In our global economy we face intellectual property challenges, as you know, which 

come at the expense of innovation and job creation. 

For this reason, many of us support high protection standards for 

intellectual property. I view the standards set forth in the U.S.- 

Korea Free Trade Agreement and U.S. law as the foundation for 

intellectual property and trade agreements going forward. Many 

believe that the Trans-Pacific Partnership is a regional platform 

that could potentially expand to include China and India, making 

it critical that you continue to seek the highest intellectual property standards during the course of these negotiations. 

Just take a moment to explain for us what the U.S. Trade Representative is doing to ensure the negotiations for the Trans-Pacific 

Partnership agreement build off the intellectual property standards 

in the Korea-U.S. agreement. 

Ambassador MARANTIS. Thank you, Senator Carper, and thanks 

for pointing out the tremendous advances that the U.S.-Korea 

18 

trade agreement makes in the area of intellectual property. It provides extraordinarily strong protections for all of our industries and 

should boost exports of our creative industries—agriculture, chemicals, pharmaceutical products, our famous brands—and there are a 

number of provisions in there that would do that. 

Going forward, with respect to the Trans-Pacific Partnership, we 

expect that whatever we negotiate in the TPP will be able to stand 

proudly alongside what we have done in the Korea agreement and 

in the Peru agreement, and in other of our trade agreements that 

have very high standard intellectual property protections. 

Senator CARPER. All right. Well, stick with it. 

I want to say in closing, really, there was a time, I think, many 

years ago when, in all seriousness, the export of poultry was not 

a big deal. The poultry we raised on Delmarva was later exported 

around the country, later around the hemisphere. Now, one out of 

every five chickens that is raised in this country is exported, so it 

is a big deal for all of us. It is a lot of scratch, as we say in Delmarva. 

Thank you. 

The CHAIRMAN. Senator Kerry, your timing is perfect. 

Senator KERRY. Oh, Senator Cardin. All right. Senator Cardin, 

you are next. 

Senator CARDIN. I thank Senator Kerry for allowing me to go so 

I can continue on the poultry industry in Delmarva. 

The CHAIRMAN. Why are you two down on the end like that? My 

gosh. 

Senator CARDIN. Chickens of a feather flock together. [Laughter.] 

It is always wonderful to have my colleague promote Maryland 

poultry, so thank you very much. [Laughter.] 

I want to follow up. I want to talk a little bit about human 

rights, basic rights, and labor rights, because one of the only times 

that we can get the attention of our government officials on international labor issues is when we have an agreement before us. It 

seems like all of a sudden then there is a lot of interest. 

So let me follow up on the Kaeso ̆ng Industrial Complex, because 

the labor practices there are horrible. As I understand it, money is 

paid to the North Korean government, and they pay a very small 

sum to the actual workers, and the conditions within the industrial 

complex are certainly not meeting any type of international standards. 

There is concern that products that are produced from the 

Kaeso ̆ng Industrial Complex will end up coming into South Korea 

and then to the United States through this agreement. As part of 

the agreement, there is annex 22(b), I think it is, which allows a 

committee to establish these outward processing zones. What protection do we have in the agreement, and how do you see this being 

implemented, to prevent products made from the Kaeso ̆ng Industrial Complex entering into the American market? 

Ambassador MARANTIS. Thank you, Senator Cardin, for that 

question. There has been, I think, a lot of confusion with respect 

to Kaeso ̆ng. Let me be very clear: there is nothing, absolutely nothing, in this agreement that would allow products from Kaeso ̆ng to 

enter into the United States. For that to change with respect to the 

annex that you talked about, Congress would have to pass a law, 

19 

and the President would have to sign a law to change any tariff 

treatment that we would give. 

Senator CARDIN. Why could the committee that is established 

under the annex not establish products coming in from this industrial zone as being part of the agreement? 

Ambassador MARANTIS. It can make a recommendation to both 

the United States and South Korean governments, and the two 

governments can make a recommendation, but, in order for that to 

be operationalized, Congress would have to pass a law. Congress 

has the final word here, and that is very clear. 

Senator CARDIN. To make it clear, if we find any products that 

originate from the Kaeso ̆ng Industrial Complex, it would violate 

the terms of this agreement, and you are prepared to take action 

under the agreement? 

Ambassador MARANTIS. Correct. It would not only violate the 

terms of this agreement, but it would violate the sanctions that we 

have against North Korea. We have very robust sanctions against 

North Korea that prohibit the direct or indirect importation of any 

good, technology, and service coming from North Korea unless 

there is a license granted by the Treasury Department. 

Senator CARDIN. I know that agreement. I am familiar with that. 

You are saying, if we find any products that come in here from any 

zone with North Korea, it would violate the agreement and you are 

prepared to take action—— 

Ambassador MARANTIS. Correct. 

Senator CARDIN [continuing]. And that the annex does not 

change that at all? 

Ambassador MARANTIS. Correct. 

Senator CARDIN. Fine. Thank you. 

Let me go to autos for one moment, because I looked at the numbers on autos today. The United States exports 6,100 cars and light 

trucks to Korea. They did that in 2009. Korea exported 475,000 

cars to the United States. We are concerned with the point that 

Ms. Lee raised about content. Can you tell me, what do we anticipate the changes in the free trade agreement will mean for U.S. 

manufacturers in export access to the Korean market? 

Ambassador MARANTIS. Senator, we worked hard and concluded 

this agreement in December to address the key barriers that have 

obstructed the access of our auto makers into the Korean market, 

and we did so in a number of ways, including by addressing standards, by including provisions on safeguards, et cetera, and I am 

happy to go through that in detail. 

Senator CARDIN. Have you been able to estimate what type of a 

market share you think the U.S. auto manufacturers would be able 

to export to? 

Ambassador MARANTIS. Yes, sir. The ITC, in response to a request from Chairman Camp of the Ways and Means Committee, 

has estimated that U.S. exports, as a result of what we did in the 

December 2010 agreement, would increase by 41 to 56 percent. I 

think what we did—— 

Senator CARDIN. Forty-one percent over the 6,100 cars? 

Ambassador MARANTIS. Correct. 

Senator CARDIN. That is not very many cars. 

20 

Ambassador MARANTIS. That is correct, sir. We have faced a 

number, a web, of tariff and nontariff barriers in the Korean market in the past. This agreement will open up that market, and we 

will be able to build our sales in that market. The Big Three are 

already planning their new sales and distribution networks in that 

market. What we did in the agreement, Senator, was so significant—— 

Senator CARDIN. Well, what period of time are we talking about, 

just so we have the time frame? 

Ambassador MARANTIS. What period of time? 

Senator CARDIN. In what time are we going to get these increases in market share? 

Ambassador MARANTIS. We are going to start as soon as the 

agreement enters into force. It is not going to happen overnight. It 

is going to be a progressive increase in exports. I also want to make 

the point, Senator Cardin, that because of what we did in December, three unions—the United Auto Workers—— 

Senator CARDIN. I know they support it. But I am trying to figure out, if our expectation is that we are going to go from 6,100 

cars to about 9,000 cars and trucks, that is not very great. 

Mr. Chairman, with your indulgence, just for 30 seconds more, 

can Ms. Lee respond? Because I see she is anxious. 

Senator HATCH [presiding]. Go ahead. 

Senator CARDIN. Thank you. 

Ms. LEE. I just wanted to say that, in terms of the increases, as 

you say, there is an increase in U.S. auto exports to Korea—about 

$194 million according to the ITC’s study—but they also project 

that U.S. imports of autos from Korea will rise by $907 million. So, 

even with the improvements in the auto sector, there is a projection by the ITC—which is often overly optimistic and does not take 

into account the light trucks, which is where you could actually see 

some real job losses—of a $713-million increase in our net deficit 

in autos. 

Senator HATCH. Senator Kerry? 

Senator KERRY. Thanks very much, Mr. Chairman. I appreciate 

it. 

Ambassador Marantis, sort of picking up on the concern about 

the impact of this agreement and the potential impact on some of 

our workers, it is accurate, is it not, that if we did not proceed forward with this agreement, the Korea-E.U. agreement will take effect this summer, and won’t the Korea-E.U. agreement taking effect disadvantage American workers if we do not ratify this agreement? 

Ambassador MARANTIS. Absolutely, Senator Kerry. The KoreaE.U. agreement takes effect on July 1. Once that agreement goes 

into effect, many of the advantages that would go to our manufacturing sector, our service providers, our farmers and ranchers, the 

E.U. will start to benefit from. The longer it takes for us to ratify 

this agreement, the longer our E.U. competitors will have a competitive access to Korea’s market. 

Senator KERRY. So, bottom line, if we are going to try to help 

American workers, we want to help them to be able to export and 

to get into the market. If we do not, I think American workers are 

going to be disadvantaged. 

21 

Ambassador MARANTIS. I agree, Senator Kerry. 

Senator KERRY. Now, let me get to a second point with respect 

to that. I think Senator Hatch and others—I am not sure about 

Senator Hatch, but I know that there are others on the other side 

of the aisle who have expressed concerns about the trade assistance 

money being linked to this agreement and others. 

Now, I have supported trade agreements, recognizing that the 

changes in the marketplace also do create dislocations. I think you 

have to be blind if you do not acknowledge that, whether it is a 

call center or some other kinds of manufacturing efforts. While we 

open up markets and while we are able to create more net jobs, you 

have to acknowledge that, whether it is textiles in some parts of 

the country or other things, some workers suffer a dislocation, 

which is why we created Trade Adjustment Assistance in the first 

place. Is that a fair statement? Ms. Lee, you would agree with that. 

That said, I would say to my colleagues, the reason that it is so 

important to do the Trade Adjustment Assistance, and the reason 

that 19 Republican Governors have joined with Governors in writing to say we should do it, is just an honest recognition that it is 

to our benefit as a country to help those people who are suffering 

from that dislocation to be able to move into retraining, reeducation, further education, whatever it is that allows them to manage 

that dislocation and enter the marketplace. 

The reason, I would say to Senator Hatch and other colleagues, 

that that is so important is that the consensus that has existed in 

this country for doing trade and having these agreements has 

frayed somewhat. It has frayed because of the dislocation, but accompanying the dislocation has been a growing inequity in the 

market in America in terms of income and opportunity. 

So, if we are going to keep the consensus that says, yes, we benefit net by creating more jobs and we will export more and we will 

adjust our balance of payments and we will get all those benefits, 

we have to address that broad consensus and hold it together. 

That, it seems to me, is part of why Trade Adjustment Assistance 

is so important. I would like both you and Ms. Lee to sort of address that. 

One thing. I heard some people try to suggest that it is a union 

boondoggle. The money does not go to unions. Unions are representing workers, people, Americans. The money goes to those 

Americans to help them go to a school, or get vocational training, 

or something that helps them to go back and get a job. 

So I would like to put this into its proper perspective, if we can. 

Ambassador MARANTIS. Yes. Thank you, Senator Kerry. Building 

on that, two-thirds of the workers who benefit from TAA are nonunion workers as well. But we agree. The administration fundamentally agrees that TAA is an integral part of the trade consensus. It has been since the program was created in 1963. It has 

evolved over the years to take into account developments in the 

economy. 

That is why, in 2009, TAA was extended to cover service workers 

and to deal with offshoring not just to our FTA partners, but to 

countries like China and India. We are committed to moving forward with a comprehensive trade agenda this summer. That includes our trade agreements, that includes Trade Adjustment AsVerDate Nov 24 2008 20:41 Mar 01, 2013 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 R:\DOCS\79457.000 TIMD
22 

sistance, renewal consistent with the objectives of the 2009 program, as well as renewing our trade preference programs. We look 

forward to working with you and the committee to do so. 

Senator KERRY. Ms. Lee? 

Ms. LEE. Thank you, Senator Kerry. I totally agree with you that 

the whole point of Trade Adjustment Assistance is to deal with the 

churning that happens in the labor market as a result of globalization, and that, even if you believe that these trade agreements will, 

on net, create jobs, most economists—every economist, I think— 

would agree that there are some workers who will lose their jobs 

and will be disadvantaged and who need the new skills to succeed 

in the global economy. 

And so, failing to renew TAA is, in fact, both morally wrong, but 

it is also economically inefficient, because we would squander one 

of our most precious resources as a country, which is our human 

capital, that we want every worker to be at his or her potential to 

be able to have the skills to compete, to look for new jobs, possibly 

to move to new parts of the country. That is what TAA has been. 

It has always been a bipartisan program. It has always had the 

support of business and labor. 

In fact, I just think it is unconscionable that TAA was not renewed several months ago, and we would not have to have it tied 

to the discussion of the trade agreements. It is something that any 

industrialized country, any civilized society, should put in place as 

a way of making sure that workers have every opportunity to fulfill 

their potential. Thank you. 

Senator KERRY. Thank you very much. 

Thank you, Mr. Chairman. 

Senator HATCH. Well, thank you. Thank you, Senator Kerry. 

Let me just say that one of the problems is, TAA, as I view it, 

is not going to pass in this Congress. What I am having trouble 

with is stopping these three trade agreements when you know that 

it is not going to pass, especially in the form that you want it to 

pass in—7.2 billion bucks over 10 years. With the problems that 

our country has, I think, yes, there are a lot of people who will support it, but there is a real question whether—because Blockbuster 

went broke because its business plan was not as good as Netflix’s, 

should all those people who lost their jobs hold up this particular 

agreement, or should we just face that problem separately? It is a 

tough problem. I think, Ms. Lee, you know that we do not have the 

votes in this Congress to do this. So why would we still hold up 

these agreements that mean a lot of jobs in America? That is one 

of the problems. 

Senator Grassley? 

Senator GRASSLEY. Yes. Senator Kerry’s first question on the 

interaction between our passage and what Europe has already done 

was the basis for my question, but I could follow up and ask the 

Ambassador and Mr. Rice if you could explain particularly the impact that it would have on agriculture if Europe would get there 

first. 

Ambassador MARANTIS. I am happy to, Senator Grassley. This is 

an amazing agreement for agriculture. Two-thirds of our agricultural exports will go to zero tariffs upon entry into force of the 

agreement. We talked a little bit earlier about why it is a good 

23 

agreement for beef. It will remove the 40-percent tariff on beef over 

the course of 15 years. For pork, which I know is very important 

to your State, 90 percent of U.S. pork exports will go duty-free in 

2016; soybean exports go duty-free immediately; cotton exports go 

duty-free right away; wheat exports go duty-free right away. I can 

go on and on through many of the agricultural commodities to 

show why it is important. 

One other thing, Senator Grassley, to note is this agreement in 

agriculture levels the playing field. We currently face an average 

52-percent tariff in Korea, where Korean exporters in the agricultural sector face an average tariff of 9 percent. Entry into force of 

this agreement will level that playing field and will allow our farmers and ranchers to compete on the same playing field as their Korean counterparts. 

Senator GRASSLEY. Before you answer, and for both of you as 

well, that is what it is when we get there. But let us suppose we 

get there 6 months or a year later than Europe does. Do you have 

any supposition that if we do not get there first, we are going to 

lose market permanently, or do you think it is just a temporary 

loss? 

Ambassador MARANTIS. I think the longer we delay, the harder 

it becomes to regain a competitive advantage. The E.U. agreement 

enters into force on July 1. That is why it is imperative that we 

move quickly here to get this agreement done so we do not suffer 

any competitive dislocations in the Korean market. 

Senator GRASSLEY. Mr. Rice? 

Mr. RICE. Thank you, Senator. I would echo the Ambassador’s 

statements with regard to running the risk of the E.U. getting 

there before us. 

We are very proud in Montana that we are able to send our highquality feeder cattle to the farmer feeders in Iowa, where we feed 

outstanding Iowa corn. As the ambassador had mentioned, we had 

been facing a 40-percent tariff on beef exports into this country. We 

really value that $200 million in savings on tariffs to reinvest back 

into the family farms and ranches in Iowa, as well as the multigenerational family farms and ranches in Montana, because we see 

bringing this next generation back to the ranch as being critical. 

Exports drive profitability, and so the timing is so critical to move 

this forward. 

Senator GRASSLEY. I will yield back the rest of my time, Mr. 

Chairman. 

Senator HATCH. Well, thank you, Senator Grassley. 

Let me just say this. This has been a good panel. It seems to me 

that all U.S. workers should be offered the training needed to compete in a global economy. I do not have any problem with that, but 

I fail to understand why we pick some workers to help over others. 

It just seems fundamentally unfair. But to extend the expanded 

TAA benefits to all workers would be prohibitively expensive, just 

as expanding into a larger subset of workers would be costly as 

well to the taxpayers. 

My problem is not so much helping people, my problem is we 

cannot get TAA through this Congress. You have just made a terrific case why we have to go ahead with these treaties regardless, 

because it means jobs, it means competitiveness, it means a United 

24 

States advantage. It means help to our economy at a time that we 

need help. If it is held up because of an insistence to have TAA as 

a precondition when we cannot pass it, it seems to me that it is 

penny-wise and pound-foolish, and I think it is for labor as well. 

Be that as it may, I notice Senator Wyden is here. I will yield 

to him. 

Senator WYDEN. Thank you very much, Senator Hatch. 

Let me ask a question for you, Ambassador Marantis. Let me 

start there. It is good to see you. To better understand the impact 

of the agreement—and, as you know, I chair the Subcommittee on 

International Trade and Competitiveness—I sought the help of the 

staff of the International Trade Commission. In 2007, the International Trade Commission found the agreement would have a 

pretty limited impact on job creation because the economic landscape in 2010 is profoundly different than it was in 2007. The ITC 

staff helped to determine that the decree of a free trade agreement 

has the potential to create about 280,000 new American jobs and 

boost U.S. economic output by $27 billion each year. 

I would ask Senator Hatch that this work by the International 

Trade Commission be made a part of the record. 

Senator HATCH. Without objection, it will be. 

[The memorandum appears in the appendix on p. 58.] 

Senator WYDEN. At the same time, Ambassador Marantis, the 

projection showed that thousands of Americans currently employed 

in the manufacturing sector could lose their jobs. Obviously, with 

the kind of heartache all across the country in terms of workingclass families and this economy, you certainly cannot ignore those 

projections. Just as you do not want to ignore the up-side and what 

is positive, you certainly cannot look the other way when you see 

those kinds of concerns about folks who could be harmed. 

So, Mr. Ambassador, let me ask you whether you have had a 

chance to look at that International Trade Commission document 

which reflects the analysis of the staff, and particularly whether 

the administration would largely agree with that analysis. 

Ambassador MARANTIS. Thank you, Senator Wyden. And thanks 

for your work with the ITC on that report. I mean, it was very 

heartening that, even though it is not an official ITC report, for us 

to see that it is consistent with our own analysis that the Korea 

trade agreement is going to support jobs throughout the economic 

sector. 

What is, I think, most interesting about your report is what you 

just said, Senator Wyden, which is that the ITC’s analysis is done 

in a way that more closely approximates the economic conditions 

that we face today, one of higher unemployment and one of underused capacity, and in doing so makes the analysis that the agreement will support an additional 280,000 jobs. That makes what the 

administration has been saying sound conservative, but it is indeed 

consistent. 

But you also point out, Senator Wyden, that, even though in 

every sector in your report it shows the possibility of the agreement 

in terms of creating jobs and in the various States around the 

United States, there are sectors where there may be potential employment dislocation, which I think again emphasizes the point of 

25 

why it is so important that we reauthorize TAA consistent with the 

2009 law as quickly as possible. 

Senator WYDEN. Let me ask you about some of the areas where 

certainly folks in my home State are going to be concerned, but I 

think folks nationally. As you know, we have a lot of agriculture 

in our State, and the numbers look pretty good there. I mean, they 

look pretty impressive. We also have a lot of electronics. It is something I feel very strongly about. I feel very strongly about medical 

technology. I have worked closely with folks in that sector. 

The analysis does show that the American electronics industry in 

particular could suffer under this agreement. Those are folks whom 

I represent, Senator Merkley represents, who work hard. There has 

been a lot of change in that sector. What would be the administration’s position about trying to help folks in that particular sector? 

Ambassador MARANTIS. I think, Senator Wyden, a couple things. 

One, there are going to be new export opportunities in Korea as a 

result of the agreement. I believe that 96 percent of Korea’s tariffs 

on electrical products go to zero upon entry into force. But there 

are also interesting provisions in this agreement with respect to ensuring technological neutrality so that it would forbid Korea from 

mandating a particular standard that our exporters would have to 

use to send their high-technology products into the Korean market. 

So I am hopeful that the combination of removal of nontariff 

measures, as well as providing duty-free access to 96 percent of all 

electrical equipment products upon entry into force, should help. 

Senator WYDEN. I think those certainly sound like constructive 

steps. Let us spend some additional time talking about it, because 

that is a very big concern for folks I represent. 

I want to spend one last minute on the question of Trade Adjustment Assistance. I appreciate your indulgence, Senator Hatch. I 

have done everything I can to support trade, and particularly an 

economic philosophy that says what we ought to be doing in this 

country is growing things here, making things here, adding value 

to them here, and then shipping them somewhere. That, in a sentence, tries to kind of capture what I think we ought to be trying 

to do more of in the American economy. 

And as part of that kind of philosophy, Trade Adjustment Assistance, to me, is absolutely key. Absolutely key. Because when we 

have an economy like this with constant change, which is what 

market economies are all about, Trade Adjustment Assistance is 

absolutely key. That is why I want to see Trade Adjustment Assistance locked in on the President’s desk so that nothing can be done, 

with the way Congress works, to make it something that is put off 

until another day, and you have a trade agreement and no help for 

workers. 

What is the administration’s position on making sure this actually gets signed into law before the trade agreements come up so 

we have that in place? I would like your thoughts on that, Ambassador. Then, Ms. Lee, if we could. I know you all feel strongly 

about it, and rightly so. 

So let us start with you on that point, Mr. Ambassador. 

Ambassador MARANTIS. Sure, Senator Wyden. As Ambassador 

Kirk said about a week, a week and a half ago, the administration 

does not intend to submit the implementing bills until we have a 

26 

deal with Congress on renewing TAA consistent with the goals of 

the 2009 law. This is an integral part of the President’s comprehensive trade agenda. We hope that we are able to move quickly on 

the FTAs, the pending FTAs, on Trade Adjustment Assistance, and 

on renewal of our trade preference programs, and are eager to 

work with you and members of this committee to do so quickly. 

Senator WYDEN. My time has expired. I would only say on that 

point, what I am concerned with, and I note that your statement 

is a good-faith one, is, if we have a deal and one chamber passes 

it and another chamber does not, then we are sitting there with the 

workers unprotected and everybody says, oh, we ought to pass the 

agreement. So I want to give the last word to Ms. Lee, but I just 

think we have to have this iron-clad, and it has to be signed into 

law so we do not play Russian roulette with the well-being of those 

workers who deserve those protections. 

If Ms. Lee could just answer, then I yield back. I thank you, Senator Hatch, for the time. 

Senator HATCH. Thank you. 

Ms. LEE. Thank you, Senator Wyden. And I completely agree 

with you that it is essential, before moving forward on the FTAs, 

that we make sure that TAA is done and is passed. 

I understand the point that you are raising, Senator Hatch, that 

there is not a lot of support for it this time. There has always been 

support in the past, and I would hope that, with the strong leadership of both the Republican and Democratic party, there will be 

enough support for a really great program like TAA, one that has 

served millions of workers over the years, to pass before it goes 

through. 

Just one last point on the ITC. We have had a lot of experience 

over the years, and I have had a lot of experience with the projections that have been made by various economists about the trade 

agreements. There are often odd things that happen, that there are 

shifts between trade with different sectors and trade with different 

countries. Even the ITC reports, I think, have a lot of oddities in 

them, so we do not put a lot of faith in those projections overall. 

Thank you. 

Senator HATCH. Well, let me just say this. I am one of the authors originally of the Job Training Partnership Act, and a whole 

raft of other bills that are supposed to take care of workers who 

lose their jobs and need retraining. One of the big problems why 

I do not think it will pass is because they want $7.2 billion, at a 

time when this country is basically broke, for additional programs 

that may be duplicative. 

Let me just put it in real terms, then I will turn to Senator 

Thune. That is, if one worker loses his job because his factory 

burns down and another worker loses his job because a domestic 

rival company out-performs his company, and a third worker loses 

his job because of a relocation of a factory abroad to serve rising 

demand in a foreign market, which worker deserves more training, 

more income support, and more generous health care credits than 

the other two? If you had to pick, it would be pretty hard to do. 

The point I am making is, if we cannot get TAA through because 

it is too expensive under current circumstances, why hold up three 

agreements that are going to mean all kinds of jobs to America? 

27 

I mean, it just does not make sense. You have made a tremendous 

case that these agreements are critical to jobs. It just does not 

make sense to me. But that does not mean we should not work to 

help those who are in need, those who need training and so forth. 

But we have programs already in existence. Now, some of them 

apply perfectly, others do not. 

But the fact is, some people think you are holding up—the administration is holding up—these trade agreements that could 

mean so much to workers in this country and to this country’s 

economy at this time, to world affairs, just because the left wants 

you to do so. Well, that is a real problem to me because I think 

we ought to get these agreements through no matter what and 

then work on these other problems as we go along. 

Senator Thune, you are next. 

Senator THUNE. Thank you, Mr. Chairman. I could not agree 

more with what you just said. I will associate myself with those 

comments. These trade agreements are critical to the economy, 

they are critical to jobs and export markets, which is something 

that is important—very important—to my State of South Dakota. 

South Dakota is the Nation’s sixth-largest exporter of wheat and 

eighth-largest exporter of soybeans, and, under this agreement, an 

unlimited amount of U.S. wheat for milling can enter Korea dutyfree immediately upon implementation. Korea also would immediately eliminate its 5-percent tariff on food-use soybeans. 

The American Farm Bureau Federation estimates that U.S. agricultural exports are increased by as much as $1.8 billion every year 

due to this agreement. It has been almost 4 years since this U.S.- 

Korea agreement was signed, and we just cannot afford to wait any 

longer. So, I would echo what you have said, Mr. Chairman, in 

your comments and just urge the administration to work with us 

here to get this ball rolling. 

There was a letter recently signed by 25 Governors, a bipartisan 

letter to the President, in support of these pending trade agreements and TAA authorization, but it also included a call for TPA 

authority. I am wondering if, in a trade package, whether some of 

these other things should be included and accompanying these free 

trade agreements, with the administration’s support, including 

Trade Promotion Authority. 

Ambassador MARANTIS. Hi, Senator. Thanks for that question. At 

this point the administration has been pretty clear that we support 

moving forward quickly with the pending trade agreements, with 

Trade Adjustment Assistance, and with renewal of several of our 

expired trade preference programs. 

Senator THUNE. But not TPA. 

Ambassador MARANTIS. Not at this point. 

Senator THUNE. Is TPA important to the administration’s stated 

goal of doubling exports in 5 years? 

Ambassador MARANTIS. I am sorry. Can you repeat that? 

Senator THUNE. Well, I just say, is Trade Promotion Authority 

important to the administration’s stated goal of doubling exports 

over the next 5 years? 

Ambassador MARANTIS. At some point we are going to have to 

take a very close look at how we deal with Trade Promotion Authority as we advance our negotiations in the Trans-Pacific PartVerDate Nov 24 2008 20:41 Mar 01, 2013 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 R:\DOCS\79457.000 TIMD
28 

nership, but right now we are really focused on getting these three 

FTAs done, as well as Trade Adjustment Assistance and our expired trade preference programs. 

Senator THUNE. I have a question that has to do with a company in my State. But South Korea has a $580-billion services sector, including financial services. I understand the one aspect of this 

agreement that is new and ground-breaking relates to cross-border 

data processing. For example, Citigroup, whose credit card operations are based in Sioux Falls, SD, has commented that these 

rules allow data processing support for Citigroup’s operations in 

Korea to be based outside Korea, perhaps back in the United 

States. Can you comment on the importance of ensuring that our 

trade rules keep up with the ever-changing technology, and these 

data processing provisions in particular? 

Ambassador MARANTIS. Yes. I mean, the services commitments 

in this agreement are pretty incredible in that, as you said, they 

will really provide new market opening to Korea’s $580-billion services market in the financial services sector, in the express delivery 

sector, for information and computer services. As you have said, 

Senator Thune, we try to keep up with developments in the economy by ensuring that the commitments that we negotiate in our 

trade agreements do do things that are important to our businesses 

to be able to compete in the 21st-century economy. 

Senator THUNE. All right. 

Mr. Rice, your testimony notes that Korea is already one of the 

largest export markets for American beef and that this agreement 

will result in $325 million in tariff reductions once the agreement 

is fully implemented. But of course, tariff reductions will not be of 

much use if our exports are kept out of the Korean marketplace 

due to regulations that are not based on sound science. I know that 

ensuring that Korea’s beef regulations are based on sound science 

has been a high priority for Chairman Baucus. It is also something 

that is important to a lot of us who represent livestock-producing 

States. 

Could you expound upon your testimony regarding some of the 

innovative approaches that the U.S. beef industry has undertaken 

to deal with some of the requirements that are imposed by nations 

such as Korea? 

Mr. RICE. Yes. Absolutely. Thank you for your question, Senator 

Thune. And, among the other many high-quality commodities that 

come from your State of South Dakota, cattle is also one of them. 

The ranchers I represent in Montana enjoy a plentiful exchange in 

interstate commerce with South Dakota in feeder cattle and highquality seed stock as well. So I appreciate your question. In my testimony, you are right, these exports have estimated adding $145 

per head to South Dakota farmers and ranchers, as well as Montana farmers and ranchers. 

While we will see exceptionally good phasing out of the 40- 

percent tariffs and the added value in dollars that we feel we can 

save in what we are paying in tariffs right now on beef, we can reinvest that back into South Dakota farmers and ranchers, as well 

as Montana farmers and ranchers, and the fabric of rural America. 

It also speaks to the sound science, which Chairman Baucus has 

been insistent on, putting forth a deal that will have consultations 

29 

on the science involved that are based upon international standards so that we can get to a rules-based system. 

One of the things that I also mentioned in my testimony is the 

element of traceability. When we were locked out of a number of 

the Pacific Rim markets after BSE in 2003, traceability really 

emerged as a market force to qualify cattle under age and source 

conditions that would provide a steady flow of cattle to enter those 

expanding markets as we began to grow back into South Korea, 

back into Japan. Those technologies are still very real today. They 

are putting more premiums in producers’ pockets, and we feel very 

strongly that those technological innovations can help to expand 

other market access opportunities like China, where traceability is 

a hang-up right now for beef. 

Senator THUNE. All right. Good. Thank you. 

Mr. Chairman, my time has expired. I want to thank our panel 

for their good comments. 

Senator HATCH. Well, thank you so much. 

I just have one last question for you, Mr. Guertin, and then we 

will close down the hearing. 

Now, it is clear to me that Varian’s medical and security products are highly complex, they are scientific, technical, and of course 

very precise types of equipment. And you said, if we do not pass 

these free trade agreements—specifically Korea is the one you 

mentioned. Let us say that we do pass them. Would these types of 

jobs that you are talking about, would we increase the number of 

jobs at Varian? 

Mr. GUERTIN. Thank you for the question, Senator. Yes. Our 

hope is that these kinds of agreements will increase our ability to 

do business with countries like South Korea that will offer us protections, will enable us to compete with other nations. It has been 

mentioned, a number of our competitors are E.U.-based competitors, so we do not want to be disadvantaged versus those competitors. If we have a level playing field, we will be able to sell more 

to South Korea. 

Frankly, most of the world is very under-equipped with medical 

devices. These kinds of agreements are crucial to us in order to 

place our high-technology components in those locations. 

So I do not anticipate any reduction in U.S. jobs for our industry 

associated with this; I anticipate an increase in the number of jobs 

associated with this. 

Senator HATCH. Well, thank you. I think each of you has added 

a lot to this testimony today, and I appreciate it personally and 

wish we could solve these problems. I would do almost anything to 

get them solved. But I think the administration has to work to get 

these issues resolved, because we need to pass these three trade 

agreements. And this is just a preliminary step to a lot of others 

that mean a lot more jobs. I think each one of you at the table 

would benefit greatly if we can pass these three trade agreements. 

I am going to do everything I can to get them passed. But we want 

to thank you for taking the time to be with us today. 

With that, we will recess until further notice. 

[Whereupon, at 11:44 a.m., the hearing was concluded.] 

(31) 

A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD


79457001.eps
32 


79457.002

The United States and Korea concluded our FTA negotiations in 2007, but the agreement fell 

short in important respects. It failed to provide additional market access for U.S. beef, and it 

failed to secure better access and better protections for U.S. auto manufacturers. 

Many of my colleagues on both sides of the aisle and in both houses of Congress joined me in 

expressing strong concerns. Unfortunately, our two countries were unable to make progress 

addressing these concerns at that time, so our journey faltered. 

But late last year, our two countries took an important step to put us back on the path to 

implementation. In December, the United States and Korea announced an agreement that will 

help U.S. auto manufacturers increase their auto sales to Korea. 

And thanks to the persistence of Ambassador Kirk, and you, Ambassador Marantis, the 

Administration recently agreed that it would do what it takes to secure better market access in 

Korea for U.S. beef. We identified two concrete steps to ensure continued progress. 

First, the Administration agreed to increase funding for U.s. beef promotion in Korea. It will 

provide an additional one million dollars this year for this purpose. The Administration also 

welcomed the u.s. meat industry's request for an additional ten million dollars in funding to 

promote U.s. beef sales in Korea over the next five years, and it agreed to favorably consider 

that request when it makes its 2012 awards later this year. 

Second, the Administration agreed to request consultations with Korea on fully opening the 

Korean market to U.s. beef. The Administration will request these consultations as soon as the 

FTA enters into force, and pursuant to the terms of our 2008 Protocol governing beef imports 

with Korea, those consultations will take place within seven days of the request. 

We are still working towards breaking down all of Korea's barriers to U.s. beef, but the 

Administration's commitments are important steps on this path. 

With these commitments - and with this hearing - we are several steps closer to implementing 

the u.s. - Korea Free Trade Agreement. Once implemented, the FTA will increase U.S. exports 

to Korea by more than $10 billion annually and support at least 70,000 American jobs. 

As we move forward with the Korea FTA, as well as our FTAs with Colombia and Panama, we 

have a duty to help American workers meet the challenge of global competition. To do so, we 

must enact a robust, long-term extension of Trade Adjustment Assistance or TAA together with 

these FTAs. 

So let us work together to successfully conclude this journey, let us reauthorize TAA, and let us 

approve the u.s. - Korea Free Trade Agreement. 

### 
33 


79457.003

VAR;AN 

medical systems 

Testimony of Timothy E. Guertin 

President and Chief Executive Officer 

Varian Medical Systems, Inc. 

Senate Finance Committee 

Hearing on the U.S.-Korea Free Trade Agreement 

May 26, 2011 
34 


79457.004

I want to thank Chairman Baucus and Ranking Member Hatch for holding this hearing today on 

the U.S. Korea Free Trade Agreement (KORUS). My name is Tim Guertin and I serve as 

President and CEO of Varian Medical Systems, Inc. We at Varian strongly support the efforts to 

expand market access for U.S. medical device products abroad through new trade agreements. 

About Varian Medical Systems 

Varian Medical Systems is the world's leading producer of medical technology and software for 

treating cancer with radiation therapy, radiosurgery, proton therapy, and brachytherapy. 

Varian's technology provides hospitals and clinics around the world with the tools they need to 

treat thousands of cancer patients each day. Varian focuses on three main areas of production: 

oncology systems, x -ray products, and security and inspection products. 

Varian manufactures 90 percent of our products in thc United States, specifically in Utah and 

Califol11ia. Varian employs more than more than 3,000 people here in the U.S. and more than 

5,500 people glohally. The jobs created here in the U.S. are high paying, high quality jobs that 

depend on access to foreign markets. In addition, Varian invests significantly in research and 

development in both Utah and California (0 develop new innovative technologies and intellectual 

property. Often this technology is developed in conjnnction with leading cancer centers such as 

Huntsman Cancer Institute at the University of Utah to create breakthroughs in cancer treatment. 

The advances we have created in cancer treatment and the superiority of our technology has 

spurred the demand for our products internationally. As a net-exporter, 53 percent of our $2.4 

billion business is exported while 47 percent of our business is in domestic sales. 

In addition, Varian's X-Ray products business, headquartered in Salt Lake City, Utah, is the 

premier independent supplier of x-ray tubes and flat panel image detectors in the world. Nearly 

700 employees in Utah work to produce x-ray products to most major diagnostic equipment 

manufacturers to be used for mammography and CT scanning, as well as industrial security 

screening and inspection equipment that helps facilitate trade through our ports and at our land 

borders. 

Varian in Korea 

We are proud that Varian has an established relationship with the leading health care provider in 

the Republic of Korea. In fact, while on a recent trade mission to the Republic of Korea, 

Department of Commerce Secretary Gary Locke and several Members of Congress devoted time 

to seeing Varian's oncology systems treating cancer patients at Seoul National University 

Hospital (SNUH). SNUB, a longtime partner of Varian, provides some of the most cutting edge 

cancer treatments available to tbose stricken with this terrible disease. The Varian linear 

accelerators that perform radiotherapy treatments at SNUH were manufactured in California and 

Utah and then installed and serviced by a team ofteehnicians in Seoul, providing jobs on both 

sides of the Pacific. 

While visiting tbe radiation oncology department at SNUH, the U.S. Delegation was ahle to see 

firsthand the efficient process a cancer patient goes through when being treated with 
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radiotherapy. Radiotherapy is a non-invasive technique that targets tumors with high-energy 

photon beams that stop cancer cells from reproducing. Treatments on Varian linear accelerators 

are tailored for each patient, focusing on breast, prostate, brain, lung and other types of cancers. 

In the next several months, SNUH will be acquiring the new Varian TrueBeam system that will 

cnable clinicians in Seoul to trcat more complex cases, while at the same time reducing treatment 

times for patients. 

Exports and Tariff Elimination 

Korea is an extremely important market for Varian as well as otber United States medical 

technology exporters. According to the U.S. Department of Commerce, Korea is one of the 

fastest growing markets for medical tcchnology products. In fact, last year Varian had more than 

$34 million in orders from Korea. The U.S. International Trade Commission estimates that the 

Korean medical device market will grow 10-15 percent in the next several years. 

We are able to place Varian technology ill the hands of oncologists in Seoul thanks to the 

existing beneficial trade relationship between the U.S. and Korea. Varian is very supportive of 

KORUS and the potential for an increase in exports and the related U.S. jobs it could sustain and 

create by expanding our market in Korea. The implementation of KORUS will increase the 

availability of medical technology in the Korean market, therehy allowing increased access by 

Korean patients to the most innovative technologies and treatment options. The U.S. medical 

technology industry exported $875 million last year. We expect to see that figure grow with the 

market opening offered under KORUS. 

We applaud KORUS for being the first free trade agreement to specitlcally address issues related 

to tbe medical device industry in distinct provisions of the agreement. KORUS outlines 

processes and procedures related to transparency in both the regulatory approval process and 

pricing of medical devices. We often find that in other markets the opaque detcmlination of 

govemment pricing of products and the lengthy regulatory approval puts U.S. medical device 

companies at a competitive disadvantage with non-U.S. manufacturers. The KORUS provisions 

related to competitive-market derived pricing, as well as the requirement for an independent 

review and appeals process ifthe industry has concems with either the regnlatory approval or 

pricing of medical device products, has grcat potential to drive increased exports to Korea. And 

an increased demand for exp()liS in tum leads to an increase in prodnctiol1 and growth at our 

factories in Utah and California. 

Varian, and other U.S. medical device companies, will also benefit from the elimination of the 

existing tariff barriers that are currently in place for our technology. In most cases radiotherapy 

equipment orders exceed $2 million. KORUS, when implemented, will eliminate an 8 percent 

tariff on Varian exports. This will lead to business growth in hoth the U.S. and Korea by 

allowing Korean customers to have greater purchasing power, and, will make the most advanced 

cancer treatment in the world more affordable to more patients and treatment t~\cilities in Korea. 

Other medical technology companies have indicated they could see similar export growth and 

also strongly endorse KORUS. 
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Competition 

Without the KORUS FTA, U.S. medical device manufacturers are at a distinct disadvantage with 

respect to our foreign competitors as other nations establish free trade agreements with Korea. 

For example, the European Union (EU) has negotiated a free trade agreement with Korea set to 

go into effect this summer (July 2011.) Our European competitors also would see decreased 

costs from tariff eliminations included in the Korea-EU FTA, further complicating matters for 

U.S. manufacturers and putting us at a competitive disadvantage. 

Intellectual Property Protection 

The KORUS FT A recognizes the importance of U.S. developed intellectual property. Varian 

supports KORUS' provisions that set forth high standards for intellectual property protection. 

We are often disadvantaged in countries where the patent enforcement rules do not reflect the 

standards of protection found in U.S. law. 

Varian filed its first patent in 1951. Since then, the company's scientists and researchers have 

amassed many hundreds of patents, and many thousands of innovations. In the area of cancer 

treatment, Varian's patented innovations have made it possihle to shape a radiation beam so that 

it more closely matches the shape and size of a tumor in order to kill cancerous tumors while 

reducing dose to healthy tissue. The company has also developed patented image-guidance 

technology so that tumors can be targeted with sub-millimeter precision, and motion 

management tools that can keep a treatment focused on a tumor even as it moves back and forth 

when the patient breathes. All of these crucial patented innovations add up to protecting more 

healthy tissues during treatment with potentially fewer side effects, and the successful treatment 

of more types of cancer in various parts of the body. 

Varian patents also have given rise to a line of low-cost radiographic X -ray image detectors that 

are manufactured by our employees in Utah. These detectors are revolutionizing diagnostic 

imaging, making it an instantaneous, digital process that eliminates the need for film, and all the 

processing chemicals that go with it. 

As a result, since all of this technological innovation leads to high-quality skilled jobs here in the 

United States, we appreciate the focus of the KORUS FTA on patent protection, as it allows 

Varian to continue to do business in Korea while protecting our intellectual property. 

Conclusion 

It is my hope that patients in Korea and all over the world will continue to benefIt from the 

collaborative innovation that occurs due to our mutually beneficial trade relationships. In order 

to continue to innovate new ways to treat cancer and other diseases, we need to ensure that we 

can keep working together around a common goal. KORUS helps us in this effort by further 

opening the Korean market to U.S. exports ofinl1ovative medical technology. 
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79457.007

STATEMENT OF HON. ORRIN G. HATCH, RANKING MEMBER 

U.S. SENATE COMMITTEE ON FINANCE HEARING OF MAY 26, 2011 

U.S.-KOREA FREE TRADE AGREEMENT 

WASHINGTON - U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance 

Committee, today delivered the following opening statement at a committee hearing 

examining the U.S.-Korea Free Trade Agreement: 

Today is the last of three hearings on our pending trade agreements. I want to thank 

Senator Baucus and his staff for the steadfast leadership that helped to get these agreements 

to where they are today. With today's hearing, we are one step closer to seeing our trade 

agreements with Colombia, Panama and Korea become a reality. 

In many ways, the Korea FTA is the gold standard for trade agreements. This agreement 

levels the playing field for American goods and services in an economy worth over one trillion 

dollars. The FTA incorporates state of the art intellectual property rights protections, 

significantly expands services sector market access, opens a large agriculture market, and offers 

new market access for American manufacturers. This FT A adopts the most advanced 

regulatory, non-tariff barrier, and investment provisions of any FT A and champions the rule of 

law which is so critical to an effective and fair rules-based trading relationship. The Korea FTA 

provides an impressive foundation upon which to build our future FTAs - including the TransPacific Partnership. 

The Administration has set a goal of doubling exports in five years. Quick approval of 

this Agreement will help us reach that goal. For Utah, South Korea is already an impressive 

market, importing more than $294 million dollars of goods from Utah in 2009. Implementation 

of the agreement will help boost Utah's exports even more, as over two-thirds of our exports to 

Korea will become duty-free immediately. The sectors that will immediately benefit from the 

agreement's tariff cuts reflect Utah's economy, including computers and electronics, metals 

and ores, machinery, agriculture and services. 

But the benefits of this agreement for Utah go far beyond just reducing tariffs. By 

adopting the strongest intellectual property rights, regulatory reforms, investment protections, 

and transparency provisions, the Korea FTA will ensure that Utah's companies, farmers, and 

workers realize the full potential of the South Korean market. By protecting the ideas of Utah's 

entrepreneurs and providing a level playing field, Utah will be in a good position to double our 

State's exports again over the next five years. 

I am very pleased that Tim Guertin could join us this morning. Tim is the CEO of Varian 

Medical Systems, a world leader in manufacturing medical devices and software. By protecting 
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Varian's intellectual property rights as well as reducing tariffs and other barriers that inhibit 

Varian from selling its products in Korea, this FTA will strengthen Varian and its workforce. 

Varian employs workers aground the world, including almost 700 in my home state of Utah. So 

I am especially interested to hear about how the agreement will impact your company. 

As I noted earlier, today is our last hearing on the three pending free trade agreements. 

Although the Korea FTA is certainly the most economically significant, it is critically important 

that the President submit all three agreements. Achieving approval of all three agreements 

remains my number one trade priority. Why that has not happened yet remains a mystery to 

me. 

I do not understand the President's excuses for further delay. Lack of support is not the 

issue. Once submitted to Congress, these agreements will gain strong bipartisan support. 

Economic concerns are not the issue. We all agree that that these agreements will provide a 

sorely needed economic boost to the economy and that if we do not act, other nations will take 

these markets from us. Foreign policy is not the issue. We all agree that Colombia, Panama, 

and South Korea are key regional allies and that approving these agreements will help 

strengthen our alliances. Yet, the President stili will not submit these agreements to Congress. 

let's be clear. Failure to submit the agreements cedes foreign markets to our 

competitors. Failure to submit these agreements sends a chilling signal around the world that 

the United States is not a trusted ally on trade. Failure to submit these agreements is 

tantamount to a failure in leadership. 

Further delay imperils the recent gains made toward consideration of the pending trade 

agreements. If we do not have an opportunity to vote on these agreements this summer, I am 

afraid we never will. So, Mr. President, please don't let the summer slip by before sending 

these agreements to Congress. The American people and our allies can no longer wait. 

Itltlt 
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Testimony of Thea Mei Lee 

Deputy Chief of Staff 

American Federation of Labor and Congress of Industrial Organizations 

Before the Senate Finance Committee 

"The U.S.-Korea Free Trade Agreement" 

May 26, 2011 

Chairman Baucus, Members of the Finance Committee, I thank you for the invitation to testify 

today on behalf of the twelve and a half million working men and women of the AFL-CIO on the 

important topic of the U.S.-Korea Free Trade Agreement (KORUS FTA). 

The United States economy remains mired in a jobs crisis, following the deepest recession in 

generations and decades of wage stagnation. Our CUlTent trade policy has rewarded and 

accelerated the off shoring of U.S. jobs, by granting multinational corporations extraordinary 

protections for their investtnents overseas, locking in low tariffs on U.S. products, and doing too 

little to end unfair trade practices abroad and to protect workers' rights and environmental 

standards. 

The KORUS FT A is potentially the most economically significant U.S. trade agreement 

negotiated since NAFT A. South Korea is a dynamic industrial export powerhouse and a major 

trading partner, with a well-developed industrial strategy and a domestic market that is highly 

protected from imports through a variety of measures. including both tariff and non-tariff 

barriers. The KORUS FT A commits both countries to reducing their tariffs and some non-tariff 

barriers over a period of several years. but it also contains major new protections for 

multinational corporate investors in the areas of investment policy and services. 

We appreciate and welcome the Obama administration's important initiative to renegotiate the 

auto market access provisions of the agreement in order to address, in part, one of the key 

concems we had raised, namely the lopsided bilateral trade in assembled autos between the 

United States and South Korea. While the newly negotiated auto provisions delay the initial 

implementation of the auto and light truck tariff reductions and address some concems abont the 

potential misuse of safety standards, other market access problems remain with the agreement, 

especially with respect to auto palis and other industrial sectors. 

Passage of the Korea trade agreement is often urged as part of the Obama Administration's plan 

to boost job creation through increasing expolis. While the AFL-CIO strongly supports the goal 

of increasing net exports, we do not helieve that passage of the Korea trade agreement is likely to 
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serve this end. Rather, addressing currency manipulation, especially by China, but by other 

trading partners as well, would be by far a more effective trade policy tool. I 

The KORUS FTA incorporates the improved labor and environment provisions negotiated 

jointly by Democratic and Republican members of Congress and the Bush administration in the 

"May 10th Bipartisan Trade Deal.,,2 While the "May 10th .. changes improved the labor and 

environment provisions in particular, further improvements are needed, especially in the areas of 

enforcement and coverage3 

The net job impact on the United States of the Korea trade agreement is likely to be negative, in 

our view, given the enhanced protections for investors, the weak rule of origin, and the 

remaining non-tariff barriers and other market access obstacles. 

Our Korean counterpart unions are also concerned that the agreement will accelerate outsourcing 

of parts production from Korea (due to the weak rules of origin) and will do little to address 

serious violations of international labor rights. 

We urge Congress to oppose the KORUS FT A, as this is the wrong time to put at risk good jobs 

in our manufacturing sector, which is just beginning to add jobs after many years of devastating 

losses. And we hope to work with Congress and the Administration to address the broader U.S. 

trade policy model- to ensure that future trade deals can give higher priority to the concerns of 

workers, communities, and the environment in the United States and in our trading partners. 

I. Likely Jobs Impact 

The Obama Administration claims that the KORUS FTA would support at least 70,000 jobs, 

based on projections by the U.S. International Trade Commission (see U.S.lTC, "U.S.-Korea 

Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects," Investigation 

No. T A-21 04-24, March 2010). But the ITC estimates have been wildly optimistic in the past, 

missing the mark on the projected job impact ofNAFTA and China's accession to the World 

Trade Organization, among others. 

• The ITC projection does not take into account likely shifts in investment and off shoring 

that have occurred in most past trade deals. 

• The ITC docs not account for the potential impact of future currency devaluation. 

t Note that this agreement fails to address South Korea's long history of currency manipulation. Given thc negative 

effects of such manipulation on U.S. workers and businesses, the FTA should have included specific provisions 

allowing the use of safeguard or snapback duties to counter currency manipulation in the future. 

2 See USTR Fact Sheet "Bipartisan Trade Deal." May 2007. 

http://ustradercp.goviassets/Doeument l.ibrary/Fact Sheets/200?!assc, upload tile 127 11319.pdf. 

3 For additional detail not provided in this testimon.l', please see our USTR submissions "'Comments Concerning 

Free Trade Agreement With the Republic of Korea," filed September 15,2009, and "Comments Regarding the 

January 2011 Supplemental Agreement to the U.S.-Korea Free Trade Agreement," tIled February 18,2011. 
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• The ITC actually finds that the U.S. global trade deficit could increase after 

implementation of the KORUS FT A - which would lead to a net job loss. 

• The ITC also projects growing trade deficits in several key manufacturing sectors, 

including textiles, apparel, and metal products. 

In fact, Nobel Laureate Paul Krugman, a world-renowned expert on trade, criticized the general 

argument that trade deals are job-creating: 

If you want a trade policy that helps employment, it has to be a policy that induces 

other countries to run bigger deficits or smaller surpluses. A countervailing duty on 

Chinese exports would be job-creating; a deal with South Korea, not. 

The Economic Policy Institute estimates that ifpast investment and off shoring trends hold, then 

a growing trade deficit with Korea could displace 159,000 U.S. jobs after implementation of the 

KORUS FT A, mostly in manufacturing. 

II. Labor Laws in Sontb Korea 

The KORUS FTA's labor chapter, which includes the "May 10th" amendments, represents a 

significant improvement over the "enforce your own laws" standard included in the previous 

trade agreements negotiated under President George W. Bush. However, we believe that the 

May loth labor template needs further strengthening, as it contains several provisions that are 

subject to conflicting interpretations and could limit the scope of the parties' obligations. 

Further, the dispute settlement provisions, while still untested, could be clarified and 

strengthened to assure workers of an expeditious and effective remedy. 

There is a commonly held misperception that labor and employment Jaws in South Korea fully 

guarantee the fundamental rights of workers. To the contrary, the International Labor 

Organization (ILO) has expounded in numerous reports the ways in which South Korea fails to 

comply with core labor rights in law and in practice. Today, workers are often fired for forming 

a union, and such workers by law are ineligible to remain union members. Trade unions are 

routinely denied registration for arbitrary reasons. Many employers have opted to use temporary 

"irregular" workers, under inferior wages and working conditions, often in open defiance of 

legal restrictions on hiring workers under these modalities. In manufacturing, workers are 

illegally hired as "dispatch" or subcontracted workers at wages and working conditions far 

inferior to directly employed workers. Recent legal changes regarding full-time trade union staff 

and minority union bargaining rights are also of major concern for Korean trade unions. 

Workers undertaking peaceful strikes can still find themselves subject to substantial fines and 

imprisonment under the Hobstmction of business" provision of the criminal code. Currently, 

there are roughly 20 members of the Korean Confederation of Trade Unions (KCTU)-affiliated 

unions in jailor prison for acts related to trade union activity. Ten migrant workers are also now 

4 Robert E. Scott, "Free Trade Agreement with Korea will cost U.S. jobs." Economic Policy Institute, July 1, 2010. 

http://www.epi.org/economic snapshots/entry/hee trade agreement with korea will cost U.S. jobs/ 
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in jail, apprehended in the course ofa KCTU-sanctioned strike. The use of riot police by 

company managers in labor disputes is an all too common practice, leaving some workers 

severely injured. 

Despite this reality, USTR has so far failed to press the South Korean government for a 

commitment to address any of these concerns. There is no "labor action plan" for South Korea. 

We believe one is sorely needed. 

Ill. Rules of Origin 

Benefits of the KORUS should accrue to the trade agreement partners--and, most importantly. 

to their workers-not to non-FTA countries. However, the AFL-CIO believes that the lax rules 

of origin negotiated for certain products, particularly autos and steel, will allow non-Parties to 

the KORUS FTA to accrue benefits that should be reserved for the Parties-turning this 

agreement from a bi-Iateral one to a regional one. 

We appreciate the Administration's decision to go back to the bargaining table and seek a better 

deal for U.S. auto assembly workers. Overall, it is our view that the supplemental agreement 

will provide additional protections for the U.S. auto industry and its workers, especially in the 

short term. The agreement will also lead to increased market access for U.S.-produced 

automobiles. However, because the Administration failed to address the rule of origin 

methodology, duty drawback provisions5

, or supply chain issues for autos and other goods, we 

remain gravely concerned that, overall, the KORUS FT A could result in significant job losses 

and continue the decline in well paying manufacturing jobs in the U.S. We are also concerned 

about the enforceability of the supplemental auto agreement, as it is not formally part of the trade 

agreement. These concerns are especially heightened if the U.S. Congress moves to ratify the 

agreement before the South Korean parliament acts. 

Although the U.S. already grants duty-free treatment to many steel products on a most-favored 

nation basis, even to countries without preferential FT A access, the KORUS FT A could help 

countries in the region with booming steel capacity, such as China, circumvent antidumping and 

countervailing duty orders by shipping steel to Korea for minimal processing before export to the 

U.S. Such minimally processed steel would be treated as Korean under the trade agreement and 

receive duty-free access to the U.S. market. While the Department of Commerce has the ability 

to include such minimally processed steel from Korea within the scope of an existing 

antidumping or countervailing duty order on steel from China, it is not clear how the lax rules of 

origin in the Korea trade agreement may affect the Department's treatment of such goods in an 

anti-circumvention proceeding. In addition, if Chinese producers take advantage of the trade 

agreement's weak rules of origin to ship steel to the U.S. through Korea (with minor processing), 

it could make it more difficult for the U.S. steel industry and its workers to meet legal thresholds 

regarding injury or import surges directly attributable to China when bringing future trade 

remedy cases against imports from China. This is particularly important given this Committee's 

recognition that many U.S. manufacturers lack confidence in the Bureau of Customs and Border 

, We note with disappointment that EU's FT A with South Korea has a 5 percent cap on the duty-drawback, a 

significant protection lacking from the KORUS FT A. 
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Protection's present ability to enforce anti-dumping and countervailing duty orders in this 

environment of budget cuts and extremely high import volumes'" 

With regard to autos, the KORUS FTA includes three different methodologies that 

manufacturers can use to calculate the content of the vehicles they produce (build-up, builddown, and net cost), and manufacturers have sole discretion as to which methodology to use. 

The regional value content (the percentage of the good that must be created domestically to 

qualifY for preferential treatment under the FTA) varies with the methodology: 35% for build-up, 

55% for build-down, and 35% for net cost. We remain concerned that 35% RVC would provide 

preferential tariff rates to autos that are 65% Chinese (our concerns with unfair trade from China 

are well known and need not be restated here). 

Moreover, while we understand that both U.S. and Korean auto manufacturers currently use the 

build-up and build-down accounting methods, the net cost method appears to open the door for 

manufacturers to further minimize regional value content--endangering jobs in both the U.S. 

and South Korea. While U.S. and Korean auto manufacturers apparently do not currently use the 

net cost method, there is no reason why they could not use it in the future, ifit is economically 

advantageous to do so. 

The trade agreement could also increase the incentive for other nations to send their unfairly 

traded products into South Korea to become eligible for benefits. The low 35% threshold for 

South Korean content-dramatically lower than the 55% content provision (under a different 

methodology) obtained by the EU during its negotiations with South Korea-would allow for 

the vast majority of components in a final product to be prodnced ontside of Korea and obtain 

the preferential trade benefits of the KORUS FTA-even if they were subject to an existing 

dumping or countervailing duty order if shipped directly to the U.S. The trade agreement, 

therefore, provides a substantial loophole to the effective enforcement of U.S. trade law. 

IV. Kaesong Industrial Complex 

The AFL-CIO opposes the inclusion of any goods or inputs whatsoever produced in the Kaesong 

Industrial Complex (KIC) because of grave concerns over the lack of hasic labor rights in the 

KIC and the potential impact on jobs and wages of the exports of these goods-produced at 

wages even lower than in China, quite possibly among the lowest industrial wages in the world. 

Core labor rights, especially freedom of association and the light to organize and bargain 

collectively, are completely repressed in North Korea, including in the KIC. KIC workers 

reportedly work excessive hours and also lack the right to change employers-which keeps 

wages from rising as workers gain skills. KIC workers have no right to form a union or to 

bargain collectively. KIC employers do not pay wages directly to the workers, but rather to the 

government of North Korea. which then makes an unknown number of deductions, including at 

least 30% for "costs" associated with housing, transportation, and health care. Some analysts 

(, Hearing: "Enforcing America's Trade Laws in the Face of Customs Fraud and Duty Evasion." Senate Finance 

Committee. Subcommittee on International Trade, Customs. and Global Competitiveness. May 5, 2011. 
44 


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have estimated that the workers eventually receive only a few dollars a month; pay often comes 

in the form of "chits" that can be exchanged for foodstuffs-rather than cash. 

The effect of the President's Executive Order (EO) 13570 on protecting American workers from 

unfair competition from KIC-originating goods is unclear. Some analysts believe that it effects a 

complete ban on the importation, direct or indirect. of any goods, services, or technology from 

North Korea, while others convincingly argue that it merely restates current law, under which 

approval to import North Korean goods is "routinely" granted. 7 In either case, the 

Congressional Research Service has indicated that, despite current law, there already exists the 

possibility that imported goods from South Korea contain North Korean content, and that, at the 

margins, this possibility could increase with the passage of the KORUS FTA.R 

We remain extremely concerned about the potential for transshipment of North Korean made 

goods to South Korea and subsequently to the United States. It does not appear that this issue 

was adequately addressed in the text or through EO 13570. Effective enforcement ofmles of 

origin, including adequate funding for enhanced Customs enforcement, must be undertaken in 

order to prevent such illegal transshipment. 

Finally, we have serious concerns that Annex 22-B leaves the door open to permanently 

increasing imports from the KIC. Under this Annex, the parties will establish a committee to 

"review whether conditions on the Korean Peninsula arc appropriate for further economic 

development through the establishment and development of outward processing zones [OPZs]." 

The Committee will meet periodically to identify geographic areas that may be designated as an 

OPZ, the goods of which may therefore be considered "originating goods" for the purposes of 

the KORUS FT A. Given the prevailing labor conditions in the KIC and the fact that the KIC is a 

significant source of foreign hard currency for North Korea-a non-Party to this agreement-the 

AFL-CIO opposes Annex 22-B, as well as any attempt to classify KIC goods as originating 

goods under this agreement. 

V. Investmelllt 

Trade agreements and their investment provisions should not incentivize off-shoring of U.S. 

jobs; establish substantive rights for foreign investors that extend beyond those granted to 

domestic investors; unduly limit countries' ability to impose capital controls where indicated; or 

invite challenges in international tribunals to non-discriminatory laws that legitimately seek to 

protect workers, the environment, or the health and safety of American citizens. The KORUS 

FT A's investment provisions do not meet this standard. 

As with the investment chapters of previous trade agreements, we remain deeply concerned by 

this agreement's JUles on expropriation, extremely broad definition of investment, and vague 

standard for fair and equitable treatment. In addition, the agreement's deeply tlawed investor-tostate dispute resolution mechanism contains none of the controls, such as exhaustion 

7 See, e.g., Stephan Haggard and Marcus Noland. "Executive Order 13570: What Does It Really Mean?" Peterson 

Institute for International Economics Blog. April2R, 2011. 

8 Mark E. Manyin and Dick K. Nanto. "The Kaesong North-South Korean Industrial Complex." Congressional 

Research Service. April 18, 2011. 
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requirements, that could limit abuse of this private right of action. As negotiated, the investment 

provisions in the Korea agreement do give foreign investors greater rights than domestic 

investors, workers, or advocates to challenge democratically enacted American public interest 

laws and regulations. Further, the KORUS FTA gives us new causes for concern due to new and 

unprecedented language and expansion ofthe scope of property rights. 

Of particular concern to the AFL-CIO is the agreement's overly inclusive concept of 

expropriation. The KORUS FT A adds several provisions that do not appear in prior FT As that 

will likely expand the scope of actions considered "indirect expropriations." For example, the 

KORUS FTA provides that relevant considerations in detel1nining whether a government action 

is an expropriation could include "whether the government action imposes a special sacrifice on 

the particular investor or investment that exceeds what the investor or investment should be 

expccted to endure for the public interest:' The "special sacrifice" standard has no corollary in 

U.S. or international law. The KORUS FT A also provides that indirect expropriation will have 

occurred if a government action is "extremely severe" or "disproportionate in light of its pnrpose 

or effect," adding vague new criteria to the dctel1nination. Arbitrators, interpreting these vague 

new tern1s, could strike down any number of laws intended to protect public health, safety, or the 

environment. 

Taken together, these broad and vague provisions will afford foreign investors greater rights than 

U.S. investors-and likely greater rights than even foreign investors covered by existing FTAs. 

While some will argue that the U.S. has never lost an investor-state challenge, there is no 

guarantee that this will always he the case. Certainly, resources used to defend such cases could 

be better used elsewhere in this austere fiscal environment. Moreover, it is impossible to 

measure the chilling effect that the investment provisions have on the policy debate. In the past. 

investors have challenged a state's right to ban the toxic gasoline additive MTBE-that 

challenge may have weighed into policy decisions regarding regulation ofbisphenol A (BPA) 

and other potentially endocrine disntpting chemicals. Finally, we raise once again the absence of 

non-discriminatory labor regulations from the list of what does not constitute an indirect 

expropriation, taking due note that the list is not exhaustive. 

VI. Services 

The AFL-CIO believes that important public services should be perfonned by the govemment 

and that quality control and accessibility should be assured by close government oversight. 

Maintaining public control over these services is essential to maintaining accountability to the 

local consumers of those services. As in previous agreements, the KORUS FTA does not 

contain a broad, explicit carvc-out for essential public services. Rather, public services provided 

on a commercial basis or in competition with private providers are generally subject to the ntles 

on trade in services, unless specifically exempted. There are few public services within the 

United States, however, that would qualify for the exception as it is written. 

The specific exemptions for services in the KORUS FTA fall shol1 of what is needed to protect 

these important sectors. There are, for example, no U.S. exceptions for energy services (except 

atomic), water services, sanitation services, public transportation, education, or health care. 

Even for those services that the U.S. did make exceptions for, the exemption only applies to 
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some of the core rules of the FT A, not all. Any trade agreement should preserve the ability of 

federal, state, and local governments to regulate services for the public benefit, allowing 

distinctions between domestic and foreign service-providers and setting appropriate 

qualifications or limitations on the provision of those services. 

VII, Conclusion 

In addition to the concerns discussed above, we remain concerned about the effects of the 

Government Procurement Chapter (17) on the ability to direct spending to create desperately 

needed local jobs; the obstacles that the Financial Services Chapter (13) poses to addressing the 

financial crisis that began in 2008; and the special status the agreement grants to foreign 

investors, who are the only entities able, under the agreement, to skip the Dispute Settlement 

provisions of Chapter 22 and challenge the United States government directly at the International 

Centre for Settlement of Investment Disputes. 

In sum, this agreement does not adequately address the economic futures of workers either in the 

United States or South Korea. American workers are willing to support increased trade if the 

rules that govern it stimulate growth, create good jobs. and protect fundamental rights. 

However. this agreement fails to meet these goals. 
47 


79457.017

Testimony 

Ambassador Demetrios Marantis 

Senate Committee on Finance 

Hearing on the U.S.-Sonth Korea Trade Agreement 

May 26, 2011 

Good morning Chairman Baucus, Ranking Member Hatch, Members of the Committee, it is an 

honor and a pleasure to testify today about the U.S.-South Korea trade agreement. 

We are here at a critical moment in our nation's history, presented with a unique opportunity. 

Our economy is recovering, and for seven straight quarters American exports have been a 

significant contributor to our economic growth. In 20 I 0, nominal exports of goods and services 

were up 17 percent. This export groV\1h already has supported hundreds of thousands of 

additional American jobs. 

Within our grasp is the chance to put our recovery on solid footing and secure additional exports, 

growth, and jobs for Americans across this country. Congress has an extraordinary opportunity 

to pass and implement the most economically significant trade agreement the United States has 

negotiated in nearly two decades. The U.S.-South Korea trade agreement will strengthen our 

trade and investment ties to South Korea's $1 trillion economy. It will bind a key strategic ally 

closer to us, anchor our economy to the dynamic Asia-Pacific, and help us keep our edge over 

international competition. It is a key element in our economic strategy in the region. Most 

importantly, the U.S.-South Korea trade agreement will create substantial export opportunities, 

establish strong enforcement provisions, and support new export-related jobs. 

When President Obama took oftice, many in Congress had serious concerns about moving 

forward with this agreement, especially regarding autos and beef. This Administration shared 

those concerns. We heard you, and we took action. 

On autos, after extensive consultation with members of this Committee and others, as well as a 

wide range of labor, business, and other stakeholders, the United States and South Korea agreed, 

last December, to a new set of commitments that will generate additional tangible benefits for the 

American economy. We agreed to four central elements that taken together will help make 

South Korea's auto market more open, fair, and transparent. 

First, we tackled the unique South Korean auto safety and environmental standards that pose a 

costly and unfair non-tariff barrier to U.S. auto exporters. Second, we negotiated a tariff 

structure that will give American auto companies and their workers a chance to build up more 

business in South Korea before U.S. tariffs come down. Third, we agreed to protect U.S. auto 

companies and their workers from potential harmful surges in South Korean auto imports by 

establishing a new special motor vehicle safeguard. Fourth, we pushed for more transparency in 

the South Korean market, giving our auto companies a 12-month grace period to comply with 

new auto regulations, as well as ensuring that South Korea will ensure transparency in adopting 

any future automotive taxes based on fuel economy or greenhouse gas emissions. 
48 


79457.018

On beef, we are pleased that U.S. beef expOlts are steadily increasing to Korea. That said, we 

heard the concerns of Chairman Baucus. his colleagues. and ranchers across the country about 

achieving science-based access to the South Korean beef market. The Obama Administration 

shares these concerns with respect to South Korea and other trading partners in the Asia-Pacific 

region. That is why on May 4. 2011, Ambassador Kirk sent Chairman Baucus a letter stating the 

intent of the United States to request consultations with South Korea under the 2008 beef 

protocol to discuss its full application once the U.S.-South Korea trade agreement has entered 

into force, recognizing that these are separate agreements. We also welcomed the U.S. Meat 

Export Federation's plans to submit a proposal to USDA requesting an additional $10 million to 

promote U.S. beef exports to South Korea's market over the next five years. 

Our progress on autos and beef, as well as comprehensive effOlts to build a bipartisan trade 

consensus through stronger enforcement and domestic outreach, has now put us in the position to 

move forward with the U.S.-South Korea trade agreement. Today the Administration and 

Congress are together poised to unlock the enormous economic and strategic benefits of this 

agreement. 

The U.S.-South Korea trade agreement promises tariff cutting benefits that are immediate. 

significant, and accrue to every state in our nation. Take a look at agriculture. South Korea is 

already our fifth-largest agricultural export market, and the Department of Agriculture projects 

that South Korea will purchase more than $6 billion oflJ.S. agricultural products during flscal 

year 20 II. Immediately upon entry into force. the U.S.-South Korea trade agreement eliminates 

tariffs on two-thirds of American agricultural exports to South Korea. As a result, farmers and 

ranchers in each of your states will be positioned to seize additional export opportunities in one 

of the most dynamic economies in the world. According to a recent report by the Department of 

Agriculture'S Economic Research Service, U.S. agricultural exports would expand by an 

estimated $1.9 billion per year if the U.S. agreement with Korea were implemented. 

Let me be specific. Once the U.S.-South Korea trade agreement is implemented, cattle ranchers 

in states like Montana, Wyoming. Texas, Oklahoma. and South Dakota will immediately benefit 

from reductions in South Korea's 40 percent tariff on U.S. beef. That lower tariff - phased out 

completely over 15 years - will help America' s ranchers build on their $518 million in sales to 

South Korea last year, an increase of 140 percent in value over 2009. 

Also under this agreement, Florida growers will benefit from an immediate elimination of a 54 

percent tariff on frozen orange juice and a phase out of the 30 percent tariff on grapefruit. New 

Jersey, Maine, and Massachusetts blueberry and cranberry growers will gain from immediate 

reductions in the 45 percent taritTthey face today. Delaware, Maryland, and West Virginia 

poultry and egg producers will also see greater opportunities as this agreement phases out tariffs 

of 18 percent or higher. 
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79457.019

Passing and implementing this agreement will give wheat farmers in North Dakota, Montana, 

and Kansas the chance to export their wheat duty free to South Korea, Ninety percent of Iowa 

and North Carolina pork exports will become duty free in 2016 under this deal, while New York, 

New Mexico, Idaho, and Michigan dairy producers will gain from expansive, duty-free tariff-rate 

quotas for their cheese, milk powder, butter, and whey exports. Arizona vegetable and pistachio 

growers will benefit from the elimination of tariffs. Washington and Oregon's cherry, wine, and 

grape juice producers will all see double-digit tariffs eliminated immediately upon 

implementation of this agreement. 

The U.S.-South Korea agreement will create equally substantial export benefits for U.S. 

manufactured goods. Manufactured goods already account for over 80 percent of exports to 

South Korea - reaching a record $32 billion in 20 10 and growing faster than our manufacturing 

exports to nearly all of our major markets. The tariff reductions and the non-tariff measure 

provisions in this agreement put our manufacturing sector on course to set and break new export 

records. Within five years of entry into force, this agreement removes tariffs on over 95 percent 

of U.S. industrial and consumer good exports. 

Again let me be specitIc. For Michigan's auto and auto parts industry - and parts manufacturers 

around the country - this Administration has leveled the playing field and created new export 

opportunities in the South Korean market. By addressing tariff and non-tariff barriers head on, 

the South Korean market will be more open, fair, and transparent. Ford, General Motors, 

Chrysler, and the United Auto Workers all support this agreement because these auto export 

benefits are now clear and within reach. 

The U.S.-South Korea agreement secures big benefits for other key American manufacturers by 

immediately eliminating tariffs on over 90 percent of aerospace exports produced in states like 

Washington and Kansas. Computer and electronics products producers in states like North 

Carolina, Massachusetts, Utah, Idaho, and New York will see many of South Korea's tariffs 

eliminated upon entry into force. The agreement will immediately eliminate tariffs on 99 percent 

of your states' scientific equipment exports to South Korea. Environmental goods manufacturers 

in many of the states you represent will face no tariffs on over 95 percent of their exports to 

South Koreajust three years after implementation of the agreement. 

The U.S.-South Korea agreement also accounts for sensitive U.S. manufacturing industries like 

textiles. Today, South Korea applies an average tariff of over 10 percent on our textile and 

apparel exports. Immediately upon implementation, approximately 98 percent of textile and 

apparel tariff lines will receive duty-free treatment in South Korea. At the same time, the 

agreement includes a special textile safeguard mechanism we can invoke if South Korean textile 

exports cause. or threaten to calise, serious damage to domestic industry. Strong customs 

cooperation provisions in this agreement will guard against illegal textiles transshipment and 

make sure textile provisions are vigorously enforced. 
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79457.020

The United States is also a global services expOlting powerhouse, and the U.S.-South Korea 

agreement will strengthen our leadership position. This agreement guarantees access for our 

services industries - infonnation and communications technology, express delivery, financial 

and insurance services, to name just a few - to South Korea's $580 billion services sector. South 

Korea is a major market in this area - the world's 8th largest importer of services and South 

Korean imports of services have grown 40 percent faster than the rest of the world over the past 

decade. In fact, estimated U.S. sales of private commercial services to South Korea through 

cross-border and affiliate channels exceeded $24 billion in 2009. New opportunities in South 

Korea's expanding market have great potential to translate into additional export-supported jobs 

here at home. 

Underpinning these new export opportunities are this agreement's state of the art provisions (0 

help protect and enforce intellectual property rights. These IPR provisions are key to small and 

large innovative companies embracing global markets. Critical too are provisions that reduce red 

tape, and eliminate unwarranted regulatory barriers to U.S. exports. This agreement also 

contains the highest standards for protecting labor rights, promoting the environment, and 

ensuring that key domestic labor and environmental laws are enforced, combined with strong 

remedies for non-compliance. 

Taken together, these additional export opportunities and stronger and better rules mean one 

thing - more export-supported jobs for Americans. The tariff reductions on goods exports alone 

will lead to significant increases in U.S. exports to South Korea that is estimated to support over 

70,000 additional American jobs. And that is a conservative number, since it does not include 

services liberalization and removal of non-tariff barriers. More services exports to South Korea 

will support tens of thousands of additional jobs. And fewer non-tariff barriers and stronger 

rules will support even more. 

The U.S.-South Korea trade agreement is an important investment in our economy. This 

Administration is ready to move this agreement forward as part of a comprehensive trade agenda 

that likewise invests in our economy and American workers. As we have stressed repeatedly, we 

must keep faith with our workers by renewing a strong and robust Trade Adjustment Assistance 

(TAA) program that will support Americans who need training and other services when their 

jobs are affected by trade. TAA is a key component of President Barack Obama's trade agenda, 

as it has been part of Democratic and Republican trade agendas for nearly half a century. We 

look forward to working with this Committee on renewing TAA, as well as reauthorizing trade 

preference programs, granting Russia Permanent Nonnal Trade Relations as that country joins 

the World Trade Organization, and unlocking the benefits of this historic trade agreement with 

South Korea. 
51 


79457.021

Questions for the Record 

U.S.-Korea Free Trade Agreement 

Thursday, May 26,2011 

Questions for Ambassador Marantis 

Questions from Chairman Baueus 

Q 1. Ambassador Marantis, the Administration announced earlier this month that it 

would take two steps to provide U.S. beef with greater market access in Korea. First, the 

Administration awarded $1 million to promote U.S. beef sales in Korea in 2011. And it 

announced that USDA would favorably consider a request for $10 million to promote U.S. 

beef sales in Korea over the next 5 years. Second, the Administration announced that it 

would seek consultations with Korea under the terms of the 2008 beef protocol. And these 

consultations will occur within 7 days of their request. I applaud your hard work in 

finding ways to resolve the beef issue in Korea. What impact will these two steps have on 

further opening Korea's market to U.S. beef? 

A. Obtaining greater market access for U.S. beef in Korea remains a high priority issue for the 

Administration, and these recent announcements are part of this Administration's broad, 

concerted, and science-based efforts to open beef markets across Asia and to assist in expanding 

U.S. market share in Korea's beef market. The additional funding will help educate and 

increase confidence among Korean consumers about the safety and quality of U.S. beef, and the 

consultations will provide an opportunity to discuss full application of the beef protocol, leading 

us one step closer to the goal of full access to Korea's beef market. 

In the meantime, once in force, this agreement will progressively reduce tariffs on our beef 

exports to zero, enabling America's beef producers to build on the significant growth of exports 

to Korea - which reached $518 million in 20 I 0, a one-year increa~e of 140 percent in value. 

This trend of robust sales is continuing into 2011. For the first four months of2011 (Jan-April), 

U.S. beef exports to Korea reached $284 million, an increase of 153 percent in value over the 

same time period last year. 

Q 2. Ambassador Marantis, the Administration announced an agreement with Korea in 

December that will create more symmetry between U.S. and Korean autos trade. This 

agreement will further open Korea's market to U.S. autos. And it will limit Korea's ability 

to have unfettered access to the U.S. autos market. What impact do you expect these 

provisions to have on U.S.-Korea autos trade? How do you expect these provisions to 

benefit U.S. auto makers and U.S. auto workers? 

A. The December 2010 agreement is designed to level the playing field in U.S.-Korea 

automotive trade. First, we addressed the ways South Korea's system of automotive safety 

standards has served as a barrier to U.S. exports and agreed to improve South Korea's regulatory 

transparency. Second, we agreed to encourage green technologies by immediately cutting in half 
52 


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South Korea's tariffs on electric car imports, and eliminating both of our tariffs altogether by the 

fifth year of the agreement. Third, we agreed that South Korea will immediately cut in half its 

tariffs on U.S. passenger vehicle exports, while our tariffs on South Korea's passenger vehicle 

exports will remain in place until the agreement's fifth year. For trucks, U.S. tariffs will remain 

in place until the eighth year, and then will be phased out by the tenth year. South Korea's truck 

tariffs will be eliminated immediately. This will give American auto companies and their 

workers a chance to build up more business in South Korea. Fourth, to protect U.S. auto 

companies and their workers from potential harmful surges in South Korean auto imports, we 

agreed to a new special motor vehicle safeguard. As part of the outcome of the negotiations, we 

also ensured that South Korea's new regulations on fuel economy and greenhouse gas emissions 

do not undermine market access for U.S. auto exports, while maintaining high standards for 

environmental protection. On June 9, these new regulations went into effect, with provisions 

consistent with what we negotiated in December. 

The impact of these provisions, together with relevant provisions that were already included in 

the 2007 agreement, will be to establish a level playing field for U.S.-South Korea automotive 

trade. We have full confidence that our workers and automakers can, and will, compete and 

excel on a level playing field and will take full advantage of the market opportunities this 

agreement will create. The United Auto Workers, Ford, Chrysler, and General Motors share this 

confidence, and have publically expressed their support for this agreement. 

Questions from Senator Menendez 

Q 1. Ambassador Marantis, as you know, I have been a strong advocate for strong 

intellectual property rights protections in all of our Free Trade Agreements. Are you 

confident that in case South Korea does not adequately protect the intellectual property 

rights of innovative companies such as Varian, the USTR has and will exercise the powers 

it has to seek remedies for any IPR violations? 

A. Korea has made great strides in recent years in protecting intellectual property rights. 

Building on this strong base, the KORUS contains provisions providing for strong protection and 

enforcement of intellectual property rights (IPR) which will benefit U.S. creators and innovators. 

Enhanced protections for IPR in this agreement include provisions that: 

• Strengthen deterrence against criminal acts of commercial-scale copyright piracy and 

trademark counterfeiting, including end-user piracy of software. 

• Protect against arbitrary revocation of patents and assure protection for a wide range of 

inventions. 

• Protect valuable U.S. brands by applying the principle of "first-in-time, first-in-right" to 

trademarks and geographical indications, and by mandating dispute resolution for 

cybersquatting. 

• Streamline and strengthen customs procedures to increase efficiency of border 

enforcement, including goods in transit. 
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• Strengthen enforcement by requiring parties to authorize the seizure, forfeiture, and 

destruction of counterfeit and pirated goods and the equipment used to produce them. 

The protection and enforcement of U.S. IPR in South Korea has long been a major subject of 

bilateral discussions, and Korean authorities have demonstrated a commitment to work closely 

with U.S. authorities to combat IPR infringement - including signing a 2010 Memorandum of 

Understanding with U.S. Immigration and Customs Enforcement to facilitate cooperation on IPR 

investigations. We will continue our robust bilateral engagement with South Korea to address 

trade related IPR matters that are of concern. And of course, all of the commitments of the IPR 

Chapter are backed by the agreement's strong enforcement provisions, which will allow the 

United States to ensure that South Korea fully implements these obligations. 

Q 2. Ambassador Marantis, Ms. Lee mentioned in her testimony that the Korea Free 

Trade Agreement does not eliminate many non-tariff barriers. What tariff barriers are not 

eliminated and how does USTR plan to deal with them so as to create as level a playing 

field as possible? 

A. Ms. Lee's assertion on non-tariff barriers is not accurate. The KORUS has the strongest 

provisions ever negotiated to deal effectively with non-tariff barriers. In addition to addressing 

specific non-tariff barriers with regard to specific sectors, the agreement contains cross-cutting 

commitments to address non-tariff measures across a range of sectors and industries. First, this 

agreement includes significant provisions on regulatory transparency that improve and enhance 

notice and comment periods and provide U.S. stakeholders opportunities to participate in the 

regulatory process from the beginning. Second, strong conformity assessment provisions ensure 

that Korea vvill give equal treatment to non-Korean conformity assessment bodies, providing 

greater flexibility for U.S. exporters seeking to certifY their products for sale in Korea and 

expanding opportunities for U.S. labs in the Korean market. Third, technology neutrality 

provisions will discourage South Korea from mandating the use of specific domestic 

technologies for information and communications technology service providers. 

Fourth, the agreement includes provisions to eliminate red tape and streamline operations in 

customs administration, providing for quick, efficient access to Korea's market. Fifth, the 

agreement also establishes a large array of committees and working groups, including the 

minister-level Joint Committee, a TBT Committee and Automotive Working Group, and SPS 

Committee. With these institutional tools, we will be able to weigh in at early stages on new 

developments and work to resolve issues before they become impediments to trade. 

Finally, the Obama Administration strengthened these non-tariff barrier provisions in the 

December 2010 agreement, including commitments that address the ways that Korea's system of 

automotive safety standards has served as a non-tariff barrier to U.S. auto exports, securing 

adequate adjustment time between the publishing of a significant motor vehicle-related 

regulation and its entry into force, and making future automotive taxes based on fuel economy or 

greenhouse gas emissions subject to certain parts of the agreement's general transparency 

obligations. 
54 


79457.024

Testimony 

on behalf of the 

Montana Stockgrowers Association Inc. 

with regard to 

the U.S.-Korea Free Trade Agreement 

submitted to the 

United States Senate Committee on Finance 

The Honorable Max Baucus, Chairman 

submitted by 

Errol Rice 

Executive Vice President 

Montana Stockgrowers Association Inc. 

May 26, 2011 

Washington, D.C. 
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79457.025

Good morning Chaitman Baucus and members of the committee. Thank you for the 

opporttmity to speak to you on behalf of the members of the Montana Stockgrowers 

Association (MSGA) regarding our point of view on the U.S.-Korca Free Trade 

Agreement (KORUS FT A). My name is Errol Rice and I am a fifth generation Montana 

rancher. I currently serve as the Executive Vice President of the Montana Stockgrowers 

Association, one ofthe nation's oldest and historically significant cattle ranching 

organizations established in 1884. 

Our mission is to protect and enhance Montana ranch families' ability to grow and 

deliver safe, healthy, environmcntally wholesome beef to the world. Our vision is to be 

the premier institution that exemplifies leading global beef innovation while preserving 

Montana's complex natural landscape, history, economy, ethics and social values. 

There was a time when the largest part of our economic activity was domestic, but now 

our future depends on our ability to be globally competitive. Ranchers must have access 

to the additional demand for beef from consumers that live outside the United States. 96 

percent of the world's population lives outside the borders ofthe U.S. The unfolding 21 51 

Century global landscape, in its breadth and complexity, is creating unprecedented 

challenges and opportunities for rancher's beef export capabilities. A global economic 

system is a fundamental reality that must be met with a rnral American consensus in 

support of free trade, which we believe, is a central pillar to this country's economic and 

geopolitical strength. 

Expediting the full implementation of the KORUS FTA gives Montana's family ranchers 

the momentum we need to benefit our rnral ranching economy at home. Exports create 

jobs. According to Cattlefax, fed steers have been selling near $115 per hundred weight 

(cwt), or roughly $1,495/head. Of that, Cattlefax estimates that exports have added a 

minimum of $1451head in value (as opposed to not having exports). Our competitiveness 

depends on profitability and attracting the next generation of ranchers back into the 

business. 

Today, Korea is one of the largest export markets for Montana and American beef. In 

20 I 0, we exported nearly $518 million worth of our product, which is a 140 percent 

increase in sales over 2009. This added $25 in value to each of the 1.3 million head of 

steers and heifers grown and marketed from Montana in 2010. This agreement achieves a 

major breakthrough in phasing out Korea's 40 percent tariff on our wholesome beef cuts. 

In 2010, we were met with over $200 million in tariffs on our beef being exported to 

Korea. The KORUS FT A upon implementation would lend $15 million in tariff benefits 

to our product in the tirst year alone and roughly $325 million in tariff reductions 

annually once fully implemented. According to the U.S. International Trade Commission, 

annual exports of U.S . beef could increase as much as $1.8 billion once the agreement is 

fully implemented. 
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79457.026

While Korea is a strong export market for U.S. beef, we have also faced unscientific 

restrictions. Montana ranchers believe that our trading partners should abide by sound 

science and international standards. That is why we appreciate very much the efforts by 

Chairman Baucus to move us toward that goal. Under the agreement that he negotiated 

with the Administration, the U.S. Department of Agriculture will consider favorably a 

request from the U.S. Meat Export Federation to educate Korean consumers about the 

safety, quality, and value of U.S. beef. And he secured a commitment from Ambassador 

Kirk to hold consultations with Korea on the full application of the 2008 U.S.-Korea beef 

protocol. 

Recognizing international science based standards, such as those set by the OIE, is very 

important. It not only creates less market volatility but it also encourages the safest and 

most prudent production practices. When BSE was detected in a cow in the U.S. on 

December 23,2003, resulting in new traceability and age standards for the exportation of 

U.S. beef to countries like Korea, the evolution of the Age and Source verification 

process and the attendant software and database needs accelerated. Age and Source 

vcrified cattle through a United States Department of Agriculture (USDA) certified 

Process Verified Program (PVP) provider has been essential to U.S. beef meeting export 

eligibility criteria. We are now leading the way to provide technologically advanced 

traceability solutions for northern tier "high quality" ranch-level certified calves. We 

estimate that of the 250,000 Montana calves that were uniquely certified beneath our 

private Verified BeefLLC traceability solutions in 2010, nearly 50,000 of them were 

exported in the form of high quality beef to Korea. Private sector solutions such as this, in 

collaboration with public sector drivers, we believe, can offer a customized traceable beef 

system that will guarantee quality throughout the supply chain. China is the only major 

market still closed to U.S. beef and represents one of the largest potential growth markets 

for ranchers. We think a public and private sector approach to beef traceability can drive 

market expansion opportunities in China much faster. 

Last week, MSGA was fortunate to be able to participate in the 2011 Asia-Pacific 

Economic Cooperation (APEC) Trade Ministers meeting in Big Sky, Montana. This was 

a tremendous opportunity to offer thought leadership and to discuss our cutting edge 

approaches to global beef innovation to meet demand. This meeting served as a proactive 

model that brought ranchers and foreign dignitaries together. It spawned greater 

information sharing and interconnectedness as a definite outcome that will bond together 

more effective trade partners who are committed to a rules based trading system. 

The United Nations' Food and Ag Organization (FAO) estimates that by 2050, global 

food production will need to increase by 70%. The global population is expanding by 

about 80 million people per year. U.S. ranchers see promising opportlmities to be seized 

by trying to meet this challenge. According to the Strategic Framework for Food Security 

in APEC, achieving global food security requires: 
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79457.027

• Adequate, reliable and sustainable supplies of crop and livestock products, 

through increased agricultural productivity and more efficient regional and global 

markets linking demand and supply; 

• An open rules-based trading system that allows food to flow from areas 

experiencing surpluses to those experiencing deficits; 

• Efficient and safe distribution systems throughout the supply chain; 

• Efficient agricultural research, extension and education systems, plus adequate 

agricultural infrastructure and property rights; and 

• . A recognition that both public and private sectors have appropriate roles to play 

and can achieve more if they work together. 

High value, perishable products like beef need rapid connection and efficient delivery to 

world consumers. U.S. infrastructure must ensure efticient and sophisticated 

transportation of our product to the global marketplace. As economies around the world 

begin to recover, we see global demand expanding for U.S. beef products. Ranchers 

cannot meet world consumer demand through inefficient, congested and outdated 

systems. We must continue to make technological advances in port-to-market distribution 

systems for U.S. agricultural exports like beef. Freshness is a key ingredient to advancing 

distant foreign markets for beef. 

Reaffirming our commitment to all of our international agreements both ratified and 

pending, especially the KORUS FTA, will drive investment into advancing our 

infrastructure. Critical challenges such as port capacity, high performance cold storage 

systems, container availability, ready access to rail and highway systems, customs 

services, inspections and distribution systems can be better met following these 

commitments. 

Our ranch families' livelihoods depend on exports which are our most dynamic and 

vibrant opportunities for long-term sustainability. 

I appreciate the opportunity that we have been granted to present our testimony today and 

we look forward to working with you throughout the course of this process to secure 

passage of this crucial agreement. 
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79457.028

SUBMITTED BY SENATOR WYDEN 

Memorandum 

To: 

From: 

Date: 

Re: 

Summary 

Interested Parties 

Majority Staff of the Senate Committee on Finance Subcommittee on Trade (Chaired 

by Senator Ron Wyden) 

January 25, 2011 

Updated assessment of the U.S.-Korea Free Trade Agreement (FTAI 

There is concern that current debate on the merits and potential economic impact of the U.S.-Korea FTA 

lacks the necessary candor for policy makers and the American public to engage in productive 

conversation about trade, globalization, and the future of the American economy. This memo provides 

an updated quantitative assessment that reexamines the potential economic impacts of the U.S.-Korea 

FTA on the U.S. economy on a national, state-by-state, and industry-specific basis. It uses recent trade 

data, and part of the discussion considers the implications of the recent economic downturn. The 

purpose of presenting this updated assessment is to enable straight talk when the merits of the 

agreement and more broadly, trade in general, are discussed. 

Section I of this memorandum provides an overview and rationale for an updated quantitative 

assessment of the U.S.-Korea FTA. Section II updates results from economic modeling simulations of the 

quantifiable elements of a fully implemented U.S.-Korea FTA under two distinct scenarios: one that 

reflects more robust economic conditions closer to those in 2007 when the agreement was concluded 

(i.e., lower unemployment and full capacity), and one that reflects relatively weaker economic 

conditions closer to those at present (i.e., higher unemployment and underused capacity). Section III 

provides more detailed results of potential employment impacts of the U.S.-Korea FTA on a state and 

sector basis under the latter scenario. 

Section I 

Overview 

The U.S.-Korea Free Trade Agreement FTA, initially negotiated in 2007 and revised in 2010, has the 

potential to be the most commercially significant FTA negotiated by the United States in more than 17 

years (after the North American Free Trade Agreement), opening up a potentially large market to U.S. 

exporters. Yet, the debate on the merits and potential economic impact of the agreement is increasingly 

polarized. Supporters claim that the agreement will be a boon to u.s. exporters, while detractors claim 

that the agreement will result in substantial American job loss and an increase in the U.S. trade deficit. 

In 2007, the independent u.s. International Trade Commission (ITe) concluded that the agreement 

would have a positive, yet modest, effect on U.S. economic output and employment in most sectors of 

the economy. For example, according to the lTC's official study, the reduction in tariffs and tariff-rate 

quotas on goods as a result of the agreement would add nearly $12 billion to U.S. GDP, $11 billion in 

U.S. exports of goods to Korea, and about $7 billion in U.S. imports from Korea. The ITC report showed 

that the FTA would likely have a small positive effect on economic output and employment on most 

sectors of the U.S. economy, with output and employment increasing in most sectors, while declining in 

others. 
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79457.029

Updated Assessment of the U.S.-Korea FTA 

The U.S. economy has changed significantly since 2007. Since then, the U.S. suffered a severe financial 

crisis and one of the worst economic recessions since the Great Depression. The current unemployment 

rate - which hovers around 10 percent - contributes to the souring of the national mood toward trade. 

It is inappropriate to preach the benefits of freer trade with Korea without acknowledging the potential 

loss of American jobs as a result of this agreement, and engaging in a policy discussion about how the 

U.S. will face growing international competition in the new decade and, indeed, the new century. 

For these reasons, we requested that ITe staff with economic modeling skills provide quantitative 

technical assistance examining the agreement based on current data and economic conditions. The ITC 

staff then conveyed these quantitative results to the staff of the Senate Committee on Finance's 

Subcommittee on Trade. We (the staff of the subcommittee) find that these results show that, in an 

economy with substantial unemployment and underused capital, the agreement has the potential to 

create about 280,000 American jobs, but that job growth would be uneven among states and across 

industry sectors, with some sectors losing out while others benefit. 
60 


79457.030

Section II' 

This section provides results from economic model simulations of the fully implemented U.S.-Korea 

FTA.' The results are reported for changes in U.S. GDP and welfare, exports, imports, output, and 

employment by sector (tables 1 to 4). Changes in state- and region-level gross product and employment, 

and state and regional output and employment by sector are also reported (tables 5 to 8). 

The simulations focus on the U.S.-Korea FTNs tariff and tariff-rate quota (TRQ) reductions. The lack of 

necessary data precludes the quantification of the FTA provisions relating to services, investment, labor, 

and environment. As such, the simulations tend to underestimate any positive economic effects of the 

FTA in these sectors. 

The method used for the simulations is a computable general equilibrium (CGE) simulation. The specific 

CGE models used are the Global Trade Analysis Project (GTAP) model and the U.S. Applied General 

Equilibrium (USAGE) model. 

The base data reflect 2009 trade and economic conditions. The models simulate the economic effects of 

FTA's tariff and TRQ reductions in the U.S. and world economies-in other words, what the economy 

would have looked like in 2009 had the FTA been fully implemented, holding all else constant.' 

Simulation results reflect long-term adjustments of supply, demand, and resource allocations as a result 

of the FTA. The models do not consider interim adjustments that might be felt as different provisions of 

the agreement enter into force, nor does it consider various adjustment costs that may occur over time. 

In the simulations, bilateral U.S.-Korea ad-valorem tariff equivalents (AVEs) are all reduced to zero (i.e., 

free of duty), with certain exceptions. No change in quantity traded is anticipated in products that fall 

within the rice sector, the raw milk sector, the sugarcane and sugar beet sector, or the manufactured 

sugar sector. In addition, as U.S. exports of oranges to Korea do not experience full liberalization 

because ofthe ongoing seasonal orange TRQ in the FTA, the Korea AVE tariffs in the vegetable, fruits, 

and nuts sector declines from an initial 38.5 percent to 6.7 percent rather than to zero. To isolate the 

effect of FTA tariff reductions on beef trade from the effects of SPS issues, U.S.-Korea beef trade is 

based on 2003 data, the most recent year of normal trade prior to the Korean ban on beef imports from 

the United States. This assumption allows for an estimate that measures the potential changes in trade 

based solely on the removal of tariffs resulting from implementation of the FTA, and assumes no 

significant SPS measures that would restrict access to the Korean market. lastly, Korean liberalization 

with respect to motor vehicles also includes the reduction of the excise tax on automobiles with an 

1 Material presented in Sections II and III was prepared by staff of the Office of Economics of the U.S. International 

Trade Commission (USITC or Commission) in response to requests by staff from the Senate Finance Trade 

Subcommittee, and does not reflect the views of the Commission or Commissioners. The technical assistance is not 

an official Commission document and if referenced, it should be referenced "work of the staff of the USITC: not a 

Commission-approved document." 

'As negotiated in 2007. The economic model simulations do not take into account subsequent revisions to the 

agreement that were made in 2010. 

3 The model simulations show the marginal effect on the economy, relative to existing trends, of the removal or 

reduction of tariffs and TRQs as specified in the FTA. For example, a negative effect, such as a decrease in a 

commodity price or decrease in a sector's output, does not imply that the overall value will be negative as a result 

of the FT A. Rather the marginal effect of the FT A would either buttress existing negative economic trends or 

suppress positive ones. For a positive effect, it would do the opposite: enhance a positive economic trend, or 

suppress a negative one. 
61 


79457.031

engine displacement over 2,000 cubic centimeters (ccl. The tax, currently 10 percent, is expected to 

decline to 5 percent. Although the reduction is included in the FTA, it would apply to all producers; 

consequently, this change is implemented for all suppliers to the Korean market, including the United 

States and domestic Korean producers, prorated based on market share across the motor vehicles and 

parts sector. 

We requested that ITe staff simulate two scenarios in the technical assistance: 

In Scenario A the amount of labor and capital that is available in the U.S. economy is held fixed and 

wages and the cost of capital adjust to equilibrate supply and demand for labor and capital.' The 

Scenario A simulation of fixed labor and capital would reflect a condition close to full employment and 

full capacity utilization where the FTA creates greater demand for labor and capital in certain industry 

sectors that must then be reallocated from other sectors. Thus the simulated result for total U.S. 

employment is zero; employment is reallocated from sector to sector and from state to state. Total 

employment for a particular state may decline but this does not imply that unemployment is generated 

in that state; it implies that a certain quantity of labor is now employed in a neighboring state. Many 

economists consider these types of simulation models, which are based on standard assumptions, to 

provide reasonable economic responses to tariff changes in most years. 

In Scenario B the amount of labor and capital that is available in the U.S. economy is variable; real wages 

and the cost of capital are held fixed. Under these conditions, the simulations show that U.S. 

employment would expand by 0.16 percent, or approximately 280,000 jobs. The Scenario B simulation 

would reflect a condition of less than full employment and excess capacity where the FTA can result in 

higher employment and increased capacity utilization, drawing resources from currently unemployed 

labor and capital as well as from other sectors. This approach more closely approximates current U.S. 

economic conditions than Scenario A. 

4 The labor and capacity utilization mechanisms in Scenario A are the same as those in the simulations performed 

in the 2007 USITC publication about the U.s.-Korea FTA (USITC, U.S.-Korea Free Trade Agreement: Potential 

Economy-wide and Selected Sectoral Effects, Sept. 2007). 
62 


79457.032

Table 1 U.S.-Korea FTA: Simulated effects of goods trade liberalization on U.S. GOP and welfare under 

two different scenarios about capacity utilization and labor employment 

Indicator 

GDP 

Payments to factors 

Land 

Unskilled labor 

Skilled labor 

Capital 

Natural resources 

Change from 2009 baseline 

Scenario A 

Fixed capacity utilization and 

employment 

Million dollars Percent 

10,381 0.1 

8,670 

508 

2,670 

1,702 

3,835 

-45 

0.1 

0.8 

0.1 

0.1 

0.1 

0.0 

Scenario B 

Fixed real wages and returns 

to capital 

Million dollars 

27,261 

21,649 

698 

6,395 

4,418 

9,317 

821 

Percent 

0.2 

0.2 

1.1 

0.2 

0.2 

0.2 

0.6 

Welfare 1,758 0.0 20,652 0.1 

Efficiency 59 0.0 5,452 0.0 

Changes in the price of capital goods 215 0.0 20 0.0 

Terms ottrade (relative price of imports to exports) 1,483 0.0 742 0.0 

Capacity utilization 0 0.0 6,688 0.0 

Labor employment 0 0.0 7,750 0.1 

Note: Zero values indicate values less than 0.05 percent in absolute value. The difference between the 

sum of payments to factors and GOP is due to changes in net tax payments. 

79457.033

Table 2.A U.S.-Korea FTA: Simulated effects on U,S.-Korea bilateral trade. Scenario A (fixed caeaci!l:: utilization and em

u.s. e!Eorts to Korea U.S. im20rts from Korea 

Korean AVE U.S. AVE 

Exports tariff before Change in U.S. exports to Imports tariff before Change in U.S. impo

GTAP Sector before FTA FTA Korea after FTA before FTA FTA from Korea after FT

Million USD Percent MillionUSD Percent Million USD Percent Mi/fionUSD Per

Paddy and processed rice 43 nta 0 0.1 1 7.5 0 

Wheat 292 1.0 1 0.5 0 0.0 0 

Cereal grains n.e.c. 1,211 2.2 12 1.0 0 1.1 0 

Vegetables, fruit, nuts 274 38.5 202 73.7 35 0.7 2 

Oil seeds 320 2.5 19 6,1 0 0.0 0 

Sugarcane, sugar beet 0 3.0 0 0.2 0 0.0 0 

Plant-based fibers 91 1.0 6 6.9 0 0.5 0 

Crops n.e.c. 213 5.6 63 29,7 7 1.1 1 

Bovine cattle, sheep and goats, horses 8 5.9 1 10.2 0 0.0 0 

Animal products n.e.c. 290 3.3 36 12.3 1 0.5 0 

Raw milk 0 0,0 0 0.1 0 0.0 0 

Wool, silkworm cocoons 0 1.0 ° 15.8 ° 0.0 0 

Forestry 180 2.0 15 8.4 0 0.2 0 Fishing 27 19.6 14 51,9 23 0.0 0 

Coal 220 0.0 0 0.0 0 0,0 0 

Oil and gas 0 0.0 0 -D.1 a 0,0 0 

Minerals n.e.c. 414 1.9 13 3.1 2 0.0 0 Bovine meat products 1,085 38.0 1,190 109.8 6 0.4 1 

Meat products n.e.c. 301 24.8 611 203.0 1 2.4 0 

Vegetable oils and fats 194 5.4 35 17.8 2 4,1 1 

Dairy products 71 39.6 263 368.7 6 16.8 11 1

Sugar 2 43.5 0 -1.2 0 8.8 0 

Food products n.e.c. 813 10.0 320 39.3 320 4.6 54 

Beverages and tobacco products 97 35,1 88 90.3 88 3.3 4 

Textiles 175 8.3 145 82.9 1,043 11.0 979 

Wearing apparel 76 12.4 100 131.1 158 16.5 260 

Leather products 81 6.2 46 57.3 44 8,8 52 

Wood products 58 4.8 21 36.4 125 0.5 3 

Paper products, publishing 614 2.4 81 13.2 415 0,3 5 Petroleum, coal products 403 0,0 0 0.0 1,087 2.1 75 

Chemical, rubber, plastic products 5,665 6.7 2,541 44.9 3,093 3.0 585 

Mineral products n.e.c, 254 7.8 135 52.9 184 2.1 18 

Ferrous metals 1,221 1.2 78 6.4 1,284 0.2 8 Metals n.e.c. 661 3.7 222 33.6 151 2.4 29 Metal products 393 6.8 221 56.2 1,188 2.4 184 Motor vehicles and parts 359 7.9 194 54.1 8,108 2.4 907 

Transport equipment n.e.c. 798 0.9 59 7.4 497 0.1 -1 

Electronic equipment 3,128 0.6 138 4.4 13,182 0,2 230 

Machinery and equipment n.e.c. 7,464 4.6 2,813 37.7 8,506 1.3 805 

Manufactures n.e.c. 424 5,3 169 39.9 314 3.4 74 

Other sectors 

79457.034

Table 2.B U.S.-Korea FTA: Simulated effects on U.S.-Korea bilateral trade, Scenario B (fixed real and returns 

u.s. e:<£orts to Korea (I.o.b./ u.s. from Korea 

Korean AVE U.S. AVE 

Exports tariff before Change in U.S. exports to Imports tariff before Change in U,S

GTAP Sector before FTA FTA Korea after FT A before FTA FTA from Korea af

MiliionUSD Percent Million USD Percent Million USD Percent MilJionUSD 

Paddy and processed rice 43 n/a 0 0.1 1 7.5 0 

Wheat 292 1.0 1 0.4 0 0.0 0 

Cereal grains n.e.c. 1,211 2.2 12 1.0 0 1.1 0 

Vegetables, fruit, nuts 274 38.5 202 73.7 35 0.7 3 

Oil seeds 320 2.5 19 6.1 0 0.0 0 

Sugarcane, sugar beet 0 3.0 0 0.3 0 0.0 0 

Plant-based fibers 91 1.0 6 6.9 0 0.5 0 

Crops n.e.c. 213 5.6 63 29.5 7 1.1 1 

Bovine cattle, sheep and goats, horses 8 5.9 1 10.2 0 0.0 0 

Anima! products n,e.c. 290 3.3 36 12.4 1 0.5 0 

Raw milk 0 0.0 0 0.2 0 0.0 0 

Wool, silkworm cocoons 0 1.0 0 16.2 0 0.0 0 

Forestry 180 2.0 15 8.3 0 0.2 0 

Fishing 27 19.6 14 51,8 23 0.0 0 

Coal 220 0.0 -1 -0.4 0 0.0 0 

Oil and gas 0 0.0 0 -0.2 0 0.0 0 

Minerals n.e.c, 414 1.9 12 2.9 2 0.0 0 Bovine meat products 1.085 38.0 1,191 109.8 6 0.4 1 

Meat products n.e.c. 301 24.8 612 203.3 1 2.4 0 

Vegetable oils and fats 194 5.4 35 17.9 2 4.1 1 

Dajry products 71 39.6 263 369,0 6 16.8 11 

Sugar 2 43.5 0 -1.0 0 8.8 0 

Food products n.e.c. 813 10.0 321 39.5 320 4.6 54 

Beverages and tobacco products 97 35,1 88 90.4 88 3.3 4 

Textiles 175 8,3 146 83.2 1,043 11.0 981 

Wearjng apparel 76 12.4 100 131.5 158 16.5 261 

Leather products 81 6.2 47 57.7 44 8.8 52 

Wood products 58 4.8 21 36.6 125 0.5 3 

Paper products, publishjng 614 2.4 82 13.4 415 0.3 6 

Petroleum, coal products 403 0.0 0 0.1 1,087 2.1 77 

Chemical, rubber, plastic products 5,665 6.7 2,552 45.1 3,093 3.0 588 

Mineral products n.e,c. 254 7.8 135 53,0 184 2.1 19 

Ferrous metals 1,221 1.2 79 6.5 1,284 0.2 10 

Metals n.e.c. 661 3.7 223 33.8 151 2.4 29 Metal products 393 6.8 222 56.5 1,188 2.4 185 Motor vehicles and parts 359 7.9 195 54,3 8,108 2.4 915 

Transport eqUipment n.e.c. 798 0.9 61 7.7 497 0.1 0 

Electronic equipment 3,128 0.6 147 4.7 13,182 0,2 248 

Machinery and equipment n.e.c. 7,464 4.6 2,836 38.0 8,506 1.3 811 

Manufactures n.e.c. 424 5.3 170 40.2 314 3.4 75 

Other sectors 

79457.035

Table 3.A U.S.-Korea FTA: Simulated effects on U.S. alobal trade, Scenario A lfixed utilization and em

u.s. exeorts 10 Ihe wortd {f.o.b.) u.s. ime0rts from the world (LOP! 

Exports before Imports before 

GTAP Sector FTA Chanse in U.S. eXf!orts after FTA FTA Chan!i!e in U.S. imeorts after F

Million USD Million USD Percent MillionUSD MillionUSD Perc

Paddy and processed rice 1,392 -8 -0.6 476 2 

Wheat 5,522 -39 -0.7 678 4 

Cereal grains n.e.c. 7,486 1 0.0 727 5 

Vegetables, fruit, nuts 13,730 148 1.1 10,765 34 

Oil seeds 9,590 -27 -0.3 714 3 

Sugarcane, sugar beet 9 0 -0.8 10 0 

Plant-based fibers 4,837 -14 -0.3 22 0 

Crops n.e.c, 2,783 25 0.9 7,258 52 

Bovine cattle, sheep and goats, horses 680 -2 -0.3 1,627 27 

Animal products n.e.c. 3,598 26 0.7 1,795 11 

Raw milk 4 0 -1.2 24 0 

Wool, silkworm cocoons 53 -1 -1.3 25 0 

Forestry 1,397 10 0.7 438 1 

Fishing 766 12 1.6 2,314 7 

Coal 12,936 -4 0.0 2,987 2 Oil and gas 3,172 -6 -0.2 234,671 146 

Minerals n.e.c. 6,940 8 0,1 11,167 8 

Bovine meat products 2,011 1,181 58.7 4,117 35 

Meat products n.e.c. 6,562 552 8.4 1,807 10 

Vegetable oils and fats 3,788 15 0.4 3,639 15 

Dairy products 2,453 246 10.0 2,317 15 

Sugar 189 -1 -0.5 1,602 5 

Food products n.e.c. 21,384 262 1.2 31,605 86 Beverages and tobacco products 4,739 81 1.7 15,238 14 

Textiles 14,031 94 0,7 52,547 225 

Wearing apparel 2,525 91 3,6 65,095 90 

Leather products 2,033 23 1,1 34,409 47 

Wood products 9,823 -24 -0.2 48,168 123 

Paper products, publishing 31,379 -25 -0.1 24,988 65 Petroleum, coal products 32,421 -12 0.0 102,148 63 

Chemical. rubber, plastic products 207,112 1,767 0.9 197,815 611 

Mineral products n.e.c. 11,003 92 0,8 23,080 58 

Ferrous metals 20,575 19 0.1 34,146 58 

Metals n.e.c. 31,170 66 0.2 41,937 83 

Metal products 23,709 111 0.5 37,160 172 Motor vehicles and parts 92,839 -38 0.0 224,550 510 

Transport equipment n.e,c. 94,407 -403 -0.4 40,110 106 

Electronic equipment 90,587 -436 -0.5 258,597 376 Machinery and equipment n.e.c, 242,594 1,502 0.6 271,892 996 Manufactures n.e.c, 14,475 85 0.6 69,955 145 

Other sectors 

79457.036

Table 3.B U.S.-Korea FTA: Simulated effects on U,S'lllobal trade, Scenario B (fixed real walles and returns 

u.s. exeorts to the world (f.o.b.) U.S. imeorts from the world (LDP) 

Exports before Imports before 

GTAPSector FTA Chanae in U.S. exeorts after FTA FTA Change in U.S. lmeorts aft

Million USD Million USD Percent MillionUSD MillionUSD P

Paddy and processed rice 1,392 -7 -0.5 476 2 

Wheat 5,522 -42 -0.8 678 5 

Cereal grains n.e.c. 7,486 2 0.0 727 6 

Vegetables, fruit, nuts 13,730 149 1.1 10,765 43 

Oil seeds 9,590 -28 -0.3 714 5 

Sugarcane, sugar beet 9 0 -0.9 10 0 

Plant-based fibers 4,837 -14 -0.3 22 0 

Crops n.e.c. 2,783 21 0.8 7,258 66 

Bovine cattle, sheep and goats, horses 680 -2 -0.3 1,627 29 

Animal products n.e.c. 3,598 27 0.7 1,795 13 

Raw milk 4 0 -1.2 24 0 

Wool, silkworm cocoons 53 0 -0.9 25 0 

Forestry 1,397 9 0.6 438 2 

Fishing 766 12 1.6 2,314 11 

Coal 12,936 -43 -0.3 2,987 17 Oil and gas 3,172 -8 -0.3 234,671 702 

Minerals n,e.c. 6,940 1 0.0 11,167 56 

Bovine meat products 2,011 1,183 58.8 4,117 35 

Meat products n.e.c, 6,562 567 8.6 1.807 10 

Vegetable oils and fats 3,788 20 0.5 3,639 17 

Dairy products 2,453 251 10.2 2,317 15 

Sugar 189 -1 -0.3 1,602 5 

Food products n.e.c. 21,384 286 1.3 31,605 99 Beverages and tobacco products 4,739 84 1.8 15,238 24 

Textiles 14,031 122 0.9 52,547 264 

Wearing apparel 2,525 97 3.8 65,095 130 

Leather products 2,033 28 1.4 34,409 74 

Wood products 9,823 -5 0.0 48.168 139 

Paper products, publishing 31,379 30 0.1 24,988 72 Petroleum, coal products 32,421 -3 0.0 102,148 292 

Chemical, rubber, plastic products 207,112 2,064 1.0 197,815 781 

Mineral products n.e,c. 11,003 100 0.9 23,080 88 

Ferrous metals 20,575 40 0.2 34,146 104 Metals n,e.c. 31,170 98 0.3 41,937 143 Metal products 23,709 162 0.7 37,160 184 Motor vehicles and parts 92,839 58 0.1 224,550 683 

Transport equipment n,e,c. 94,407 -183 -0.2 40,110 113 

Electronic equipment 90,587 -198 -0.2 258,597 584 

Machinery and equipment n.e.c. 242,594 2,065 0.9 271,892 1,066 Manufactures n.e.c. 14,475 122 0.8 69,955 186 

Other sectors 
67 


79457.037

Table 4 U.S.-Korea FTA: Simulated effects on U.S. output and employment under two scenarios about 

capacity utilization and employment 

GTAP sector 

Paddy and processed rice 

Wheat 

Cereal grains n.e.c. 

Vegetables, fruit. nuts 

Oil seeds 

Sugarcane, sugar beet 

P!ant~based fibers 

Crops n.e.c. 

Bovine cattle, sheep and goats, horses 

Animal products n.e.c, 

Raw milk 

Wool, silkworm cocoons 

Forestry 

Fishing 

Coal 

Oil and gas 

Minerals n.e.c. 

Bovine meat products 

Meat products n.e.c. 

Vegetable oils and fats 

Dairy products 

Sugar 

Food products n.e.c, 

Beverages and tobacco products 

Textiles 

Wearing apparel 

Leather products 

Wood products 

Paper products, publishing 

Petroleum, coal products 

Chemical, rubber, plastic products 

Mineral products n.e.c. 

Ferrous metals 

Metals n.e.c. 

Metal products 

Motor vehicles and parts 

Transport eqUipment n.e.c, 

Electronic equipment 

Machinery and equipment n.e.c. 

Manufactures n.e.c. 

Other sectors 

Total 

Scenario A Scenario B 

Fixed capacity utilization and employment Fixed real wages and returns to capital 

Output Labor quantity Output Labor quantity 

Quantity Revenue Skilled Unskilled Quantity Revenue SkU!ed Unskilled 

Percent changes 

-0.2 -0.1 -0.2 ·0.2 -0.2 -0.1 -0.1 -0.1 

-0.5 ·0.4 -0.5 -0.5 -0.5 -0.4 -0.5 -0.5 

0.3 

0.2 

-0.2 

0.0 

-0.3 

-0.1 

1.1 

0.5 

0.2 

0.2 

0.0 

0.1 

0.0 

0.0 

0.0 

1.2 

0.6 

0.1 

0.3 

0.0 

0.1 

0.0 

·0.4 

0.1 

-0.1 

0.0 

0.0 

0.0 

0.1 

0.0 

-0.1 

-0.1 

0.0 

·0.1 

-0.2 

-0.3 

0.0 

-0.1 

0.0 

0.0 

0.5 

0.5 

0.0 

0.3 

·0.1 

0.2 

1.4 

0.6 

0.4 

0.3 

0.1 

0.4 

0.0 

0.0 

0.1 

1.4 

0.7 

0.2 

0.4 

0.1 

0.2 

0.1 

-0.3 

0.1 

-0.1 

0.0 

0.1 

0.0 

0.2 

0.1 

0.0 

0.0 

0.0 

·0.1 

-0.1 

-0.3 

0.1 

0.0 

0.1 

0.1 

0.4 

0.3 

-0.2 

0.1 

-0.2 

0.0 

1.2 

0.5 

0.3 

0.3 

0.0 

0.1 

0.0 

0.0 

0.0 

1.2 

0.6 

0.1 

0.3 

0.0 

OJ 

0.0 

-0.4 

0.1 

-0.1 

0.0 

0.0 

0.0 

0.1 

0.0 

-0.1 

-0.1 

0.0 

·0.1 

-0.2 

-0.3 

0.0 

-0.1 

0.0 

0.0 

0.4 

0.3 

-0.2 

0.1 

-0.2 

0.0 

1.3 

0.5 

0.3 

0.3 

0.0 

0.1 

0.0 

0.0 

0.0 

1.2 

0.6 

0.1 

0.3 

0.0 

0.1 

0.0 

-0.3 

0.1 

-0.1 

0.0 

0.0 

0.0 

0.1 

0.0 

-0.1 

-0.1 

0.0 

-0.1 

-0.2 

-0.3 

0.0 

0.0 

0.0 

0.0 

0.4 

0.3 

-0.2 

OJ 

-0.2 

0.0 

1.2 

0.6 

0.3 

0.4 

0.1 

0.1 

0.0 

0.0 

0.1 

1.3 

0.7 

0.3 

0.4 

0.1 

0.2 

0.1 

-0.1 

0.3 

0.1 

0.1 

0.2 

0.1 

0.3 

0.2 

0.1 

0.1 

0.1 

0.0 

0.0 

-0.1 

0.2 

0.2 

0.2 

0.0 

0.6 

0.5 

0.0 

0.4 

0.0 

0.3 

1.5 

0.7 

0.5 

0.5 

0.3 

0.5 

0.3 

0.2 

0.5 

1.5 

0.8 

0.3 

0.5 

0.2 

0.3 

0.2 

-0.1 

0.3 

0.1 

0.2 

0.2 

0.2 

0.3 

0.2 

0.2 

0.2 

0.2 

0.1 

0.0 

0.0 

0.3 

0.2 

0.2 

0.2 

0.5 

0.4 

-0.1 

02 

-0.1 

0.1 

1.4 

0.7 

0.4 

0.6 

0.2 

0.2 

0.1 

0.1 

0.2 

1.3 

0.7 

0.3 

0.4 

0.1 

0.2 

0.1 

-0.1 

0.3 

0.1 

0.1 

0.2 

0.1 

0.3 

0.2 

0.1 

0.1 

0.1 

0.0 

0.0 

-0.1 

0.2 

0.2 

0.2 

0.2 

0.5 

0.4 

-0.1 

0.2 

-0.1 

0.1 

1.4 

0.7 

0.4 

0.6 

0.2 

0.2 

0.1 

0.1 

0.2 

1.3 

0.7 

0.3 

0.4 

0.1 

0.2 

0.1 

-0.1 

0.3 

0.1 

0.1 

0.2 

0.1 

0.3 

0.2 

0.1 

0.1 

0.1 

0.0 

0.0 

-0.1 

0.2 

0.2 

0.2 

0.2 
68 


79457.038

Table 5 U.S.-Korea FTA: Simulated effects on real gross product and employment, by U.S. state, under 

two scenarios about U.S. capacity utilization and employment 

Scenario A Scenario B 

Fixed V,S. capacity utilization and employment Fixed real wages and returns to capital 

State Real gross state product State employment Real gross state product State employment 

Percent 

Alabama 0.0 0.0 0.1 0.1 

Alaska 0.0 0.0 0.1 0.1 

Arizona -0.1 -0.1 0.1 0.1 

Arkansas 0.0 0.0 0.2 0.2 

California 0.0 0.0 0.1 0.1 

Colorado 0.1 0.1 0.2 0.2 

Connecticut -0.1 -0.1 0.1 0.1 

Delaware 0.0 0.0 0.1 0.1 

Florida 0.0 0.0 0.2 0.2 

Georgia 0.1 0.1 0.2 0.2 

Hawaii -0.1 -0.1 0.0 0.0 

Idaho 0.1 0.0 0.2 0.2 

Illinois 0.0 0.0 0.2 0.2 

Indiana 0.0 -0.1 0.1 0.1 

Iowa 0.3 0.3 0.5 0.6 

Kansas 0.2 0.2 0.4 0.4 

Kentucky 0.0 0.0 0.2 0.2 

Louisiana 0.0 0.0 0.2 0.2 

Maine -0.1 -0.1 0.1 0.1 

Maryland 0.0 0.0 0.1 0.1 

Massachusetts -0.1 -0.1 0.1 0.1 

Michigan -0.1 -0.1 0.1 0.1 

Minnesota 0.0 0.0 0.2 0.2 

Mississippi 0.0 0.0 0.2 0.2 

Missouri 0.0 0.0 0.2 0.2 

Montana 0.1 0.1 0.2 0.2 

Nebraska 0.3 0.4 O.S 0.6 

Nevada 0.0 0.0 0.1 0.1 

New Hampshire -0.1 -0.1 0.1 0.1 

New Jersey -0.1 -0.1 0.2 0.2 

New Mexico 0.0 0.0 0.1 0.1 

New York 0.0 0.0 0.2 0.2 

North Carolina 0.0 0.0 0.1 0.1 

North Dakota 0.0 0.0 0.2 0.2 

Ohio -0.1 -0.1 0.1 0.1 

Oklahoma 0.1 0.1 0.3 0.3 

Oregon 0.0 0.0 0.1 0.1 

Pennsylvania -0.1 -0.1 0.1 0.1 

Rhode Island -0.1 -0.1 0.1 0.1 

South Carolina 0.1 0.1 0.2 0.2 

South Dakota 0.3 0.3 0.4 0.4 

Tennessee 0.0 0.0 0.2 0.2 

Texas 0.0 0.0 0.2 0.2 

Utah 0.0 0.0 0.1 0.1 

Vermont -0.1 -0.1 0.0 0.0 

Virginia 0.1 0.1 0.2 0.2 

Washington 0.1 0.1 0.2 0.2 

West Virginia 0.0 0.0 0.1 0.1 

Wisconsin -0.1 -0.1 0.1 0.1 

Wlomjn~ 0.1 0.1 0.3 0.2 
69 


79457.039

Table 6 U.S.-Korea FT A: Simulated effects on real gross product and employment, by U.S. region, under 

two scenarios about U.S. capacity utilization and employment 

Scenario A Scenario B 

Fixed U.S. capacity utilization and employment 

Real gross regional 

Fixed real wages and returns to capital 

Real gross regional 

Region product Regional employment product Regional employment 

NorthWest 

Western 

Rocky Mountain 

Mid-America 

South West 

Midwest 

0.0 

0.0 

0.1 

0.1 

0.1 

0.0 

--------- Percent ---------

0.0 

0.0 

0.1 

0.1 

0.1 

0.0 

0.2 

0.1 

0.3 

0.2 

0.2 

0.2 

0.2 

0.1 

0.3 

0.2 

0.2 

0.2 

Great Lakes -0.1 -0.1 0.1 0.1 

Southeastern 0.0 0.0 0.2 0.2 

Mid-Atlantic 0.0 0.0 0.2 0.2 

New England -0.1 -0.1 0.1 0.1 

Note: In this and the following tables, U.S. states have been grouped to ten regions according to the 

following: 

Northwest: Alaska, Washington, Oregon, Idaho, Montana. 

Western: California, Nevada, Arizona, Hawaii. 

Rocky Mountain: Utah, Wyoming, Colorado, New Mexico, Nebraska, South Dakota, North Dakota. 

Mid-America: Kansas, Missouri, Arkansas. 

Southwest: Texas, Oklahoma, Louisiana. 

Midwest: Minnesota, Iowa, Wisconsin, Illinois. 

Great Lakes: Michigan, Indiana, Ohio. 

Southeastern: Kentucky, Tennessee, Mississippi, Alabama, Florida, Georgia, South Carolina, North 

Carolina. 

Mid-Atlantic: Virginia, West Virginia, Maryland, Delaware, Pennsylvania, New Jersey, New York. 

New England: Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire, Maine. 
70 


79457.040

Table 7.A U.S.-Korea FTA: Simulated effects on employment, by U.S. state and sector, Scenario A 

(fixed capacity utilization and employment) 

Alabama 

Alaska 

Arizona 

Arkansas 

California 

Colorado 

Connecticut 

Delaware 

Florida 

Georgia 

Hawaii 

Idaho 

Illinois 

Indiana 

Iowa 

Kansas 

Kentucky 

Louisiana 

Maine 

Maryland 

Massachusetts 

Michigan 

Minnesota 

Mississippi 

Missouri 

Montana 

Nebraska 

Nevada 

New Hampshire 

New Jersey 

New Mexico 

New York 

North Carolina 

North Dakota 

Ohio 

Oklahoma 

Oregon 

Pennsylvania 

Rhode Island 

South Carolina 

South Dakota 

Tennessee 

Texas 

Utah 

Vermont 

Virginia 

Washington 

West Virginia 

Wisconsin 

Wyoming 

1.1 

0.1 

0.9 

1.3 

0.4 

4.0 

0.1 

0.5 

0.5 

1.2 

0.3 

1.4 

1.4 

1.5 

3.8 

4.3 

1.8 

0.8 

0.3 

0.4 

0.3 

0.4 

1.6 

1.2 

2.3 

2.3 

4.7 

i.E 

0.1 

0.2 

2.0 

0.3 

1.7 

1.2 

0.9 

3.5 

0.8 

0.8 

0.4 

2.1 

3.9 

1.5 

2.2 

2.4 

0.5 

3.4 

1.3 

1.8 

0.7 

4.4 

-0.1 

-0.1 

-0.2 

-0.1 

-0.1 

-0.1 

0.0 

-0.1 

0.0 

0.0 

0.0 

0.0 

-0.1 

-0.1 

0.2 

-0.1 

-0.1 

-0.2 

0.0 

-0.1 

-0.1 

-0.2 

-0.2 

-0.1 

0.0 

-0.1 

0.1 

-0.1 

0.0 

-0.1 

-0.1 

-0.1 

0.0 

-0.1 

-0.2 

-0.2 

0.0 

-0.1 

-0.1 

0.0 

0.0 

0.0 

-0.2 

-0.1 

0.0 

-0.1 

0.0 

-0.1 

0.0 

0.0 

0.0 

0.0 

0.0 

0.0 

0.0 

0.1 

-0.1 

0.0 

0.0 

0.1 

0.0 

0.0 

0.0 

0.0 

0.3 

0.2 

0.0 

0.0 

0.0 

0.0 

-0.1 

-0.1 

0.0 

0.0 

0.0 

0.1 

0.3 

0.0 

-0.1 

-0.1 

0.0 

0.0 

0.0 

0.0 

-0.1 

0.1 

0.0 

0.0 

-0.1 

0.0 

0.2 

0.0 

0.0 

0.0 

-0.1 

0.1 

0.1 

0.0 

0.0 

0.1 

-0.2 

-0.1 

-0.3 

-0.1 

-0.3 

-0.1 

-0.4 

-0.2 

-0.2 

-0.2 

-0.1 

-0.3 

-0.2 

-0.2 

0.0 

-0.2 

-0.2 

-0.1 

-0.2 

-0.2 

-0.2 

-0.2 

-0.1 

-0.1 

-0.2 

-0.1 

0.0 

-0.2 

-0.2 

-0.3 

-0.2 

-0.3 

-0.2 

-0.1 

-0.2 

-0.1 

-0.3 

-0.2 

-0.2 

-0.3 

0.0 

-0.2 

-0.2 

-0.2 

-0.4 

-0.2 

-0.4 

-0.2 

-0.2 

0.0 

0.0 

0.0 

0.1 

0.1 

0.2 

0.4 

-0.1 

-0.1 

0.1 

0.2 

0.0 

0.3 

0.1 

0.0 

1.2 

1.2 

0.0 

0.2 

-0.1 

0.0 

-0.1 

-0.1 

0.1 

0.3 

0.0 

0.1 

1.9 

0.0 

-0.1 

-0.1 

0.0 

0.0 

0.1 

0.2 

-0.1 

0.3 

0.1 

0.0 

-0.1 

0.1 

1.6 

-0.1 

0.2 

0.1 

-0.1 

0.5 

0.5 

0.0 

-0.1 

0.1 

0.0 

0.0 

-0.1 

0.1 

0.0 

0.1 

-0.1 

0.0 

0.0 

0.1 

-0.1 

0.1 

0.0 

0.0 

0.3 

0.2 

0.0 

0.1 

0.0 

0.0 

-0.1 

-0.1 

0.0 

0.1 

0.0 

0.1 

0.3 

0.0 

-0.1 

0.0 

0.0 

0.0 

0.1 

0.0 

0.0 

0.1 

0.1 

0.0 

-0.1 

0.1 

0.3 

0.0 

0.1 

0.0 

-0.1 

0.1 

0.1 

0.0 

0.0 

0.1 

0.0 

0.0 

0.0 

0.0 

0.1 

0.1 

-0.1 

0.0' 

0.1 

0.1 

-0.1 

0.0 

0.0 

-0.1 

0.3 

0.2 

0.0 

0.1 

-0.1 

0.0 

-0.1 

-0.1 

0.0 

0.1 

0.0 

0.0 

0.3 

0.0 

-0.1 

-0.1 

0.0 

0.0 

0.0 

0.0 

-0.1 

0.1 

0.1 

-0.1 

-0.1 

0.3 

0.2 

0.0 

0.1 

0.0 

-0.1 

0.2 

0.3 

0.0 

-0.1 

0.1 

Finance, 

0.0 

0.0 

-0.1 

0.0 

0.0 

0.1 

-0.1 

0.0 

0.0 

0.1 

-0.1 

0.1 

0.0 

0.0 

0.3 

0.3 

0.0 

0.0 

-0.1 

0.0 

-0.1 

-0.1 

0.0 

0.1 

0.0 

0.1 

0.3 

0.0 

-0.1 

-0.1 

0.0 

-0.1 

0.0 

0.0 

-0.1 

0.2 

0.0 

-0.1 

-0.1 

0.1 

0.2 

0.0 

0.1 

0.0 

-0.1 

0.1 

0.1 

0.0 

-0.1 

0.1 

0.0 

0.0 

0.0 

0.0 

0.0 

0.0 

-0.1 

0.0 

0.0 

0.0 

0.0 

0.0 

0.0 

0.0 

0.2 

0.1 

0.0 

0.0 

0.0 

0.0 

-0.1 

-0.1 

0.0 

0.0 

0.0 

0.0 

0.2 

0.0 

-0.1 

0.0 

0.0 

0.0 

0.0 

0.0 

-0.1 

0.1 

0.0 

0.0 

0.0 

0.0 

0.1 

0.0 

0.0 

0.0 

-0.1 

0.1 

0.0 

0.0 

0.0 

0.1 
71 


79457.041

Table 7.8 U.S.-Korea FTA: Simulated effects on employment, by U.S. state and sector, Scenario B 

(fixed real wages and returns to capital) 

Alabama 

Alaska 

Arizona 

Arkansas 

Califomia 

Colorado 

Connecticut 

Delaware 

Flonda 

Georgia 

Hawaii 

Idaho 

Illinois 

Indiana 

!owa 

Kansas 

Kentucky 

Louisiana 

Maine 

Maryland 

Massachusetts 

Michigan 

Minnesota 

Mississippi 

Missouri 

Montana 

Nebraska 

Nevada 

New Hampshire 

New Jersey 

New Mexico 

New York 

North Carolina 

North Dakota 

Ohio 

Oklahoma 

Oregon 

Pennsylvania 

Rhode Island 

South Carolina 

South Dakota 

Tennessee 

Texas 

Utah 

Vermont 

Virginia 

Washington 

West Virginia 

Wisconsin 

Wyoming 

1.3 

0.3 

1.0 

t.5 

0.6 

4.2 

0.4 

0.7 

0.7 

1.4 

0.4 

1.5 

1.7 

1.7 

4.1 

4.5 

2.0 

1.0 

0.5 

0.6 

0.5 

0.6 

1.8 

1.4 

2.5 

2.4 

4.9 

1.7 

0.4 

0.5 

2.1 

0.6 

1.9 

1.4 

1.1 

3.7 

0.9 

1.1 

0.6 

2.3 

4.1 

1.7 

2.4 

2.6 

0.6 

3.6 

1.4 

2.0 

0.9 

4.5 

0.2 

0.1 

0.0 

0.2 

0.1 

0.1 

0.2 

0.1 

0.2 

0.1 

0.1 

0.1 

0.2 

0.2 

0.4 

0.2 

0.2 

0.1 

0.1 

0.2 

0.1 

0.0 

0.0 

0.1 

0.2 

0.1 

0.3 

0.1 

0.1 

0.2 

0.1 

0.2 

0.2 

0.1 

0.1 

0.1 

0.1 

0.2 

0.1 

0.2 

0.2 

0.2 

0.1 

0.1 

0.1 

0.2 

0.2 

0.2 

0.2 

0.2 

0.1 

0.1 

0.1 

0.2 

0.2 

0.2 

0.1 

0.2 

0.2 

0.2 

0.0 

0.1 

0.2 

0.1 

0.5 

0.4 

0.2 

0.1 

0.1 

0.2 

0.1 

0.1 

0.2 

0.2 

0.2 

0.2 

0.5 

0.1 

0.1 

0.2 

0.1 

0.2 

0.2 

0.2 

0.1 

0.3 

0.1 

0.2 

0.1 

0.2 

0.4 

0.2 

0.2 

0.1 

0.1 

0.2 

0.2 

0.1 

0.2 

0.2 

0.0 

0.0 

-0.2 

0.0 

-0.1 

0.0 

-0.2 

0.0 

-0.1 

0.0 

0.0 

-0.1 

0.0 

0.0 

0.2 

-0.1 

0.0 

0.0 

0.0 

0.0 

-0.1 

0.0 

0.0 

0.0 

0.0 

0.0 

0.2 

0.0 

0.0 

0.0 

-0.1 

-0.1 

0.0 

0.1 

0.0 

0.0 

-0.1 

0.0 

0.0 

-0.1 

0.1 

0.0 

-0.1 

-0.1 

-0.2 

0.0 

-0.2 

0.0 

0.0 

0.1 

0.2 

0.1 

0.3 

0.3 

0.3 

0.6 

0.1 

0.1 

0.3 

0.3 

0.1 

0.5 

0.3 

0.2 

1.4 

1.4 

0.2 

0.3 

0.1 

0.2 

0.1 

0.1 

0.2 

0.4 

0.2 

0.2 

2.1 

0.2 

0.1 

0.2 

0.2 

0.2 

0.2 

0.3 

0.1 

0.4 

0.3 

0.2 

0.1 

0.2 

1.8 

0.1 

0.4 

0.3 

0.1 

0.6 

0.6 

0.1 

0.1 

0.2 

0.2 

0.1 

0.1 

0.2 

0.2 

0.2 

0.1 

0.2 

0.2 

0.2 

0.0 

0.2 

0.2 

0.2 

0.7 

0.6 

0.2 

0.3 

0.1 

0.2 

0.1 

0.1 

0.2 

0.2 

0.2 

0.2 

0.7 

0.2 

0.1 

0.2 

0.2 

0.2 

0.2 

0.2 

0.1 

0.3 

0.2 

0.2 

0.1 

0.3 

0.6 

0.2 

0.2 

0.2 

0.1 

0.3 

0.3 

0.2 

0.2 

0.3 

0.1 

0.1 

0.1 

0.2 

0.3 

0.2 

0.1 

0.2 

0.3 

0.3 

0.1 

0.2 

0.2 

0.1 

0.6 

0.5 

0.2 

0.3 

0.1 

0.2 

0.1 

0.1 

0.2 

0.2 

0.2 

0.2 

0.7 

0.2 

0.1 

0.2 

0.2 

0.2 

0.2 

0.2 

0"1 

0.3 

0.2 

0.2 

0.1 

0.5 

0.4 

0.2 

0.2 

0.2 

0.0 

0.4 

0.4 

0.2 

0.1 

0.3 

F!nance, 

0.2 

0.1 

0.1 

0.2 

0.2 

0.2 

0.1 

0.1 

0.2 

0.3 

0.0 

0.2 

0.2 

0.2 

0.5 

0.5 

0.2 

0.2 

0.1 

0.2 

0.1 

0.1 

0.2 

0.2 

0.2 

0.2 

0.5 

0.2 

0.1 

0.2 

0.2 

0.1 

0.2 

0.2 

0.1 

0.3 

0.2 

0.2 

0.1 

0.3 

0.4 

0.2 

0.2 

0.2 

0.1 

0.3 

0.2 

0.2 

0.2 

0.3 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.2 

0.0 

0.1 

0.2 

0.1 

0.4 

0.3 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.4 

0.1 

0.1 

0.2 

0.1 

0.1 

0.1 

0.1 

0.1 

0.2 

0.1 

0.1 

0.1 

0.1 

0.2 

0.1 

0.2 

0.1 

0.0 

0.1 

0.1 

0.1 

0.1 

0.1 
72 


79457.042

TableS.A U.S.-Korea FTA: Simulated effects on employment, by region and sector, Scenario A (fixed 

ca~acit~ utilization and em~lo~mentl 

Finance, 

North West 1.2 -0.1 0.0 -0.3 0.3 0.1 0.2 0.1 0.0 

Western 0.4 -0.1 0.0 -0.3 0.2 0.0 0.1 0.0 0.0 

Rocky Mountain 3.4 -0.1 0.1 -0.1 0.8 0.1 0.1 0.1 0.1 

Mid-America 2.5 -0.1 0.1 -0.2 0.3 0.1 0.0 0.1 0.0 

South West 2.3 -0.2 0.0 -0.2 0.2 0.1 0.1 0.1 0.0 

Midwest 1.9 -0.1 0.0 -0.2 0.2 0.0 0.0 0.0 0.0 

Great Lakes 0.9 -0.1 -0.1 -0.2 -0.1 0.0 -0.1 -0.1 -0.1 

Southeastern 1.2 -0.1 0.0 -0.2 0.1 0.1 0.1 0.0 0.0 

Mid-Atlantic 1.2 -0.1 0.0 -0.2 0.0 0.0 0.0 0.0 0.0 

New England 0.3 0.0 -0.1 -0.3 -0.1 -0.1 -0.1 -0.1 -0.1 

TableS.B U.S.-Korea FTA: Simulated effects on employment, by region and sector, Scenario B (fixed 

real walles and returns to ca~itall 

Finance, 

Agriculture, Transportation, Wholesale Insurance 

forestry and Durable Nondurable communications and retail and fea! Other 

Region fisheries Mining Construction manufacturing manufacturing and utilities trade estate 

------------ Percent --------------

North West 1.4 0.1 0.2 -0.2 0.5 0.2 0.3 0.2 0.1 

Western 0.6 0.1 0.1 -0.1 0.3 0.2 0.2 0.2 0.1 

Rocky Mountain 3.6 0.1 0.2 0.0 0.9 0.3 0.3 0.3 0.2 

Mid-America 2.7 0.2 0.2 0.0 0.5 0.3 0.3 0.3 0.2 

SouthWest 2.5 0.1 0.2 0.0 0.4 0.3 0.3 0.3 0.2 

Midwest 2.1 0.1 0.2 0.0 0.4 0.3 0.2 0.2 0.2 

Great Lakes 1.1 0.1 0.1 0.0 0.1 0.1 0.1 0.1 0.1 

Southeastern 1.4 0.2 0.2 0.0 0.2 0.2 0.2 0.2 0.1 

Mid-Atlantic 1.4 0.2 0.2 0.0 0.3 0.2 0.2 0.2 0.1 

New England 0.5 0.1 0.1 -0.1 0.1 0.1 0.1 0.1 0.1 
73 


79457.043

Table 9.A U.S.-Korea FTA: Simulated effects on gross output, by U.S. state and sector, Scenario A 

(fixed capacity utilization and employment) 

State 

Alabama 

Alaska 

Arizona 

Arkansas 

California 

Colorado 

Connecticut 

Delaware 

Florida 

Georgia 

Hawaii 

Idaho 

illinois 

Indiana 

Iowa 

Kansas 

Kentucky 

Louisiana 

Maine 

Maryland 

Massachusetts 

Michigan 

Minnesota 

Mississippi 

Missouri 

Montana 

Nebraska 

Nevada 

New Hampshire 

New Jersey 

New Mexico 

New York 

North Carolina 

North Dakota 

Ohio 

Oklahoma 

Oregon 

Pennsylvania 

Rhode !sland 

South Carolina 

South Dakota 

Tennessee 

Texas 

Utah 

Vermont 

Virginia 

Washington 

West Virginia 

Wisconsin 

Wyoming 

Agriculture, 

forestry and 

fisheries 

0.9 

0.0 

0.8 

1.1 

0.4 

3.5 

0.0 

0.4 

0.4 

1.1 

0.2 

1.1 

1.1 

1.2 

3.4 

3.8 

1.5 

0.7 

0.2 

0.3 

0.2 

0.2 

1.3 

1.0 

1.9 

1.8 

4.1 

1.1 

0.0 

0.1 

1.6 

0.2 

1.5 

0.9 

0.7 

3.0 

0.7 

0.6 

0.3 

2.0 

3.4 

1.2 

1.9 

2.0 

0.3 

3.1 

1.2 

1.5 

0.5 

3.7 

Mining Construction 

-0.1 0.0 

-0.1 0.0 

-0.1 0.0 

0.0 0.0 

-0.1 0.0 

-0.1 0.1 

-0.1 -0.1 

-0.1 0.0 

0.0 0.0 

0.0 0.1 

0.0 0.0 

0.0 0.0 

-0.1 0.0 

-0.1 

0.2 

0.0 

-0.1 

-0.1 

0.0 

-0.1 

-0.1 

-0.2 

-0.2 

-0.1 

0.0 

-0.1 

0.1 

-0.1 

-0.1 

-0.1 

-0.1 

-0.1 

0.0 

0.0 

-0.1 

-0.1 

0.0 

-0.1 

-0.1 

0.0 

0.0 

0.0 

-0.1 

-0.1 

0.0 

-0.1 

0.0 

-0.1 

0.0 

0.0 

0.0 

0.3 

0.2 

0.0 

0.0 

0.0 

0.0 

-0.1 

-0.1 

0.0 

0.0 

0.0 

0.1 

0.3 

0.0 

-0.1 

-0.1 

0.0 

0.0 

0.0 

0,0 

-0.1 

0.1 

0.0 

-0.1 

-0.1 

0.0 

0.2 

0.0 

0.0 

0.0 

-0.1 

0.1 

0.1 

0.0 

0.0 

0.1 

Durable Nondurable 

manufactunng manufacturing and utilities 

---Percent ----------

-0.2 0.0 0.0 

-0.1 

-0.3 

-0.1 

-0.3 

-0.1 

-0.3 

·0.2 

-0.2 

·0.2 

-0.1 

-0.2 

-0.2 

-0.2 

0.0 

-0.2 

-0.2 

-0.1 

-0.2 

-0.2 

-0.2 

-0.2 

-0.1 

-0.1 

-0.2 

-0.1 

0.0 

-0.1 

-0.2 

-0.2 

-0.2 

-0.3 

-0.2 

-0.1 

-0.2 

-0.1 

-0.3 

-0.2 

-0.2 

-0.3 

0.0 

-0.2 

-0.2 

-0.2 

-0.3 

-0.2 

-0.4 

-0.2 

-0.2 

0.0 

0.0 

0.1 

0.1 

0.1 

0.4 

-0.1 

-0.1 

0.1 

0.2 

0.0 

0.3 

0.1 

0.0 

1.2 

1.2 

0.0 

0.2 

-0.1 

0.0 

-0.1 

-0.1 

0.1 

0.2 

0.0 

0.1 

1.8 

0.0 

-0.1 

-0.1 

0.0 

0.0 

0.1 

0.1 

-0.1 

0.3 

0.1 

0.0 

-0.1 

0.1 

1.6 

-0.1 

0.2 

0.1 

-0.1 

0.4 

0.5 

-0.1 

-0.1 

0.1 

0.0 

-0.1 

0.1 

0.0 

0.1 

-0.1 

0.0 

0.0 

0.1 

-0.1 

0.1 

0.0 

0.0 

0.3 

0.2 

0.0 

0.1 

0.0 

0.0 

-0.1 

-0.1 

0.0 

0.1 

0.0 

0.1 

0.3 

0.0 

-0.1 

0.0 

0.0 

0.0 

0.0 

0.0 

0.0 

0.1 

0.1 

0.0 

-0.1 

0.1 

0.3 

0.0 

0.1 

0.0 

-0.1 

0.1 

0.1 

0.0 

0.0 

0.1 

Finance, 

Wholesale insurance 

and retail and real 

trade 

0.0 

0.0 

0.0 

0.0 

0.1 

0.1 

-0.1 

0.0 

0.1 

0.1 

-0.1 

0.0 

-0.1 

-0.1 

0.3 

0.2 

0.0 

0.1 

-0.1 

0.0 

-0.1 

-0.1 

0.0 

0.1 

0.0 

0.0 

0.3 

0.0 

-0.1 

-0.1 

0.0 

0.0 

0.0 

0.0 

-0.1 

0.1 

0.1 

-0.1 

-0.1 

0.3 

0.2 

0.0 

0.1 

0.0 

-0.1 

0.2 

0.2 

0.0 

-0.1 

0.1 

estate 

0.0 

0.0 

-0.1 

0.0 

0.0 

0.1 

-0.1 

0.0 

0.0 

0.1 

-0.1 

0.1 

0.0 

0.0 

0.3 

0.3 

0.0 

0.0 

-0.1 

0.0 

-0.1 

-0.1 

0.0 

0.1 

0.0 

0.1 

0.3 

0.0 

-0.1 

-0.1 

0.0 

-0.1 

0.0 

0.0 

-0.1 

0.2 

0.0 

-0.1 

-0.1 

0.1 

0.2 

0.0 

0.1 

0.0 

-0.1 

0.1 

0.1 

0.0 

-0.1 

0.1 

0'''''' 

0.0 

0.0 

0.0 

0.0 

0.0 

0.0 

-0.1 

0.0 

0.0 

0.0 

0.0 

0.0 

0.0 

0.0 

0.2 

0.1 

0.0 

0.0 

0.0 

0.0 

-0.1 

-0.1 

0.0 

0.0 

0.0 

0.0 

0.2 

0.0 

-0.1 

-0.1 

0.0 

0.0 

0.0 

0.0 

-0.1 

0.1 

0.0 

0.0 

0.0 

0.0 

0.1 

0.0 

0.0 

0.0 

-0.1 

0.1 

0.0 

0.0 

0.0 

0.1 
74 


79457.044

Table 9.B U.S.-Korea FTA: Simulated effects on gross output, by U.S. state and sector, Scenario B 

(fixed real wages and returns to capital) 

Alabama 

Alaska 

Arizona 

Arkansas 

California 

Colorado 

Connecticut 

Delaware 

Florida 

Georgia 

Hawaii 

Idaho 

Illinois 

Indiana 

Iowa 

Kansas 

Kentucky 

Louisiana 

Maine 

Maryland 

Massachusetts 

Michigan 

Minnesota 

Mississippi 

Missouri 

Montana 

Nebraska 

Nevada 

New Hampshire 

New Jersey 

New Mexico 

NewYor!< 

North Carolina 

North Dakota 

Ohio 

Oklahoma 

Oregon 

Pennsylvania 

Rhode Island 

South Carolina 

South Dakota 

Tennessee 

Texas 

Utah 

Venmont 

Virginia 

Washington 

West Virginia 

Wisconsin 

Wyoming 

Agriculture. 

1.1 

0.1 

0.9 

1.2 

0.5 

3.7 

0.3 

0.6 

0.6 

1.3 

0.3 

1.3 

1.3 

1.4 

3.6 

4.0 

1.6 

0.8 

0.4 

0.5 

0.4 

0.5 

1.5 

1.2 

2.1 

1.9 

4.3 

1.3 

0.3 

0.5 

1.7 

0.5 

1.7 

1.1 

0.9 

3.2 

0.8 

0.9 

0.5 

2.2 

3.6 

1.4 

2.0 

2.2 

0.5 

3.4 

1.3 

1.7 

0.7 

3.8 

0.2 

0.1 

0.1 

0.2 

0.1 

0.1 

0.1 

0.1 

0.2 

0.1 

0.1 

0.1 

0.2 

0.1 

0.4 

0.2 

0.2 

0.1 

0.1 

0.2 

0.1 

0.0 

0.0 

0.1 

0.2 

0.1 

0.3 

0.1 

0.1 

0.2 

0.1 

0.2 

0.2 

0.1 

0.1 

0.1 

0.1 

0.1 

O.t 

0.2 

0.2 

0.2 

0.1 

0.1 

0.1 

0.2 

0.1 

0.1 

0.2 

0.2 

0.1 

0.1 

0.1 

0.2 

0.1 

0.2 

0.1 

0.2 

0.2 

0.2 

0.0 

0.1 

0.2 

0.1 

0.5 

0.4 

0.2 

0.1 

0.1 

0.2 

0.1 

0.1 

0.2 

0.2 

0.2 

0.2 

0.5 

0.1 

0.1 

0.2 

0.1 

0.2 

0.1 

0.2 

0.1 

0.3 

0.1 

0.2 

0.1 

0.2 

0.4 

0.2 

0.2 

0.1 

0.1 

0.2 

0.2 

0.1 

0.1 

0.2 

Durable 

0.0 

0.0 

-0.2 

0.0 

-0.1 

0.0 

-0.1 

0.0 

-0.1 

0.0 

0.0 

-0.1 

0.0 

0.0 

0.2 

-0.1 

0.0 

0.0 

0.0 

0.0 

-0.1 

0.0 

0.0 

0.0 

0.0 

0.0 

0.2 

0.0 

0.0 

0.0 

-0.1 

0.0 

0.0 

0.1 

0.0 

0.1 

-0.1 

0.0 

0.0 

-0.1 

0.1 

0.0 

0.0 

-0.1 

-0.1 

0.0 

-0.2 

0.0 

0.0 

0.1 

Finance, 

Transportation, Vv'ho~sale insurance 

Nondurable commumcations and retail and real 

0.1 

0.1 

0.3 

0.2 

0.3 

0.6 

0.1 

0.1 

0.3 

0.3 

0.1 

0.4 

0.2 

0.2 

1.4 

1.4 

0.2 

0.3 

0.1 

0.2 

0.1 

0.1 

0.2 

0.4 

0.2 

0.2 

2.0 

0.2 

0.1 

0:2 

0.1 

0.2 

0.2 

0.3 

0.1 

0.4 

0.2 

0.2 

0.1 

0.2 

1.7 

0.1 

0.4 

0.2 

0.0 

0.6 

0.6 

0.1 

0.1 

0.2 

0.2 

0.1 

0.1 

0.2 

0.2 

0.2 

0.1 

0.1 

0.2 

0.2 

0.0 

0.2 

0.2 

0.2 

0.7 

0.6 

0.2 

0.2 

0.1 

0.2 

0.1 

0.1 

0.2 

0.2 

0.2 

0.2 

0.7 

0.2 

0.1 

0.2 

0.2 

0.2 

0.2 

0.2 

0.1 

0.3 

0.2 

0.2 

0.1 

0.3 

0.6 

0.2 

0.2 

0.2 

0.1 

0.3 

0.2 

0.1 

0.2 

0.2 

0.1 

0.1 

0.1 

0.2 

0.2 

0.2 

0.1 

0.2 

0.3 

0.3 

0.1 

0.2 

0.2 

0.1 

0.6 

0.5 

0.2 

0.2 

0.1 

0.2 

0.1 

0.1 

0.2 

0.2 

0.2 

0.2 

0.7 

0.2 

0.1 

0.2 

0.1 

0.2 

0.2 

0.2 

0.1 

0.3 

0.2 

0.1 

0.1 

0.4 

0.4 

0.2 

0.2 

0.1 

0.0 

0.4 

0.4 

0.2 

0.1 

0.3 

0.2 

0.1 

0.1 

0.2 

0.2 

0.2 

0.1 

0.1 

0.2 

0.3 

0.0 

0.2 

0.2 

0.2 

0.5 

0.5 

0.2 

0.2 

0.1 

0.2 

0.1 

0.1 

0.2 

0.2 

0.2 

0.2 

0.5 

0.2 

0.1 

0.2 

0.2 

0.1 

0.2 

0.2 

0.1 

0.3 

0.2 

0.2 

0.1 

0.3 

0.4 

0.2 

0.2 

0.1 

0.1 

0.3 

0.2 

0.2 

0.1 

0.3 

Other 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.2 

0.0 

0.1 

0.1 

0.1 

0.4 

0.3 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.1 

0.4 

0.1 

0.1 

0.2 

0.1 

0.1 

0.1 

0.1 

0.1 

0.2 

0.1 

0.1 

0.1 

0.1 

0.2 

0.1 

0.1 

0.1 

0.0 

0.1 

0.1 

0.1 

0.1 

0.1 
75 


79457.045

Table 10.A U.S.-Korea FTA: Simulated effects on gross output, by region and sector, Scenario A (fixed 

capacity utilization and employment) 

NorthWest 1.0 -0.1 0.0 -0.3 0.3 0.1 0.1 0.0 0.0 

Western 0.4 -0.1 0.0 -0.3 0.1 0.0 0.1 0.0 0.0 

Rocky Mountain 2.9 -0.1 0.1 -0.1 0.7 0.1 0.1 0.1 0.1 

Mid-America 2.1 0.0 0.1 -0.2 0.3 0.1 0.0 0.1 0.0 

South West 2.0 -0.1 0.0 -0.2 0.2 0.1 0.1 0.1 0.0 

Midwest 1.6 -0.1 0.0 -0.1 0.2 0.0 0.0 0.0 0.0 

Great Lakes 0.7 -0.1 -0.1 -0.2 -0.1 0.0 -0.1 -0.1 -0.1 

Southeastern 1.1 -0.1 0.0 -0.2 0.1 0.0 0.1 0.0 0.0 

Mid-Atlantic 1.0 -0.1 0.0 -0.2 0.0 0.0 0.0 0.0 0.0 

New England 0.2 -0.1 -0.1 -0.3 -0.1 -0.1 -0.1 -0.1 -0.1 

Table 10.B U.S.-Korea FTA: Simulated effects on gross output, by region and sector, Scenario B (fixed 

real walles and returns to capita'l 

Finance, 

Agriculture, Transportation, Wholesale insurance 

forestry and Durable Nondurable communications and retail and rea! Other 

Region fisheries Mining Construction manufacturing manufacturing and utilities trade estate services 

---------- Percent ------------

North West 1.2 0.1 0.2 -0.2 0.4 0.2 0.3 0.2 0.1 

Western 0.5 0.1 0.1 -0.1 0.3 0.2 0.2 0.2 0.1 

Rocky Mountain 3.1 0.1 0.2 0.0 0.9 0.3 0.3 0.3 0.2 

Mid-America 2.3 0.2 0.2 0.0 0.5 0.3 0.3 0.3 0.2 

SouthWest 2.1 0.1 0.2 0.0 0.4 0.2 0.2 0.2 0.2 

Midwest 1.8 0.1 0.2 0.0 0.3 0.2 0.2 0.2 0.2 

Great Lakes 0.9 0.1 0.1 0.0 0.1 0.1 0.1 0.1 0.1 

Southeastern 1.2 0.2 0.2 0.0 0.2 0.2 0.2 0.2 0.1 

Mid-Atlantic 1.3 0.2 0.2 0.0 0.2 0.2 0.2 0.2 0.1 

New England 0.4 0.1 0.1 -0.1 0.1 0.1 0.1 0.1 0.1 
76 


79457.046

Section III 

This section provides more detailed simulated results of the U.S.-Korea FTA under scenario B. 

Table 11 shows job changes for the U.S. economy as a whole and by sector. Table 12 shows job changes 

for each state as a whole and by sector. Note that approximately 86 percent of the job gains are in the 

services sectors. 

Table 13 shows job changes for ten U.s. regionsS and the District of Columbia as a whole and by sector. 

The regional results were obtained by summing the state level effects shown in table 12. 

In orderto calculate the FTA results for jobs by sector and state, additional job statistics for 2009 were 

obtained from the Census Bureau and BEA.6 

S The U.S. states have been grouped to ten regions according to the following: Northwest: Alaska, Washington, 

Oregon, Idaho and Montana; Western: California, Nevada, Arizona and Hawaii; Rocky Mountain: Utah, Wyoming, 

Colorado, New Mexico, Nebraska, South Dakota, North Dakota; Mid-America: Kansas, Missouri and Arkansas; 

Southwest: Texas, Oklahoma and Louisiana; Midwest: Minnesota, Iowa, Wisconsin and Illinois; Great Lakes: 

Michigan, Indiana and Ohio; Southeastern: Kentucky, Tennessee, Mississippi, Alabama, Florida, Georgia, South 

Carolina and North Carolina; Mid-Atlantic: Virginia, West Virginia, Maryland, Delaware, Pennsylvania, New Jersey 

and New York; and New England: Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire and Maine. 

6 State-level employment data are collected every 5 years by the Bureau ofthe Census as part of the Economic 

Census. These data are collected at the NAICS 6 digit level by state. In this technical assistance, the 2007 Census 

data were projected to 2009 using SEA's Regional Economic Accounts data. These data provide total full-time and 

part-time employment by broad NAICS industry, by state. Several concordances were applied to map the Census 

statistics from the NAICS sector system to the sectors in the GTAP and USAGE models. The Bureau of Labor 

Statistics is another source of jobs statistics by sector and state. The Census statistics, however, allow a more 

precise mapping of the jobs statistics to the sectors in the GTAP and USAGE models than the BLS statistics allow. 
77 


79457.047

Table 11 U.S.-Korea FTA: Simulated results for U.S. job changes. Scenario B (fixed real wages and returns to capital) 

Sector Number of jobs 

Jobs result for U.S. economy as a whole 277.061 

Sector job results 

Agriculture 

Fishing and forestry 

Coal 

Oil and gas 

Minerals n.e.c. 

Bovine meat products 

Meat products n.e.c, 

Vegetable oils and fats 

Dairy products 

Sugar 

Food products n.e.c. 

Beverages and tobacco products 

Textiles 

Wearing apparel 

Leather products 

Wood products 

Paper products, publishing 

Petroleum, coal products 

Chemical, rubber, plastic products 

Mineral products n.e.c. 

Ferrous metals 

Metals n.e.c. 

Metal products 

Motor vehicles and parts 

Transport equipment n.e.c. 

Electronic equipment 

Machinery and equipment n.e.c. 

Manufactures n.e.c. 

Electric utilities 

Gas manufacture, distribution 

Water utilities 

Construction 

Trade, wholesale and retail 

Transportation services n.e.c. 

Water transportation 

Air transportation 

Communication services 

Financial services n.e.c. 

Insurance 

Business services n.e.c, 

Recreational and other services 

Public administration, defense, education and health services 

8,277 

1,582 

112 

639 

542 

1,783 

2,162 

13 

472 

19 

1,425 

249 

-437 

489 

21 

1,120 

2,561 

113 

4,670 

747 

350 

205 

1,593 

300 

35 

-426 

5,683 

473 

598 

356 

287 

15,842 

56,181 

5,483 

301 

1,369 

1,788 

18,673 

5,404 

32,244 

22,086 

78,920 

Sources: GTAP model simulations and 2009 U.S. labor statistics from the U.S. Census Bureau and the Bureau of Economic Analysis. 

Note: Sector-level results do not necessarily sum to the economy-wide result in the first row because the model aggregates aU labor 

occupations to just two labor types. Thus these results are approximate. 

79457.048

Table 12 U.S.-Korea FT A: Simulated results for state-level job changes, Scen:r!o B (fixed real wages and returns 

..... """,ectic 

Sector 

Jobs result for stale as a whole 

Sector lob resulis 

Agnculture 

Fishing and forestry 

Coal 

Oil and gas 

Mmerals n,e.c. Bovine meat products Meat products n.e.c. 

Vegetable ods and fats 

Dairy products 

Suga, 

Food products n.a.c, 

Beverages and tobacco products 

Textiles 

Wearing appare! 

Leather products 

Wood products 

Paper products, publishing 

Petroleum, coal products 

Chemical. rubber, plastiC products 

Minera! products n.e.c. 

Ferrous metals 

Metals n.a.c. Me!alproducts Motor vehicles and parts 

Transport equipment n.e.c. 

Electronic eqUIpment 

Machinery and eqUIpment n,a,c. Manufactures n.e,c. 

Electnc uhirtJ9S 

Gas manufacture, dlstnbutlon 

WaterutifrtfeS 

Constructlon 

Trade, wholesale and retat! 

Transportation services n,a.c. 

Water transportation 

Air transportation 

Commumcatlon services 

Financial services n.e,c. 

Insurance 

Business services n,e.c. 

Recreational and other senllces 

Public administration. defense, 

education, health services 

Alabama Alaska Anzona Arkansas California Colorado ut 

3,083 326 2,379 2,556 28,148 6,247 1.212 

718 

21 

104 " 

16 

3 

., 

-5 

o 

18 

21 

" 11 

-3 

·3 

11 

·15 

·16 

·7 

10 

4 

16 

11 

2 

227 

740 

92 

12 

24 

207 

75 

457 

316 

543 

33 

19 

o 

21 

79 

20 

61 

50 

49 

266 

·1 

67 

-5 

10 

18 

1 

18 

9 

., 

-3 -4 -5 

.{53 

·79 

143 

669 

103 

3 

17 

24 

221 

87 

417 439 

634 

845 1.210 1,922 

-2 1,618 5 

o 

17 16 33 

8 25 13 

15 768 274 

157 128 -4 

16 

29 

25 

·1 

7 

·5 

·10 

-5 

15 

1 0 

63 

202 

91 

52 

383 

17 

206 

22 

282 

72 

·5 

·11 

·36 

-53 

-329 -032 

68 

55 

71 

24 

8 

12 

51 

2 

32 

14 

o 

11 

1 

.. 

·17 

31 

7 

17 

46 12 24 4 

160 1.462 374 

503 9,558 1,343 

120 1,181 180 

12 67 3 

87 39 

19 264 60 

155 2,416 473 

35 642 182 

332 4,244 893 

216 2,915 616 

454 SAM 1,027 

28 

16 

o 

·2 

3 

22 

12 

4 

.. 

.. 

·5 

·172 

·16 ·14 

4 

118 

312 

30 

10 

3 

21 

153 

95 

218 212 

519 

Delaware 

667 

20 43 

-3 

·2 

·2 

1 

49 

229 

16 

3 

61 

17 

102 

83 

144 

Florida Georgia 

16,594 10,784 

528 

467 

o 

·2 

51 

139 

26 

37 

17 14 

30 

111 

3 

104 

40 

., 

23 

·9 

-46 

-114 

41 

20 42 

866 

12 

106 

308 

40 

15 

37 

27 

'9 

92 94 36 

·1 

24 

·5 

-82 

·20 

27 

14 

42 

20 23 

10 

902 620 

5,537 3,348 

498 347 

122 18 

30 51 

170 116 

1,336 750 

454 256 

2,515 1,752 

1,678 1,056 

3.243 1.663 

79457.049

Table 12 U.S.-Korea FTA: Simulated results for state-level job changes, Scenario B (fixed real wages and returns to capital), con

Sector 

Jobs result for slate as a whole 

Sector lob results 

Agriculture 

Fishing and forestry 

Coat 

Oil and gas 

Minerals o.e.c. 

BOVine mea! products 

Meat products n.e.c. 

Vegetable oils aru:l fats 

Daryproducts 

Sugar 

Food products n.e.c. 

Beyerages and tobacco products 

TextIles 

Wearing apparel 

leather products 

Wood products 

Paper products, pubhshlng 

Petroleum. coal products 

ChemICal, rubber, plastiC products 

MineraI products n.e.c. 

Ferrous metals 

Metals fl.e.C. 

Metal products 

Motor vehicles and parts 

Transport equipment n.S.C. 

ElectrOniC equipment Machmery and eqwpment n.e.c. ManufactUres f"i.e.c. Electl1culilities 

Gas manufacture, dlstribulion 

Waterutll!l16s 

Construction 

Trade, wholesale and (eta!! 

Transportation services n_e.1:. 

Water transportation 

AIr transportation 

Communication services 

Financial services n.e.c. 

Insurance 

BUSiness services n.e.c 

Recreational and other services 

Public adminIStration, defense, 

education, health servICes 

Hawaii 

186 

33 

27 

-2 

19 

34 

14 

-7 

16 

29 

.. 

31 

'0"'" 

1,436 

572 

32 

2' 

-3 

31 

o 

1 

-56 

1 

89 

298 

67 

1 

13 

'5 

25 

229 

120 

221 

Illinois 

11,462 

1,343 

34 

19 10 

26 

285 

-76 

11 

o 

146 

12 

-1 

22 

139 

11 

125 

19 

-1 

-4 

15 

-7 

-5 

-34 

38 

26 

32 

2. 

10 

649 

2,483 

464 

21 

65 

100 

999 

328 

1.762 

1.286 

2,559 

IndIana 

4,087 

1,083 

10 

10 10 

129 

-25 

114 

o 

3D 

49 

83 

13 

-17 

-14 

-1 

-<35 

-26 

12 

11 

15 

13 

270 

952 

194 

15 

34 

280 

112 

57. 

464 

9B2 

10_ 

10,877 

3.694 

110 

17 

866 

-20 

12 

2XJ 

,., 

10 

6 

o 

40 

111 

2 

122 

17 

34 

10 

-5 

118 

29 

15 10 

540 

2.366 

523 

11 

34 66 

570 

245 

998 679 

1.600 

Kansas Kentucky louisiana 

7,682 3,702 4,324 

2,859 

88 

52 

20 

907 

-9 

77 

17 

66 

77 

14 

23 

·147 

-4 

68 

10 

24 

14 " 

352 

1.697 

355 

35 92 

441 

184 

.39 

503 

1,117 

1,759 

1 

41 

8 

59 

-25 

12 17 

4 

15 

43 

2 

25 

-2 

-10 

-10 

-2 

10 

236 

808 

136 

14 19 

27 

243 

65 

509 

347 649 

393 

111 

1 

63 

32 

4 

12 

27 

19 

45 

10 

1 

-1 

12 

7 

15 

14 

6 

263 

1.265 

138 

104 

14 

42 

26. 

70 

562 

398 

728 

Maine Maryland 

652 4,812 

40 

17 

-1 

o 

-1 -2 

-12 

o 

54 

173 

19 

44 

17 

89 

99 

171 

108 

28 

38 

16 10 

-1 

47 

2 

38 

9 

-1 

6 

-1 

-9 

-34 

19 

4 

17 10 

356 

1,293 

135 

19 

23 

53 

375 

109 

756 

583 

1.059 

79457.050

Table 12 U,S,-Korea FT A: Simulaled resulls for slale-Ievel job chanlles, Scenario B (fixed real and relurns 10 capital), con

Sector lob results 

Agriculture '9 437 1,639 642 2,513 779 2,462 82 20 76 

Flshrng and forestry 64 10 46 ·3 16 10 57 

Coal 3 0 

Oil and gas 12 15 4 

Minerals l1.e.c. 4 3 2 16 17 8 

BOVine meat products la 71 246 la 117 1,112 63 

Meat products n.e.c< .\1 ·22 .,. 96 ·10 ·1 ·13 10 

Vegetable ods and fats 0 

Dairy products 23 22 

Sugar 0 

Food products 11.9.C. 13 82 25 57 36 

Beverages and tobacco prCK1ucts 5 " TexUles ·1 9 

Weanng apparel ·2 

leather products ·1 ., ·2 ·1 

WOJ:Jdproducts 4 " 24 20 15 14 16 Paper products, pUblIShing 37 35 81 I. 73 64 12 119 

Petroleum, coal products 3 4 4 0 

ChemIcal, rubber, plastic products 16 27 45 27 69 57 114 

Minerai products n.9.G. 15 13 19 

FerrolJllmetals ·1 ·15 ·1 

Metalsn.9,c, -6 ·10 ·1 ·1 ·7 ·3 ·1 ·3 ·2 Meta! products ·7 ·13 13 5 0 20 15 Motor vehicles and parts -4 ·39 1 ·7 1 ·1 ·1 1 

Transport equipment n.e.c. ·20 ·12 8 -40 -4 ·5 -'3 

ElectroniC eqUIpment -<55 ·16 ·14 -3 ·14 ·1 ·2 ·5 ·11 -43 

Machinery and eqUipment n. eA::, -6 -66 44 15 1 .7 0 32 Manufactures n.e.c. la 10 5 3 14 ElectrlCuhhtJes 7 18 " 11 la 17 Gas manufacture, distributIon 13 13 8 14 12 17 

Waterutdilies 4 3 5 11 

Construction 194 244 315 170 392 82 347 110 54 527 

Trade, v.tJo!esaie and retall 507 832 1,113 668 1,361 266 1,577 658 164 2,135 

TransportatIOn services n.€.C. 65 109 lB9 103 236 42 42a 7B 15 153 

10 10 3 14 34 

6 17 23 10 23 37 15 49 

Commul11cation servICes 34 37 39 21 53 40 lB a2 

Financial servIceS n.e<c. 236 308 416 160 420 73 406 183 49 707 

In.surance 99 129 14B 33 158 16 147 45 25 291 

BusIneSS servIces n,e.c, 365 642 654 311 87a 135 655 270 61 1,400 

Recreallonal and other services 480 560 53B 197 578 106 511 305 110 1,007 Public administration, defense, 

education, health servIces 998 1,278 1,214 380 1,153 197 1,053 280 193 2,060 

79457.051

Table 12 U.S.-Korea FT A: Simulated results for state-level Scenario B (fixed real wages and returns to 

No,,,, South 

Sector 

Jobs result for state as a whole 

Sector job results 

Agriculture 

Fishing and forestry 

Coal Oil and gas 

Minerals n.e.c 

Bovine meal prOducts 

Meat products n.e.c. 

Vegetable OJls and fats 

Dairy products 

Sugar 

Food products n.e.c. 

Beverages and tobacco products 

Textiles 

Wearing apparel 

Leather products 

Wood products 

Paper products, publishing 

Petroleum, coal produc!s 

Chemical, rubber, plastiC prodU{l\s 

Mineral products n.e.c. 

Ferrous meta!s 

Metals n.e.c, 

Metal products Motor vehiCleS and parts 

Transport eqUIpment n,e.c. 

ElectroniC equJpmenl 

Machinery and equipment n.a.c. 

Manufactures n,s.c, 

Electnc utilities 

Gas manufacture, dlstnbutlon 

Waterutilitle5 

Construct!on 

Trade, wholesale and retail 

Transportation services n.s.c. 

Water transportation 

Alr transportation 

Communicatkln serviCes 

Financial services n.e.c. 

Insurance 

BUSiness services n.B.C. 

Recreational and other services 

Public administration, defense. educahon, 

health serviceS 

New MeXICO New York 

1,321 16,711 

527 

14 

o 

·3 

·7 

-31 

91 

303 

58 

18 

83 

18 

189 

138 

245 

323 

90 

26 

34 

·13 

25 

49 20 

22 

75 

-3 

20 

175 

4 

\31 

28 

-3 

·9 

·38 

-48 

30 

48 

62 

37 

13 

952 

4,439 

610 

46 44 

214 

1,417 

532 

2,465 

1,767 

4,877 

Carolina North Dakota 

7,651 785 

1,300 

149 

o 

15 

472 

109 

29 

51 

·13 

·34 

·2 

41 

78 

2 

68 

18 

·1 

14 '" 

·21 

·3 

·38 

-4 

12 

20 

10 

498 

1,753 

253 

11 

30 

83 

524 

136 

1,183 

835 

1,348 

439 

11 

·2 

·1 ·1 

15 

49 

188 

42 

41 

21 

74 

59 

116 

Ohio Oklahoma 

5,497 5.615 

800 

21 

11 

17 17 

47 

-46 

2 

17 

42 21 

78 

65 

15 

·18 ·16 

-48 

·72 ·28 

-47 

15 

21 

16 

3 

369 

1,292 

207 

11 

31 

58 

474 

193 

880 

730 

1,636 

3,332 

15 

2 

100 

14 

81 

·12 

11 

3 

33 

33 

14 

3 

·25 

·1 

29 

22 

17 

333 

1.222 

169 

19 

51 

339 

109 

652 

413 

843 

Oregon Pennsylvania Rhode Island CaroUna 

2,725 9,963 523 4,547 

715 

147 

63 

29 

5 

19 

1 

21 

·2 

-6 

-3 -3 

·21 

"2 

157 

837 

117 

3 

26 

170 

71 

361 318 666 

783 

24 

20 

18 

288 

·14 

14 

55 

22 

11 

12 

-4 

44 

137 

13 

91 

27 

·16 

·7 

-9 

.. 0 

-65 

16 13 

28 

23 

11 

634 

2.294 

315 

12 

47 

92 

735 

307 

1,310 

1,253 

2,674 

3 

16 

-3 

o 

·1 ·1 

·1 

-4 

·7 

-3 

36 

101 

10 

48 

17 

69 

92 

160 

761 

24 

213 

122 

18 

2 

24 

o 

-6 

26 

21 

16 

·3 

.. 

-38 

·10 .J<J 

-6 

6 

17 

16 

247 

2,189 

160 

9 

46 

286 

109 

713 

467 

607 

79457.052

Table 12 U.S.-Korea FT A: for state-level job changes, Scenario B (fixed real wages and returns to capital)

West Distric

Sector 

Jobs result for state as a Whole 

Sector job results 

Agriculture 

FJshing and forestry 

Coal Oil and gas 

Minerals n.e.c. 

BOVine meat products 

Meat products n.e.c. 

Vegetable oils and fats 

Dairy products 

Sugar 

Food products n.e,c, 

Beverages and tobacco products 

Textiles 

Wearing apparel 

Leather products 

Wood products 

Paper products, publishing Petroleum, coal products 

Chemical. rubber, plastIc products 

Mineral products n.e.c. 

Ferrous metals 

Metals n.e,c, Metal products Motor vehicles and parts 

Transport eqUIpment n.ex. 

Electronic equipment Machinery and equipment n.e.c, Manufactures n.e.c. Electric utilities 

Gas manufacture, distnbution 

Water utilities 

Construcllon 

Trade, wholesale and retaH Transportation servIceS n.e.c. 

Water transportation 

Alf transportation 

Communication services 

Financial servIces n.e.c. 

Insurance 

Business services n.e.c. Recreational and other servIces Public administration, defense, 

Dakota Tennessee Texas Utah Vermont Virgmia Washmgton Virginia Wisconsin Wyoming Colum

2,282 5,356 26,993 1,893 116 10,838 7,025 1,192 3,743 897 4

1,296 

3 

231 

6 

17 

-1 

14 

11 

125 

447 

109 

15 

160 

31 

182 

145 

1,393 

o 

11 

37 

-36 

o 

29 

10 

4 

,. 

58 

2 

55 

14 

o 

-5 

10 

·15 

·5 

·7 

19 

9 

364 

1,225 

240 

17 

26 

58 

377 

143 

803 

562 

6,690 509 

283 27 

12 

274 

42 2 

994 62 

29 ¥2 

18 11 

2 0 

74 

22 23 29 

o 

52 

162 18 

44 2 

195 19 

63 6 

2 -1 

-2 

45 2 

-9 

-220 -42 

-210 -7 

114 13 

42 9 

84 

64 

35 

1,692 115 

6,730 493 

1,064 80 

85 

103 

233 18 

1,930 162: 

693 51 

3,945 262 

2,552 195 

57 1.966 

-1 96 

11 

3 

11 

269 

-1 128 

o 

20 

• • 

g g 

o 

w 

• 

1 

55 2 _ 

o 

-1 

15 

-11 

-4 -5 

-40 -41 

-3 27 

12 

29 

20 

10 

16 668 

34 3,323 

8 351 

25 

31 

112 

711 

190 

13 1,553 

44 1,020 

1,306 

265 

10 

468 

42 

o 

80 

10 12 

o 

-6 

44 

5 

51 

22 

-1 

-13 

3 

-4 

¥253 

-62 

11 

11 

5 

434 

2,669 

270 

27 

13 

82 

479 

147 

1,020 

700 

470 

-1 

49 

14 

2 

13 

3 

-2 

-9 

-B -1 

2 

75 

296 

33 

12 

71 

18 

129 

127 

897 

15 

10 

205 

-71 

o 

52 

o 

29 

7 

4 

-2 

-5 

28 

71 

1 

42 

10 

-3 

5 

-7 

5 

-16 

22 

11 

14 

8 

251 

696 

176 

14 

34 

253 

142 

477 437 

569 

o 

14 

21 

5 

68 

198 

31 

51 

10 

114 

71 

1

education, health services 320 1,092 4,241 329 66 1,579 1,241 255 897 106 1

Sources: USAGE model (state-level extension) simulations and 2009 U.S, labor statistics from the U.S. Census Bureau and the Bureau of Economic Analys

Note: Sector-level resutts for each state do not necessarlly sum to the state-wide result in the first row because the model aggregates all labor occupations t

a single labor input. Thus these results are apprOximate. 

79457.053

Table 13 U.S.-Korea FTA: Simulated results for B real wages and returns:

Roc,,! South Great N

Sector 

Jobs result for state as a whole 

Sector job results 

Agriculture 

FIshing and forestry 

Coal 

Oil and gas 

Minerals n,e.C. BOlilne meat products 

Meat products n.e.c. 

Vegetable oIls and fats 

Dairy products 

Sugar 

Food products n.e.c. 

Beverages and tobacco products 

Textiles 

wearing apparel 

leather products 

Wood products 

Paper products, pubhshing Petroleum, coal products 

Chemical. rubber. plastic products 

Mineral products n.e.c. 

Ferrous metals 

Metals n.e.c. 

Metal products 

Motor vehicles and parts 

Transport equipment n.e.c. 

Electromc equipment 

Machinery and equipment o.e.c. 

Manufactures n.e.c. 

Electric utillties 

Gas manufacture, distribution 

Waterutmties 

Construction 

Trade, wholesale and retai! 

Transportation services Re.C. 

Water transportation 

Airtransportauon 

Communication services 

Financial services n.e.c. 

Insurance 

Business services n.e.c. 

Recreational and other services 

Public administration, defense, 

education, health services 

Sources: Table 12. 

NorthWest Western 

12,665 32,689 

3,374 1,610 

475 1,654 

4 

22 

30 43 

571 836 

46 121 

o 1 

18 61 

162 210 

15 96 

. " 

18 386 

o 0 

30 

78 240 

10 23 

65 309 34 88 

-4 -6 

-21 ·15 

2 -39 

-7 -59 

·273 ·396 

-211 ·717 

18 76 

21 67 27 88 

16 60 12 26 

764 1,734 

4,149 10,939 

502 1,364 

40 90 

27 113 

135 307 

827 2,836 

263 777 

1,806 4,959 

1,300 3,649 

2,374 6,430 

Mountain Mid-America Midwest Lakes Southeastern Mid-Atlantic Eng

21,006 18,126 36,931 31,613 13,144 54,254 52,945 5,

7,724 

50 

34 65 35 

1,690 

-22 

4 

27 

102 

14 15 

5 

-1 

46 

167 

9 

132 

35 

2 

-1 

39 

·5' 

·59 

145 

36 

46 42 

14 

1,168 

4,548 

92. 

12 

101 161 

1,395 

460 

2,367 

1,734 

3,196 

6,217 10,415 7,573 2,411 

74 408 166 42 

15 19 21 

70 437 12 30 

44 60 54 29 

1,039 1,064 1,601 247 

138 49 ·203 -93 

2 22 

24 22 105 29 

6 3 1 

117 96 438 169 

12 28 33 19 

10 29 20 16 

16 34 9 4 

1 ·9-1 

40 64 114 64 

168 222 402 162 

12 70 18 17 

171 274 335 175 

34 87 62 35 

7 6 11 -51 

-9 ·8 -5 -39 

39 64 67 -22 

-3 -7 -152 

-197 -244 17 

-23 -212 -69 -71 

99 155 222 ·102 

23 55 57 34 

51 121 97 53 

43 95 64 42 

22 48 27 10 

904 2,288 1,756 882 

3,561 9,217 6,658 3,077 

711 1,368 1,352 510 

29 194 40 24 

69 136 137 63 

164 326 238 129 

1,016 2.537 2,237 1,063 

377 872 863 433 

2,049 5,159 3,892 2,100 

1,297 3,362 2,940 1,754 

2,724 5,811 6,270 3,908 

7,966 

715 

54 

28 

111 

1.057 

703 

20 

4 

, .. 

117 

54 

57 

-4 

127 

445 

20 

423 

151 

-5 

·33 

95 

-219 

101 

74 

165 

54 52 

3,264 

16.268 

1,829 

207 

186 

545 

3,882 

1,271 

8,243 

5,459 

9,527 

3.746 

271 

.5 

44 

71 

'93 

175 

71 

174 

90 

59 

111 

-9 

106 

579 

30 

437 

112 

·24 

-28 

54 

·56 

·134 -

-347 ·

125 

91 

160 

115 

52 

3,263 

14,009 1,

1.713 

140 

201 

570 

4,076 

1,465 

7,716 

5,839 1,

12,648 2.
(85) 

COMMUNICATIONS


79457054.eps
86 


79457.055

Accuray incorporated, manufacturer of the CyberKnife" Robotic Radiosurgery System, 

would like to thank the Committee for holding this important hearing on the U.S. -Korea Free 

Trade Agreement (FTA). Not only will this FTA expand market access for our technology and 

those of other U.S. companies operating in Korea, it will allow Accuray to improve access for 

patients in Korea to the life-saving technology that our company designs and manufactures. 

Founded in 1990, Accuray manufactures the CyberKnife'" Robotic Radiosurgery System, 

a non-invasive alternative to surgery for the treatment of both cancerous and non-cancerous 

tumors anywhere in the body. The treatment - which delivers precision beams of high dose 

radiation to tumors with extreme accuracy - allows physicians to treat highly complex or hard 

to reach tumors safely (for example, tumors inside the spine or those wrapped around critical 

structures) while sparing surrounding healthy tissue. It is the only radiation technology that can 

stay on target when the tumor or patient moves during treatment. For many patients, 

treatment with the CyberKnife System, is life-saving. For others, it is a clinically effective and 

patient-friendly alternative to invasive surgery or long courses of less precise radiation 

treatment. CyberKnife treatments are typically offered in five or fewer short dally sessions. 

They are pain-free with minimal to no side effects, and allow patients to return immediately 

following treatment to normal activities, minimizing time away from family and work. The 

CyberKnife System exemplifies American ingenuity in the service of the public's health. 

To date, over 200 CyberKnife Systems have been installed worldwide, and over 100,000 

patients have been treated, including over 6,000 in Korea. Accuray's business is strong, but we 

cannot underestimate the importance of sales outside the U.S. to the continued health of our 

organization. In FY 2010, 57 percent of new orders for the CyberKnife System were generated 

outside of the U.S. Company exports, therefore, playa key role in supporting our U.5. 

workforce of over 400 employees. Accuray employs a highly skilled and highly paid work force, 

including jobs in engineering, clinical development, manufacturing, management, marketing, 

service, and sales. 

The U.S. Department of Commerce notes that Korea is one of the largest and fastest 

growing export markets for medical technology, with growth between 10 and 1S percent 

expected over the next several yearsl. To date, Accuray has had good success making its 

cutting edge technology available to Korean patients, with export sales of roughly $30 million 

and an installed base in Korea of 9 Systems. By expanding market access, free trade 

agreements like the U.S.-Korea FTA will support the commercial success of companies like 

Accuray, increasing US competitiveness in a global economy. At the same time, they will allow 

our trading partners to benefit from American leadership in medical technology through 

adoption of products like the CyberKnife System that benefit the health and welfare of their 

citizens. 

The U.S.-Korea FTA comes at a timely moment. With Korea's evolving national health 

insurance system expanding to cover more and more procedures, the Korean people are 

'International Trade Administration, US-Korea Trade Agreement, Opportunities for the US Medical Equipment 

Sector, April 2011 Report 
87 


79457.056

becoming accustomed to a higher level of health care. This could create Significant U.S. export 

opportunities for companies like ours. However, expansion of the health insurance system has 

not been without growing pains. As government officials seek, understandably, to control cost 

while expanding access, a need arises to ensure that well-intentioned payment policies do not 

have the unintended consequence of reducing patient access to Accuray's and other U.S. 

companies' effective, patient-friendly and efficient technologies. Without the FTA, American 

manufacturers have no voice in the Korean reimbursement setting process, or ability to provide 

crucial product information to support informed decision-making by the Korean agencies. With 

the FTA, both U.S. manufacturers and Korean patient interests are better served. 

The U.S.-Korea FTA is the first U.S. free trade agreement with specific provisions for the 

medical technology industry. Included in Chapter S on Pharmaceutical Products and Medical 

Devices, these proviSions, among other things, affirm the importance of sound economic 

incentives in assuring patient access to medical technology and provide a needed voice for the 

manufacturer in the determination of product reimbursement. Specific provisions of the U.S. -

Korea FTA addressing the concerns of U.S. medical technology companies, like Accuray, include 

the following: 

• The FT A acknowledges the importance of access to medical technology to the 

provision of high quality health care and the importance of patented products in 

reducing other more costly expenditures; 

• It provides for the promotion of innovation and timely and affordable access to 

safe and effective medical devices through transparent and accountable 

procedures; 

• It calls for fair, reasonable and non-discriminatory procedures for the setting of 

reimbursement rates that are mainly derived from market competition; 

• In instances where non-competitive practices define reimbursement rates, the 

agreement permits manufacturers to apply for increased level of reimbursement 

based on the product's safety or efficacy; 

• The FTA contains a requirement for transparency of regulations and rules 

affecting medical technology, including advance publication of rules prior to 

implementation with a reasonable opportunity (at least 60 days) to provide 

comment; 

• It calls for timely approval of reimbursement requests for medical technology 

products; 

• It enhances transparency via a commitment to make available in a timely 

manner to applicants all procedural rules, methodologies, principles, and criteria, 

used to determine pricing and reimbursement for medical technology, including 

detailed written information regarding the basis for a decision or 

recommendation; 

• It provides manufacturers timely and meaningful opportunities to provide 

comments at relevant pOints in the pricing and reimbursement decision-making 

processes; 
88 


79457.057

• It establishes an independent review process that may be invoked at the request 

of a manufacturer directly affected by a recommendation or determination; and 

• It establishes an important commitment to openness of reimbursement 

decision-making bodies to all stakeholders, including innovative and generic 

companies. 

These commitments are especially important to Accuray at this moment in time, as the 

Korean Government health insurance authority has recently set a new payment rate for 

CyberKnife treatments in Korea that appears to be significantly below the cost to provide such 

treatments. Because the new rate was set without benefit of the important safeguards that 

would be provided under the U.S.-Korea FTA, Accuray - as a foreign manufacturer - was given 

no role in the rate-setting process. OUf lack of involvement led to a situation in which policy 

makers set the payment rate for our technology without benefit of important information 

about its use, its unique clinical and patient benefits, and its cost to providers in Korea that a 

manufacturer, uniquely, is capable of providing. While we are now working in good faith with 

national health insurance officials in Korea to correct this situation, which undermines both 

patient access and Accuray's business in Korea, we offer this example to illustrate the very real 

need for the transparency safeguards and commitments to pricing policies based on sound 

economics that exist in the US-Korea FTA. These commitments will support both US jobs and 

innovation while improving Korean patient access to the best America has to offer in health 

care technology. We therefore urge Congress to approve the FTA as quickly as possible. 

We join our trade association, AdvaMed, in recognizing the strong effort by USTR in 

negotiating these provisions on behalf of our industry. We agree that the U.s.-Korea FTA will 

establish essential protections that will better ensure a more competitive, transparent and 

predictable market in Korea. Importantly, it will also better enable Accuray and other U.S. 

medical technology companies to bring life saving treatments to Korean patients who need 

them. 

Thank you for the opportunity to comment on this important trade agreement. 
89 


79457.058

70l Pennsylvania Avenue, Ste. 800 

W""h;o,o'on DC 20001-261\1 

Fax: 202783 A7iSO 

www.AdvaMcd.org 

AdvaMed 

Advanced Medical Technology Association 

SENATE FINANCE COMMITTEE 

HEARING ON 

u.s. - Korea Free Trade Agreement (FTA) 

May26,2011 

STATEMENT BY 

STEPHEN J. UBL 

PRESIDENT AND CEO 

THE ADVANCED MEDICAL TECHNOLOGY ASSOCIATION (AdvaMed) 

701 PENNSYLVANIA AVE, NW 

SUITE 800 

WASHINGTON, D.C. 20004 

Bringing innovation to patlel1t carewor!dwid8 
90 


79457.059

We thank the Committee for holding this important hearing today on the U.S. Korea 

Free Trade Agreement (FT A). We strongly support the efforts to expand market access 

for U.S. products abroad through new FT As as a vital means of increasing U.S. 

competitiveness in a global economy. 

AdvaMed is the world's largest medical technology association. AdvaMed represents the 

world's leading medical technology innovators and manufacturers of medical devices, 

diagnostic products and medical information systems. AdvaMed is proud to represent an 

industry that brings new hope to patients around the world. U.S. companies are still 

benchmark manufacturing leaders in terms of total production, innovation and highest 

quality products. Our member companies manufacture nearly 90% of the $94 billion U.S. 

health care technology market, and nearly 50% of the $240 billion of medical technology 

products that are purchased globally each year. In 2010, U.S. exports in medical devices 

and diagnostics totaled over $36.1 billion. 

The size of AdvaMed member companies spans the full spectrum from large 

multinationals to very small stm1-ups. About two-thirds of AdvaMed members are small 

in size but are among the most dynamic in terms of innovation. Indeed, the medical 

technology industry is fueled by intense competition and the innovative energy of small 

companies firms that drive very rapid innovation cycles among products, in many cases 

creating new product iterations every 18 months. Accordingly, our US industry succeeds 

most in fair, transparent global markets where products can be adopted on their merits 

without excessive regulatory hurdles or inappropriate reimbursement policies. 

Medical technology products improve people's Jives and contribute to economic progress. 

In a world of shrinking healthcare resources, medical technology products me an 

investment in our most valuable resource - the health of our people. The returns on that 

investment are the long-term benefits that can be achieved when we provide the resources 

needed for the best medical care. These benefits include greater quality of life, 

productivity and economic competitiveness. 

Impact of the U.S. - Korea FT A on Medical Technology Exp0!1S 

The U.S. - Korea FT A has specific provisions addressing the concerns of the medical 

technology industry, and illustrates thc benefits that FT As can bring to the medical 

technology sector and to job creation in the U.S. Korea is an extremely important market 

for United States medical technology exporters. According to the U.S. Department of 

Commerce, Korea is one of the largest and fastest growing markets for medical technology. 

U.S. manufacturers exported over $875 million worth of medical technology products to 

Korea in 2010, while Korea exp0!1ed $331 million in medical technology products to the 

United States. The U.S. International Trade Commission estimates that the Korean 

medical device market will grow 10- J 5 percent in the next several years. With a growing 

cconomy, the Korean people will come to demand an even higher level of health care and, 

with it will come increased U.S. export opportunities. AdvaMed views the 
91 


79457.060

implementation of the Korea-U.S. FT A as an opportunity to increase exports of medical 

technology products to this expanding market. 

However, access to the Korean market is currently limited by excessive tariffs; pricing 

and reimbursement policies that discriminate against foreign manufacturers; burdensome 

product-testing requirements; and inappropriate requirements to register products in their 

country of origin and re-register following a change in manufacturing location. Korea 

was not a party to the Uruguay Round "zero-for-zero" tariff elimination initiative for 

medical devices, and maintains import tariffs on a range of medical technology products, 

including most of our top export categories. 

AdvaMed strongly supports adoption and implementation of the U.S.-Korea FTA as 

quickly as possible as it will serve to assist in eliminating tariffs and non-tariff measures 

applied to medical technology products by Korea. We anticipate that implementation 

will provide greater access and a more equal competitive arena for U.S. medical 

technology in the Korean market. The effect of implementation of the U.S.-Korea FT A 

will be to increase the availability of medical technology in the Korean market, thereby 

allowing increased access by Korean patients to the most innovative technologies and 

treatment options. 

The U.S.-Korea FT A is the first U.S. free trade agreement with specific provisions for the 

medical technology industry. Chapter 5 of the FT A contains a number of protections for 

the medical technology industry, and also attempts to address many of the concerns that 

have been experienced by our industry and that remain pervasive. Some of the 

provisions most beneficial to the medical tcchnology industry include the following: 

• The FT A acknowledges the importance of access to medical technology to 

the provision of high quality health care and the importance of patented 

products in reducing other more costly expenditures; 

• It provides for the promotion of innovation and timely and affordable 

access to safe and effective medical devices through transparent and 

accountable procedures; 

• It calls for fair, reasonable and non-discriminatory procedures for the 

setting of reimbursement prices that are mainly derived from market 

competition; 

• In instances where non-competitive practices define reimbursement rates, 

the manufacturer is permitted to apply for increased level of 

reimbursement based on the product's safety or ef!1cacy; 

• A requirement for transparency of regulations and mles affecting medical 

technology is contained in the FT A, including advance publication of mles 

prior to implementation with a reasonable opportunity (at least 60 days) to 

provide comment; 
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• Requests for approval or reimbursement for medical technology products 

will be processed within a reasonable timeframe; 

• Applicants will be provided within a reasonable and specified time all 

procedural rules, methodologies, principles, and criteria, used to determine 

pricing and reimbursement for medical technology, including detailed 

written information regarding the basis for the decision or 

recommendation; 

• Applicants will be provided timely and meaningful opportunities to 

provide comments at relevant points in the pricing and reimbursement 

decision-making processes; 

• An independent review process will be provided that may be invoked at 

the request of an applicant directly affected by a recommendation or 

determination; 

• Reimbursement decision-making bodies will be open to all stakeholders, 

including innovative and generic companies; and 

• A membership list of all committees related to the reimbursement and pricing 

of pharmaceutical products and medical devices will be made publicly 

available, 

Additionally, under the FTA's strong dispute settlement provisions, its implementation 

will mean that the medical technology industry will gain very important procedural 

safeguards against arbitrary and non-transp,u'enl reimbursement and regulatory decisions 

by Korea. 

The implementation phase of the FT A is critical in ensuring the success of these 

provisions and will offer challenges to maintain their letter as well as spirit. The 

negotiation of these provisions and their inclusion in the FT A is a trihute to the effort by 

USTR, working with our industry. 

We view these as essential protections that will better ensure a more competitive, less 

arbitrary market in Korea. Implementation of the FT A will ensure these hard won 

provisions are brought to life. 

Impact on U.S. Jobs 

The medical technology industry is a powerful economic driver in the United States. In 

the United States in 2008, the medical technology industry employed 422,778 workers; 

paid $24.6 billion in salaries; and shipped $135.9 billion worth of products. 

Until 2003, the United States ran a significant trade surplus in medical technology 

products. The U.S. industry is witnessing a slow-down in the value of exports, largely as 

a result of foreign government reimbursement and regulatory policies. The industry 

needs U.S. Government support to address these issues and to eliminate other market 

access restrictions. 
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Examining the industry on a state by state basis, according to recent data, the median 

figure for all states in the United States indicates the following: 

• Each medical technology job generates an additional 1.5 jobs in that state, 

• Each medical technology payroll dollar generates and additional $0.90 in 

earnings in that state; 

• Each dollar of medical technology sales generates an additional $.90 in 

sales in that state. 

Implementation of the FT A would help United States retain and expand jobs in the U.S. 

Decreasing tariff and non-tariff barriers will obviously lead to more sales of U.S. medical 

technology products in Korea. Implementation of the FT A would therefore benefit not 

just the medical technology sector, but also would crcate positive collateral benefits to the 

U.S. economy as a whole. These benefits are in addition to the benefit that will accrue to 

the Korean people, benefits derived from obtaining the most innovative products, 

increased patient choice and treatment options, and improved quality of lifc. 

Non-implementation would put us at a disadvantage because, as other nations establish 

FT As with Korea, the U.S. domestic industry would face increased competition. For 

example, some U.S. firms manufacture in the European Union (EU), which has 

negotiated an FT A with Korea. That agreement will go into effect this summer (July 

2011). If, as a result, shipping manufactured medical technology products from the EU 

becomes more cost-effective than shipping it from U.S. manufacturing plants, valuable 

jobs could shift overseas. 

Conclusion 

The United States must negotiate and implement strong FT As as one means of providing 

a level playing field for U.S. firms and improving U.S. competitiveness in the global 

market place. We cannot afford to cede U.S. leadership on international trade to other 

countries. The KORUS provides an illustration of the benefits that rJ As can bling to the 

U.S. medical technology industry. These benefits are the result of improvements in 

market access and conditions for U.S. medical technology manufacturers that are 

contained within the terms of the FTA. This improved market access will help U.S. 

medical technology t1rms increase their exports, with a direct and strong impact on 

employment in the United States. Adoption of the U.S. - Korea FT A will benefit U.s. 

workers, the U.S. economy, and patients overseas. 
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3822 

ANNEX I 

Medical Devices - Harmonized Tariff Schedule (HTS) Codes 

Diagnostic or laboratory reagents on a 

backing and prepared diagnostic or 

laboratory reagents 

3822.00.1v.vv-~"'''''<.VIJ. 

o 

3822.00.10.91: 6.5 

3822.00.10.92: 8 

3822.00.10.93: 0 

3822.00.10.99: 8 

3822.00.20.11-3822.00.20.90: 

o 

3822.00.20.91: 6.5 

3822.00.20.92: 8 

3822.00.20.93: 0 

3822.00.20.99: 8 

8 
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79457.064

6115.92.30 SurQical stockinQs of cotton 13 

6115.93.30 Surqical stockinqs of synthetic fibers 13 

6307.90.60 Surgical drapes of fabric formed on a 10 

base of paper or covered or lined with 

paper 

6307.90.68 Surgical drapes of spunlaced or 10 

bonded fiber fabric; disposable 

surgical drapes of man-made fibers 

6307.90.72 Other surQical drapes 10 

6307.90.89 SUrQical towels 10 

8419.20 Medical, surgical or laboratory 0 

sterilizers 

8419.90.5040, 8419.90.9040 Parts and accessories for medical, 0 

surqical or laboratory sterilizers 

8543.89.85 Electrical machines and apparatus for 0 

electrical nerve stimulation 

8713 Carriages for disabled persons, 0 

I whether or not motorized or otherwise 

mechanically propelled 

8714.20 Parts and accessories of carriages for 0 

disabled persons 

9001.20 Sheets and plates of polarizing 8 

material 

9001.30 Contact lenses 8 

9001.40 Spectacle lenses of glass, unmounted 8 

9001.50 Spectacle lenses of other materials 8 

9003.11 Frames and mountinQs of plastic 8 

9003.19 Frames and mountings of other 8 

materials 

9003.90 Parts for frames and mountings, 8 

spectacles, goggles or the like 

9004.10 SunQlasses 8 

9004.90 Spectacles, goggles and the like, 8 

• protective 

9018 Instruments and appliances used in 8 

medical, surgical, dental or veterinary 

sciences, and electro-medical 

apparatus and sight-testing 

instruments; parts and accessories 

thereof 

9019 Mechano-therapy appliances; 0 

Excluding 9019.10.2020 and massage apparatus; psychological 

9019.10.2030 (hand-held aptitude testing apparatus; ozone 

massagers and parts therapy, oxygen therapy, aerosol 

thereof) therapy, artificial respiration or other 

therapeutic respiration apparatus; 

parts and accessories thereof 

9020.00.60 Breathing appliances and gas masks 8 

9020.00.90 Parts and accessories for breathing 8 

appliances and gas mas~~ ____ . _____ -_. 9021 Orthopedic appliances, including 0 

crutches, surgical belts and trusses; 
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splints and other fracture appliances; 

artificial parts of the body; hearing aids 

and other appliances which are worn 

or carried, or implanted in the body, to 

compensate for a defect or disability; 

parts and accessories thereof 

9022 X-ray equipment 8 

Excluding 9022.19.0000, 

9022.29.4000, 

9022.29.8000, and 

9022.29.0700 (non-medical 

equipment; smoke detectors 

and parts thereof) 

9025.11 Liquid filled clinical or veterinary 8 

thermometers 

9025.19.00.40, Other clinical thermometers 8 

9025.19.80.40 

9402 Medical, surgical dental or veterinary 0 

furniture and earts thereof 

9608.20.0000' Felt-tipped and other porous-tipped 8 

pens and markers: 

Source: U.S. Harmonized TarIff Schedule, Advanced MedIcal Technology ASSOCIatIOn, 

Korea 2005 Tariff Rate Schedule as reported on the APEC Tariff Database 

*Note: Skin markers for surgery are included in this category; if the tariff cannot be 

removed from the entire category, AdvaMed recommends creating a more specific eightor ten-digit code for the surgical markers and lift the tariff on that code. 
97 


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ANNEX II 

Top 10 U.S. Medical Technology Exports to Korea, 2005 

9001200000 8 

9018908000 Instruments and appliances 8 

used in medical, surgical, 

dental or veterinary sciences, 

and electro-medical apparatus 

and instruments 

9018390030 Bougies, catheters, drains and $30,466,031 8 

sondes and parts and 

9022140000 X-ray equipment $23,303,336 8 

9018120000 Ultrasonic scanning apparatus $22,946,442 8 

9018906000 ,185,957 8 

9018199580 $19,734,740 8 

8419200000 $18,614,420 0 

9018130000 $18,614,420 8 
98 


79457.067

Statement by 

American Apparel & Footwear Association 

Before the Senate Finance Committee 

On 

The U.S/Korea Free Trade Agreement 

May 26, 2011 

Thank you for providing the American Apparel & Footwear Association - the 

national trade association of the apparel and footwear industries, and their 

suppliers - a chance to submit comments in connection with the U.S.jKorea Free 

Trade Agreement (KORUS). 

By way of background, AAFA represents more than 400 apparel and footwear 

companies, as well as many of the companies that supply inputs and services to 

our industry. As an industry that is on the frontlines of globalization, our 

members make everywhere and sell everywhere, including Korea. 

Collectively, AAFA represents more than 800 brands that employ hundreds of 

thousands of workers in the United States, in such diverse fields as design, 

manufacturing, logistics, transportation, finance, compliance, merchandising, 

marketing, sales, and compliance. Our industry has a significant employment 

footprint in every state in diverse locations such as factories, distribution centers, 

home offices, and retail shops. We also directly and indirectly create millions of 

jobs in the United States and around the world. 

Although much of the clothing and shoes worn by a typical American is imported 

- in 2010, 99 percent of all footwear and 98 percent of all garments were 

produced offshore - most of those items were touched by hundreds of thousands 

of American workers as they made their way through the supply chain. 

Many of our members view the United States as their principal market. The 

United States alone accounts for about one-quarter of all clothing and footwear 

purchased worldwide. However, significant market opportunities exist for 

competitive and globally minded clothing and footwear companies, especially 

since 95 percent of the world's population lives outside the United States. 

It is with this in mind that we can discuss the importance of KORUS - and the 

rest of the trade agenda - for the U.S. apparel and footwear industry. 

1601NorthKentS" .. t,5u;te12oo,MHngton,VA22209 www.apparelandfootwear.org p(703)524·1864 (800)520-2262 f(703) 522-6741 
99 


79457.068

Like many in the business community, AAFA strongly supports the immediate 

approval and quick implementation of the KORUS. Our members believe that 

the KORUS, which was negotiated three years ago, has been unacceptably stalled. 

Those delays have resulted in extra costs that have ultimately been born by U.S. 

and Korean consumers, workers, and businesses. We find this sitnation 

intolerable. 

We also take this opportunity to urge that Congress and the Administration work 

together to pass the other pending flAs with Colombia and Panama. Delays with 

those flAs, which have been even longer than those with KORUS, have also led 

to job losses and costs, and have contributed to uncertainty and unpredictability. 

In particularly, we note that the delay in the Colombia flA has been exacerbated 

in the textile and apparel industry by the expiration of the Andean trade 

preference program, which until earlier this year permitted duty-free access to 

the U.S. market for garments made in Colombia primarily with U.S. and 

Colombian inputs. Failure to resolve this situation - with immediate passage 

and retroactive renewal of the Andean preference program and immediate 

approval of the Colombia flA - to secure both the short and long term 

partnership with Colombia will result in irreparable economic damage and 

further job losses in our industry. 

KORUS & Textiles and Apparel 

KORUS represents an important opportunity for U.S.-made apparel sold in 

Korea. South Korea is 

currently the 4th largest export 

market for U.S.-made finished 

apparel!, behind Canada, the 

U.K. and Japan.2 From 2000 

to 2010, U.S. apparel exports 

to South Korea increased 

more than 5 times. 

U.S.-made apparel currently 

faces an 8 to 13 percent duty 

when entering the Sonth 

Korean market. KORUS provides for the immediate elimination of those tariffs -

all of them - on the first day the agreement enters into force. This is a huge 

benefit. Not surprisingly, a number of our members have applauded the KORUS 

for removing duties on their U.S.-made textile or apparel exports to South Korea. 

1 Unless otherwise specified, all data is drawn from Commerce Department sources. 

2 South Korea is the ih largest export market for apparel (factoring in exports of partially made 

apparel to Mexico and Central America). 
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Unfortunately, on July 1 2011, the day the EU-Korea ITA takes effect, EU 

clothing exports to Korea will face zero duties. Although the KORUS also 

envisions immediate duty elimination, that may not occur for some time, owing 

to delays in submission by the Administration, continued delays in Congressional 

consideration, and the almost certain delays in implementation. This means that 

EU apparel exporters will most likely have a 6-12 month advantage in selling 

garments to Korea. In an industry where profit margins are often measured in 

fractions of pennies, such an advantage can prove fatal. 

The KORUS also protects the Berry Amendment - the provision of U.S. law that 

requires all clothing and shoes worn by U.S. soldiers to be made in the United 

States from U.S. materials - by excluding South Korean made textiles, clothing, 

and footwear from gaining access to U.S. military procurement opportunities. 

This important provision ensures that the U.S. warm industrial base for textiles, 

clothing, and footwear for the U.S. armed forces remains American. While this 

also means that U.S. apparel exporters do not have opportunities to compete for 

South Korean contracting opportunities - since the South Korean Government 

insisted upon a reciprocal exclusion - U.S. negotiators felt this was an acceptable 

deal. We agree. 

On the import side, the provisions for textiles and apparel tell a different and 

mixed story. Although Korea 

has historically played an 

important sourcing role for 

imported apparel, it has become 

much less significant in recent 

years. In 2010, total U.S. 

apparel imports from Korea 

equaled less than 100 million 

square meter equivalents (or 

less than one-half of one 

percent of total U.S. apparel 

imports). In 2010, 21 countries 

supplied more apparel to the 

U.S. market. By contrast, in 2002, Korea was the 7th largest supplier of apparel 

to the U.S. market. 

Our apparel import members generally believe the ternlS of KORUS will not lead 

to much additional sourcing from South Korea. Among other things, the 

agreement features a yarn-forward rule of origin (which requires all yarus and 

fabrics to originate in the United States or South Korea). The yarn-forward rule 

of origin is viewed as too restrictive and costly to support apparel trade with most 

countries. While some products will be able to meet the requirement that all 

significant operations and inputs - yarn, fabric, cutting, and sewing - originate 

or occur in the United States or Korea, most will find this hurdle too high and will 

therefore be rendered ineligible for benefits under KORUS. The yarn-forward 

rule also carries significant paperwork burdens - to prove that each garment 
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79457.070

meets the tight input requirements - which also serve as a strong disincentive. 

Moreover, duties for U.S. apparel imports from Korea are not eliminated 

immediately but rather are phased-out over a long period of time - in some cases 

10 years.3 Although U.S. duties on apparel imports are among the highest that 

the United States imposes on any product, the promise of eventual duty-free 

status on Korean made apparel is not likely to lead to a significant increase in 

U.S. apparel imports from Korea because of the presence of many other countries 

where apparel can be made duty-free and because of KORUS' restrictive yarnforward rule of origin that is not likely to work well with South Korea. 

It is important to note, however, that some of our domestic textile and apparel 

manufacturers do believe there will be opportunities to import specialized fibers, 

yarns and fabrics, including those that may be hard to find in the United States. 

One AAFA yarn executive commented that KORUS will save his domestic yarn 

manufacturing firm thousands of dollars a year by removing a duty burden his 

company currently pays on imports of fibers from Korea. 

Finally, KORUS contains strong customs enforcement provisions that were added 

to address any transshipment concerns. Although some have raised concerns 

that these provisions will be ineffective, the text of the agreement suggests 

otherwise. The KORUS enforcement provisions give new powers to U.S. Customs 

officials that they did not have during the quota period. 

While we would have preferred an approach that would create incentives for 

trusted shippers, rather than treat every shipment like a potential threat, we 

understand that these provisions reflect the long standing requests of textile 

industry interests. KORUS' textile and apparel customs enforcement provisions 

include strict documentation, recordkeeping, and penalty provisions. Like the 

FTA with Singapore, KORUS gives U.S. Customs officials new abilities to make 

unannounced factory visits and requires Korean officials to maintain profiles on 

all companies and individuals engaged in textile and apparel trade to aid in 

enforcement purposes. KORUS also provides new cooperation tools on 

containers transiting through Korea. 

According to a recent article in Apparel Magazine that was written by Elise 

Shibles, a former U.S. Customs official who negotiated the textile and apparel 

Customs provisions in KORUS, "The apparel enforcement provisions in KORUS 

are also unique and set the stage for a higher level of cooperation between the 

countries than the enforcement provisions of most other U.S. ¥FAs." 

3 To amplify the point, U.S. market access for South Korean made products stands in contrast 

with U.S. apparel exports to South Korea where all duties are eliminated immediately. 
102 


79457.071

Footwear and Travel Goods 

For footwear and travel goods, KORUS contains favorable provisions with South 

Korea. Although South Korea is not seen as an important export market or 

sourcing platform for either footwear or travel goods, the provisions are widely 

viewed as reflecting the state of the industry. 

Sensitive domestic U.S. footwear manufacturers are protected through the 

aforementioned Berry Amendment provisions as well as long phase outs and a 

restrictive rule of origin that requires originating uppers and 55 percent local 

value added. Once duties are removed, it is expected that U.S. domestic footwear 

manufacturers will be able to increase exports to Korea under these provisions. 

Likewise, the vast majority of footwear receives immediate duty free access under 

a flexible rule of origin, reflecting the fact that these products are no longer made 

in the United States. 

Likewise, all travel goods receive immediate duty free access under a flexible rule 

of origin - also reflecting the fact that these products are no longer made in the 

United States. It is also important to note that the travel goods provisions do not 

contain a false distinction between those travel goods made with textiles and 

those made from non-textile materials. U.S. travel good companies were pleased 

that the KORUS provisions reflect this reality and urge that future FTAs are 

treated in this manner. 

Conclusion 

In conclusion, we would reiterate our appeal that the KORUS, and other pending 

FTAs and trade programs, be quickly approved and implemented. At a time 

when U.S. producers and consumers are facing increasing costs from just about 

every direction, and when the job market continues to remain weak, we find no 

reason why further delay in the trade agenda should be tolerated. 
103 


79457.072

American Council of Life Insurers (ACLI) Statement for the Record 

The U.S. - Korea Free Trade Agreement 

Senate Finance Committee 

United States Congress 

May 26, 2011 

The American Council of Ufe Insurers ("ACLI") fully supports the pending free trade agreement 

("FTA") between the United States and South Korea ("KORUS") and urges that it be considered 

by the United States Congress as soon as possible. ACLI is a Washington, D.C.-based trade 

association backed by an industry with more than 200 years of experience protecting American 

families, workers, and businesses. ACLI represents 340 life insurance companies operating in the 

United States before federal and state legislators, regulators, and courts. ACLI members are the 

leading providers of financial and retirement security products covering individual and group 

markets, offering life insurance; annuities; pensions, including 401(k) plans; long-term care 

insurance; disability income insurance; reinsurance; and other retirement and financial security 

products. In these uncertain economic times, achieving financial and retirement security has 

never been more important. 

The life insurance sector is key to both the economies of South Korea and the United States. 

The strong FTA commitments for the life insurance sector under the KORUS FTA will thus be 

beneficial for both economies. In the United States, for example, life insurers provide the 

products that protect against life's uncertainties. Our industry helps individuals and families 

manage the financial risks of premature death, disability, and long-term care. We enable 

employers to provide employees with critical retirement savings programs such as pensions and 

401(k) plans. Finally, through annuities, life insurers guarantee retirees an income for life, no 

matter how long they live. 

With nearly $4.5 trillion invested in the U.S., we help fuel our nation's economic growth. We're 

the largest holder of corporate bonds in the country, and with our long-term focus, life insurers 

provide businesses and governments the long-term capital they need to invest in roads, schools, 

and homes, and in the plants and equipment that create jobs. We fuel economic growth, help 

families secure their future, and guarantee a retirement income that lasts a lifetime. Our 

industry can serve similar functions in South Korea and provide important means for enhancing 

the quality of life for South Korean families, households and workers. 

ACLI supports the KORUS FTA because of its economic and commercial significance. South 

Korea is the world's tenth largest insurance market with total premium volume of more than $96 

billion. The South Korean insurance and retirement security market would be by far the largest 

insurance market to be included in a FTA with the United States. The financial sector reforms 

that South Korea would undertake as a result of the FTA would contribute to a stronger and 

more resilient global economy as Korea will move to deepen its capital markets and investment 

for the long term. 

This agreement is particularly important to the U.s. insurance industry because, as concluded, it 

will set a new standard for addressing regulatory, as well as market access, barriers. Given the 

nature of the insurance business, regulatory hurdles and the need for a level playing field are 

often as critical as our ability to enter the market. Establishing better regulatory transparency, 

predictability and coherence in Asia is a goal that would be enhanced by passage of this FTA. 

The KORUS FTA achieves a comprehensive opening of Korea's insurance and retirement savings 

market for U.S. insurers and asset management companies in new and meaningful ways that 

fully meet key industry goals. The KORUS Agreement contains the strongest chapter on financial 
104 


79457.073

services of any U.S. FTA and provides an excellent precedent for future U.S. FTAs. Significantly, 

the agreement: 

Contains rigorous transparency obligations. Under KORUS, U.S. insurers will have 

access to, and a longer opportunity to comment on, Korea's insurance regulations in a 

predictable manner and well in advance of their taking effect. The FTA provides standardized 

"notice and comment" procedures for the insurance sector and permits U.S. firms access to 

regulatory information on an equal basis with Korean competitors. 

Helps ensure U.S. insurers' competitive equality with Korea Post and other 

government affiliated insurance providers. The KORUS Agreement provides equitable 

treatment for U.S. insurers in Korea's marketplace. Korea Post and the other government 

affiliates will be subject to the same regulatory authority and many of the same regulatory 

requirements as private insurers. Korea Post will be prohibited from issuing new types of 

insurance products upon entry into force of KORUS, and limitations apply to how Korea Post 

can modify the coverage or increase the value of existing insurance products. 

Eases ability of U.S. insurers and asset managers to provide cost-efficient service 

by maximizing efficiency of regional operations. The KORUS FTA is the first U.S. FTA 

that contains provisions allowing the transfer of data into and out of the country. After a 

two-year transition period, KORUS allows data to be sent intra-company or to third parties, 

allowing U.S. companies to utilize established data processing hubs. 

Streamlines key aspects of Korea's insurance regulatory environment. Under 

KORUS, as part of its Financial Hub initiative, Korea committed to follow a "negative list" 

approach to regulation under which actions are permitted unless they are specifically 

prohibited. The distribution channel for insurance through banks ("bancassurance") will be 

further opened to U.S. insurers. Korea also increased caps on required levels of foreign 

currency reserves which will bring Korea into line with international norms and make it easier 

for U.S. companies to provide cutting-edge products in Korea. 

Enables U.S. insurers to bring new insurance products to market more quickly. 

Within one year of implementation, KORUS will establish expedited approval procedures 

allowing most new insurance products to be introduced in the market within shorter 

timeframes, adding to U.S. firms' competitiveness and ability to innovate. 

Establishes a bilateral Insurance Working Group. KORUS establishes an ongoing 

consultative process which will allow U.S. firms to address changing conditions in Korea's 

marketplace and pursue additional market-opening measures in the future. 

In addition to the strong commitments outlined above, it is always important to keep in mind 

that, from a strategiC vantage pOint, South Korea Is an Important ally with whom the United 

States must work closely in order to continue advancing global security. From a trade 

standpOint, the consumers of both countries stand to gain significantly from the broad benefits of 

a comprehensive agreement, as well as from the expanded and more stable financial 

development In the Northeast Asian regional economy that such an agreement will bring. 

Finally, an agreement of this high quality will help set the standard for future bilateral and 

multilateral progress, including in the Trans-Pacific Partnership negotiations and at the WTO. 

As stated above, ACLI supports this ground breaking KORUS FTA and urges its immediate 

passage. 
105 


79457.074

American Manufactul'in:il; Trade Action Coalition 

May 31, 2011 

The Honorable Max Baucus, Chairman 

The Honorable Orrin G. Hatch, Ranking Member 

Senate Committee on Finance 

219 Dirksen Senate Office Building 

Washington, DC 2051 0-6200 

RE: Hearing on U.S. - Korea Free Trade Agreement, Mav 26, 2011 

Comments Submitted By: 

Mr. Auggie Tantillo 

Executive Director 

American Manufacturing Trade Action Coalition 

910 16th Street, NW, Suite 402 

Washington, DC 20006 

www.amtacdc.org 

Dear Chainnan Baucus and Ranking Member Hatch: 

The American Manufacturing Trade Action Coalition (AMTAC) would like to submit the 

following comments for the record in conjunction with the Senate Committee on Finance Hearing 

on the U.S.-Korea Free Trade Agreement (KORUS). 

AMT AC is a uot-for-profit trade association that represents domestic manufacturers. All of our 

members share the common objective of preserving and expanding manufacturing in the United 

States by recapturing lost markets and winning new ones at home and abroad. A significant 

component of AMTAC's membership consists of textile and apparel producers. 

Summary 

AMTAC strongly opposes the KORUS. First, the agreement itself is flawed in concept; second, 

the terms of the agreement were poorly negotiated to the disadvantage of key industries such as 

textiles; and, third, the textile and apparel provisions in the agreement are unlikely to be 

adequately enforced. As a result, AMTAC expects that the flaws in the textile chapter of the 

agreement alone could result in an estimated loss of 40,000 U.S. jobs. 

KORUS is a Continuation of Flawed U.S. Trade Policy 

It is AMTAC's strong position that the KORUS is a continuation of the flawed U.S. trade policy 

of negotiating free trade agreements (FT As) with countries that can produce low-cost goods for 

export but that are unable or consistently refuse to buy finished products made in the United 
106 


79457.075

States. The substantial market disparity in relation to South Korea will continue this trend. South 

Korea's GOP is $986.3 billion, or less than 7 percent of the U.S. GOP of $14.6 trillion in 20 I 0.' 

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, the agreement will be a major 

blow to U.S. manufacturers. The U.S. trade deficit in goods with South Korea was $10.0 billion 

in 2010, with a $10.6 billion deficit in molor vehicles and motor vehicle parts and a $600 million 

deticit in textiles and apparel. 2 

The KORUS will eliminate U.S. tariffs on 95 percent of current trade in industrial products 

within three years of implementation of the agreement. Despite this, the agreement does not 

guarantee reciprocal U.S. access to the South Korean market for key industrial products such as 

autos and textiles. Virtually all U.S. tariffs on textile and apparel products will be eliminated by 

January 1 of the S'h year of the agreement. In addition, the FTA does not take into account the 

fact that South Korea has a long history of unfair trading practices. Currently, there are IS 

antidumping and countervailing duty orders in place against U.S. imports from South Korea. 

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 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 V AT rate above the current 10 percent at any point in the future. It is 

important to address this inequity as part of any trade agreement, as border taxes are another 

persistent example of foreign practices that place domestic companies at a competitive 

disadvantage. 

U.S. Jobs at Stake 

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. Of that total, we estimate that 

between 9,300 and 12,300 jobs will be lost in the U.S. textile and apparel sectors as a result of 

KORUS trade. U.S. govemment figures show that approximately three additional jobs are lost to 

the U.S. economy for each textile job that is eliminated; this increases the job loss estimate to 

nearly 40,000 textile and related jobs due simply to the flaws in the KORUS textile chapter. It is 

also important to note that these figures do not account for job losses as a result of illegal Chinese 

transshipments, which we expect to be significant. 

Impact 011 U.S. Textile and Apparel Sector 

According to the U.S. International Trade Commission's analysis of the agreement, "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}." In these sectors, U.S. output is estimated to decline by 1.3 percent as a result of 

the FTA. 

South Korea is a major exporter of textile and apparel products to the United States as our Sth 

largest supplier of textiles and apparel by volume in 2010. In yarns and fabrics alone, where 

South Korea is particularly competitive, they are our 2nd largest supplier in terms of volume. As a 

t CIA World Factbook. Official Exchange Rate GOP. 

2 U.S. IntemationaI Trade Commission, DATA WEB. Total Exports minus General Imports for All 

Commodities, DOC Automotive HTS 10 List, and Textiles and Apparel HTS Chapters 50-63. 
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result, we are deeply concerned about the KORUS agreement and how it is expected to impact 

our industry and its ability to remain competitive in the global marketplace. 

In addition to its direct threat to the U.S. market, KORUS represents a significant attack on the 

hemispheric textile production structure encouraged by U.S. policy for three decades. As a result 

of trade preference programs and the NAFTAI CAFTA/Peru FTAs, nearly two million textile and 

apparel workers produce garments, home furnishings and the textile components incorporated in 

those products in the region. The U.S. textile and apparel industry exports more than $10 billion 

a year, predominantly in components such as yarns, fabrics and cut pieces, to our preferential 

partners in the Western Hemisphere. Tbis trade accounts for the overwhelming majority of total 

U.S. textile and apparel exports. 

The KORUS threatens to damage the Western Hemisphere because South Korea's textile and 

apparel exports are expected to surge and displace orders cun'cntly being sourced in the region. 

When finished product orders are lost by manufacturers in the Western Hemisphere, U.S. mills 

also lose the orders fi)[ the yarns and fabrics that go into garments and made-up articles. 

Moreover, the poorly-negotiated textile and apparel text will exacerbate the negative effects of 

the agreement. Our principal conccms with the text include accelerated tariff phase-outs that do 

not give U.S. producers time to adjust, non-reciprocal tariff phase-outs that favor the South 

Korean textile industry in key products, exclusion of certain textile components from the rule of 

origin, and strong evidence that Customs' ability to enforce this agreement will be ineffective. 

Tariff Phase-Out 

Contrary to the precedent established in the NAFTA and succeeding FTAs, 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 I of Year 5 of the agreement. This is 

the first time a large number of sensitive products from a country with a 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 expOlts of polyester fiberf1ll have entered the United States 

under anti-dnmping 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. However, the KORUS agreement immediately removes the U.S. duty on 

polyester fiberfill, defeating the purpose of the anti-dumping rule and defying logic of 

equitable trade negotiations. 

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, flameretardant fabrics for industrial and military applications including body armor. Under 

KORUS, South Korea will be allowed to exp0l1 aramids to the U.s. 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. 
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Rule-of-Origin 

The rule of origin is a critical element of any free trade agreement in that it defines which 

products qualify for preferential treatmeut under the agreement and whether countries not 

party to the agreement will receive benefits. The KORUS contains a "yam forward" rule 

of origin. While we support a basic yam forward rule as opposed to value-based rules, 

the limited scope of the rule under KORUS is very problematic. 

In essence, the rule applies only to the apparel or home furnishing component that 

determines the tariff classification of the good (the "essential character" rule) 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 CAFTADR, 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 Cbina, to benefit without making any 

concessions of their own. Domestic producers of these types of component yams fabrics 

provide thousands of U.s. jobs, which will be put into jeopardy if KORUS is 

implemented. 

Customs Euforcement 

Due to South Korea's history of transshipment paired with significant cross-border 

investment with China, upgraded customs enforcement provisions were necessary to 

prevent large-scale customs fraud under KORUS. However, the KORUS customs 

enforcement language was significantly weakened compared to other high risk agreement 

such as the Singapore FT A. Key enforcement provisions that were dropped under 

KORUS include the ability for U.S. Customs to seize goods from repeat offenders, to 

reduce Korea's access ifit does not enforce the rules of the agreement and to deny 

fraudulent companies from importation for several years. 

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. 3 

The substandard customs provisions in the KORUS leave the U.S. textile indust.ry 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 

the KORUS agreement. 

Industrial Textiles 

In addition to these overarching concerns, U.S. industrial textile manufacturers are particularly 

concerned about this agreement and its impact on the extended domestic supply chain for coated 

3 CBP (July 10,2008). "CBP Charges More Than 1,000 Containers of Illegal Textile Shipments to China's 

Quota Levels." Press release. 

l:mQ;fiy;ww. clm,ru2YL'fpifgQy!neiY.SJ:Q!lmb"}Y'i.J:s;k;1~~!m:£hiYf,1!20Q.!L!leiYs..J.:£l£<);iITjilly 20Q.l!!Jl?1 020..Q!L 

3.Xllll 
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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. This particular component of 

the U.S. textile industry represents over 25,000 jobs throughout the couutry and many companies 

participating in this supply chain also support the military needs of our warfighters. The ability to 

innovate and responsively supply the military is dependent on an overall healthy domestic market 

and industry. 

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 FT A will do significant harm to the industrial textile industry and 

greatly diminish the sustainability of our fragile domestic supply base. 

Textile Provisions Left Unaddressed in Reopening of Agreement 

Last August, AMTAC and other industry associations requested that the Obama administration 

reopen the textile and apparel chapter of the agreement along with autos in order to fix the aboveoutlined problems. However, textile concerns were never raised with South Korea, and these 

provisions remain unchanged despite the reasonable requests whieh were made by the industry. 

As a result, we urge Members of Congress to reject the agreement due to an overall lack of 

reciprocity and negative impact on U.S. companies and jobs. Congress should prioritize fixing 

U.S. trade policy, stopping manufacturing job loss, and closing the trade deficit before 

considering any new trade deals including KORUS. 

Sincerely, 

Augustine D. Tantillo 

Executive Director 
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From: Mr. Bill Donald 

President, National Cattlemen's Beef Association 

1301 Pennsylvania Avenue, NW 

Suite 300 

Washington, DC 20004·1701 

Statement of Mr. Bill Donald, President, National Cattlemen's Beef Association 

Submission for the record to the 

United States Senate Committee On Finance 

Hearing on the Korea-United States Free Trade Agreement 

2011 

Chainnan Baucus, Ranking Member Hatch and membcrs of the committee, the three pending 

free trade agreements are a top priority for the U.S. beef industry and I strongly encourage you to 

work with President Obama to pass these agreements immediately. I appreciate you holding a 

hearing on the Korea-United States Free Trade Agreement, although my comments will stress 

the importance of all three pending free trade agreements to the U.S. beef industry. 

My name is Bill Donald and I am president of the National Cattlemen's Beef Association 

(NCBA). [am a third generation rancher from Melville, Mont. Along with my family, I own and 

operate Cayuse Livestock Company, a cow/calf/yearling operation. My wife, our two sons and 

their families are actively involved with our operation, which is headquartered in the foothills of 

the Crazy Mountains in South Central Montana. 

NCBA is the nation's oldest and largest national trade association for cattlemen and represents 

more than 140,000 cattle producers through direct membership and our state affiliates. NCB A is 

producer-directed and consumer-focused and represents all segments of the beef industry. Our 

top priority is to produce the safest, most nutritious and affordable beef products in the world. 

This has been consistent throughout our industry's history and in our long-tenn efforts to 

continually improve our knowledge and ability to produce beef products to meet consumer 

preferences. 

With 96 percent of the world's consumers living outside ofthe United States, access to foreign 

markets for our beef and beef products is significantly important for our industry to grow. 

Exports are vitally important for the future success of U.S. beef producers and rural America. 

Future growth of the U.S. economy depends upon our ability to produce and sell products 

competitively in a global marketplace. Economic globalization is not simply a matter of 
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ideological or political preference; it is a fundamental reality that will determine whether 

America remains an economic super-power or becomes a secondary economic force. 

Fast-growing economies in Asia and South America expose a growing consumer base to U.S. 

beef, and as statistics show, they enjoy eating U.S. beet: The pending free trade agreements with 

Korea, Colombia and Panama give cattlemen like me and my sons the opportunity to compete on 

a level playing field with cattlemen around the world. We're all courting the same consumers 

internationally. I'm here to say today - please do not handicap us by delaying these agreements 

any longer. I want my sons and grandchildren to be able to carry on the family business. The 

beef industry is not asking for a handout from Washington but we are asking for the opportunity 

to compete for consnmers in Korea, Colombia and Panama. These trade agreements would allow 

the beef industry to grow and create economic opportunities throughout rural America without 

costing taxpayers a dime. 

NCBA continues to encourage Congress to expedite the technical discussions with President 

Obama and U.S. Trade Representative Ron Kirk, draft legislation and send the three pending 

agreements to Capitol Hill for swift consideration. I appreciate the recent efforts to finalize these 

agreements, but we cannot afford to wait any longer to implement them. Each day that goes by 

without implementing these agreements is another day we risk losing more American jobs by 

losing market share to other countries. Additionally the free trade agreements are an important 

factor to reach President Obama's goal of doubling exports. The progress made recently to move 

forward with technical discussions is definitely welcome, but I will not be satisfied until the ink 

is dry and the trade agreements are implemented. As a cattleman, I am only as good as my word. 

And quite frankly, I've heard a lot of bull when it comes to trade. Last May, a group of us from 

the agriculture industry came to Washington and heard lots of promises and talk about action on 

these trade agreements. But here we are one year later. The agreements still have not been 

implemented. It's time. Not six months from now. Right now. 

Competing For Market Share 

The European Union (EU), Australia, Canada, Argentina and Brazil are independently 

competing with the United States for access and market share of foreign markets. Further delay 

ofthese free trade agreements keeps outrageously high tariff rates in place that put American 

cattlemen at a competitive disadvantage. If other countries secure agreements that eliminate or 

reduce their tariff rates before we do, their beef will be sold at a lower cost than ours. This means 

we lose even more market share and consequentially will export more American jobs. 

The U.S. beef industry'S largest competitor is Australia. In 2010, Australia had 53 perccnt of 

Korean market share compared to 32 perccnt by U.S. If the Australians successfully ratify a 

similar bilateral trade agreement with South Korea before the United States, they will have a 

2.67 percent tariff advantage over American beef for the next 15 years, allowing them to sell 

more of their product at a cheaper price. Additionally, South Korea and the EU signed a free 

trade agreement in October 2010 that will take eireet this July. Recently, Korea announced they 

will fe-open their market to Canadian beef as early as June 20 II. Time is ticking - we can't 

continue to sit on the sidelines whilc other countries move forward and sign their trade 

agreements. Furthermore, other key Asian trading partners are closely watching the Korea-U .S. 
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Free Trade Agreement (KORUS FT A) as this agreement will likely set the benchmark for 

Ameriean beef trade with Japan, China and Hong Kong. 

Other countries are also competing with the United States for market share in Central and South 

America. Most recently, Canada and Mexico aggressively pursued free trade agreements with 

Colombia and have been successful in securing those agreements. Failure to implement the 

pending free trade agreements sends the wrong message to major export markets like China and 

Russia - markets with tremendous potential consumer demand but limited or non-existent 

access. That demand will be met, let us meet it with American beef. Pass the trade agreements 

and allow America's cattle producers to do what they do best produce the safest, most 

wholesome and affordable beef in the world. 

NCBA Supports Implementation of Korea-U.S. Free Trade Agreement (KORUS FTA) 

NCBA fully supports immediate implementation of the KORUS FTA. Korea is one of the largest 

export markets for American beef. The United States exported nearly $518 million of beef in 

2010, which is a 140 percent increase in sales over 2009. American beef exports to South Korea 

added $25 in value to each of the 26.7 million head of steers and heifers produced in the United 

States in 2010. Unfortunately, American beeffaces a 40 percent tariff on all cuts, resulting in 

over $200 million in tariffs in 2010. NCBA strongly believes the 40 percent tariffis the greatest 

hindrance to U.S. beef exports to Korea. 

Implementation of the KORUS FTA would phase out South Korea's 40 percent tariff on beef 

imports, with $15 million in tariffbenefits for beef in the first year of the agreement alone and 

about $325 million in tariff reductions annually once fully implemented. According to U.S. 

International Trade Commission, annual exports of U.S. beef could increase as much as $1.8 

billion once the agreement is fully implemented. Eliminating the 40 percent tarifl'will give more 

Korean consumers greater access to safe, wholesome U.S. beef at a more afl'ordable price. 

NCBA Supports Implementation of U.S.-Colombia Trade Promotion Agreement (CTPA) 

NCBA supports immediate passage of the U.S.-Colombia Trade Promotion Agreement (CTP A). 

I recently sent a letter to President Obama urging him to work with Congress to pass and 

implement the revised agreement with Colombia. I am pleased that Ambassador Kirk has 

notified congressional leaders of his intent to begin technical discussions, and I hope thesc 

discussions are completed as soon as possible. 

Colombia is an important market for U.S. beef and beef variety meat exports. Unfortunately, 

Colombia places up to an 80 percent tariff on U.S. beef imports, making it one of the highest 

tariffs U.S. beef faces anywhere in the world. Once the CTP A is implemented, high quality U.S. 

beef will have duty-free access and the tariffs on all other beef and beef products will be reduced 

over the next 15 years. For the first time ever, the CTPA puts American beef on a competitive 

footing with beef imports from Brazil and Argentina. In 2010, the United States exported 

approximately $759,000 of beef and beef products to Colombia, a paltry sum considering the 

excessive duties. In addition to eliminating tariffs, CTPA addresses non-tariff barriers by 

providing assurances for a stable export market through plant inspection equivalency. It also 
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fully reopens the Colombian market to U.S. beef by assuring that Colombia adheres to tbe World 

Organization for Animal Health (OlE) guidelines related to BSE. 

NCBA Supports Implementation of Panama Free Trade Agreement 

Another important lynch pin for U.S. beef trade is the Panama Free Trade Agreement. NCBA is 

pleased that all outstanding issues have been addressed and that the agreement is ready for 

further aetion by Congress. Like the CTP A, the Panama Free Trade Agreement provides 

assurances for a stable export market through plant inspection equivalency and Panama also 

modified its import requirements related to bovine spongijorm encephalopathy (BSE) to be 

consistent with international standards. Additionally, the 30 percent tariff on prime and choice 

cuts would be immediately eliminated and the duties on all other cuts would be phased out over 

15 years. Once the agreements with Panama and Colombia are put into place, the United States 

will ultimately have free trade for U.S. beef with approximately two-thirds of the population in 

the Western Hemisphere. 

Abiding By Internationally-Recognized Science-Based Standards Insures Fair Trade 

International trade must be based on sound science, not political science. Allowing U.S. beef 

producers to be subject to the whim of foreign governments who do not base their decisions on 

internationally recognized science-based standards creates a high level of market volatility. 

According to Cattlefax, U.S. beef lost nearly $22 billion in potential sales through 2010 due to 

BSE bans/restrictions. 

Abiding by internationally recognized science-based guidelines as those set by the OlE 

guidelines promotes fair trade for the U.S. and developing countries. Additionally, this creates 

less market volatility and encourages safer production practices. But if you question the need for 

abiding by internationally recognized science-based standards, take a look at what has happened 

to U.S. beef in some key Asian markets. 

China's market remains closed to U.S. beef since the 2003 discovery of a Canadian-born cow 

infected with BSE in the United States. China uses non-science based standards to keep out U.S. 

beet: which is recognized internationally as a safe product. U.S. Beef sales in China could 

exceed $200 million if given access. Beefisn't the only industry to suffer from these non-science 

based trade restrictions. On a larger scale, the elimination of China's tariff and other trade 

restrictions could lead to an additional $3.9 to $5.2 billion in U.S. agricultural exports to China, 

according to an U.S. International Trade Commission study. 

Historically, Japan was the top markct for U.S. beef exports at $1.4 billion. In 2010, the U.S. 

exported $640 million in U.S. beef in Japan far short ofpre-BSE levels due to Japan's 20 

month age restriction, which is not based on internationally recognized sound science. If Japan 

would follow OlE guidelines and recognize U.S. beef as the safe product it is by raising the age 

limit, it is estimated that Japan would once again easily be a $1 billion market for U.S. beef. 

Unfortunately, Taiwan is another example of what happens when internationally-recognized 

science-based standards are not in place. Recently, 20 United States senators sent a letter to 
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Taiwan President Ma urging his government to use internationally-recognized scientific 

standards regarding U.S. beef 

In January 2011, the Taiwan Food and Drug Administration began testing for the existence of 

raetopamine in imported beef. Based on trace amounts of the feed additive in U.S. beef products, 

Taiwanese officials pulled products from grocery shelves and rejected affected products at ports 

of entry. Ractopamine is recognized by the U.S. Food and Drug Administration as a safe feed 

additive. Taiwan's current zero-policy standard lacks scientific standing and is out of step with 

accepted international standards. Further, the zero-tolerance policy is inconsistent with Taiwan's 

own risk assessment in 2007, which found that ractopamine was safe for use. Taiwan's nonscience based actions create an unnecessarily volatile trading environment. U.S. exporters are 

extremely reluctant to ship product to Taiwan given the uncertainty presented by the amplified 

testing regime. Prior to the enhanced testing regimen, Taiwan had been a historically strong 

market for U.S. beef. In 2010, Taiwan purchased more than $216 million worth of U.S. beet~ a 

53 percent over 2009 levels of $141 million in sales. 

Exports Create Jobs 

Without question, exports create jobs. According to Cattlefax, fed steers have been selling near 

$115 per hundred weight (cwt), or roughly $1 ,495/head. Of that, Cattlefax estimates that exports 

have added a minimum of$145lhead in value (as opposed to not having exports). I believe the 

potential value added to each head that is created by increased exports provides the essential 

economic incentive needed to curb outrnigration in rural America. An aging agricultural 

workforce is a serious problem facing our country. A profitable future in agriculture is the draw 

we need to get younger generations involved in food and tiber production. 

I am fortunate and blessed that my sons have chosen to return to our family ranch, but that isn't 

the case everywhere. One of the biggest problems facing agriculture today is an aging workforce 

with fewer young people returning to the farm to pmticipate in farming and livestock production. 

There is a growing global demand for food, and some predict that global food production must 

double by 2050 to meet demand. "[G]lobal food production may have to double by 2050, says 

agriculture economist Robert Thompson of the Chicago Council on Global Affairs. From 2010 to 

2050, the world's population is projected to increase 38 percent, from 6.9 billion to 9.5 billion, 

with gains concentrated in poorer countries." (Samuelson, Robert, "The Global Food Crunch," The 

Washington Post, 03113/2011). 

The shrinking number of young folks returning to production agriculture isn't the only challenge. 

For those men and women who do choose farming and ranching, they face a wide array of 

challenges. Rising land prices and startup costs make it difficult for younger generations to begin 

ranching unless they inherit the family business. High startup costs for production agriculture 

and market volatility make livestock production a risky investment for young people with little 

credit. "Higher land values also can have a crippling effect on beginning and limited resource 

farmers or ranchers who may not have the capital necessary to initiate or expand their operations. 

Nationwide, the annual number of new farm entrants under age 35 declined from 39,300 from 

1978-1982 to 15,500 from 1992-1997 (Gale, 2002)." ("Final Benefit-Cost Analysis forthe Farm and 

Ranch Lands Protection Program (FRPP)," USDA- Natural Resources Conservation Service, December 2010) 
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Without question, development of land fonnerly used for production agriculture is making 

farm/grazing land more scarce and more expensive. "As development pressure increases, 

agricultural land values are hard pressed to compete with developed uses. Farm real estate values 

continue to increase. These values have been driven largely by non-agricultural factors, such as 

low interest rates and demand for residential development and recreational uses." ("Final BenefitCost Analysis for the Farm and Ranch Lands Protection Program (FRPP)," USDA- Natural Resources Conservation 

Service, December 2010). 

Rural America is facing a growing trend of outmigration primarily due to lack of employment 

As you can see, most of this outrnigration is occurring in the middle of cattle country. According 

to USDA-ERS, one of the reasons we are experiencing outmigration in rural areas is due to few 

non-agriculture related jobs. Between 2000 and 2005, population patterns in non-metro counties 

reverted to those of the 1980s. Population in an estimated 1,027 out of2,051 non-metro counties 

(about half) declined in population, compared with the decline in 593 counties between 1990 and 

2000. This is a reversion to patterns of the 1980s. For the most part, the newly declining counties 

are found in and among the large agriculture-dependent zones of the Great Plains and Corn Belt 

that lost people in the 1990s. But counties with declining populations also include Appalachian 

mining areas and a number of Southern counties that have relied heavily on manufacturing. 

Population decreased overall in both fanning and mining county types (in the ERS county 

typology system) during 2000-05. (hnp:llwww.ers.usda.govIBriefing/Population/Natural.htm) 

One way to fight trend of outrnigration is to develop more jobs in rural areas. If exports add 

value to and increase demand for agricultural products, then increasing exports is a benefit to 

employment in rural America. The U.S. should stop relying on government programs as the main 

incentive for young people to get into agriculture. Greater market access for U.S. agricultural 

goods means greater economic incentive for young people to get involved in agriculture. 
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In closing, I would like to reiterate that I support President Obama's effort to double U.S. exports 

and create jobs in rural America. All three of these free trade agreements are an economic boon 

for American beef producers. We strongly encourage Congress and the Obama Administration to 

put aside partisan differences and focus on creating job opportunities for our cattle producers. 

NCBA and many other stakeholders ask for your continued support in expanding market access 

by voting for the pending free trade agreements. 
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Senate Committee on Finance 

Hearing on U.S. - Korea Free Trade Agreement 

Statement for Record 

May 26,2011 

Comments Submitted By: 

Mr. Cass Johnson 

President 

National Council ofTextile Organizations 

910 17th Street NW. Ste 1020 

Washington. DC 20006 

www.ncto.org 

Mr. Karl Spilhaus 

President 

National Textile Association 

6 Beacon Street, Suite 112S 

Boston, MA 02108 

www.nationaltextile.org 

Mr. Auggie Tantillo 

Executive Director 

American Manufacturing Trade Action Coalition 

910 16th Street. NW. Suite 402 

Washington. DC 20006 

www.amtacdc.org 

Mr. Paul O'Day 

President 

American Fiber Manufacturers Association 

1S30 Wilson Boulevard, Suite 690 

Arlington, VA 22209 

www.afma.org 

Ms. Ruth Stephens 

Executive Director 

U.s. Industrial Fabrics Institute 

1801 County Rd. B W. 

Roseville MN 5S113 

www.usifi.com 
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AMTAC OONAl TEXTILE ASSOCIATION 

AmericJn :..tmuf:lcttlnn,~ Tra-d;; ,\ctkm c\1Uiitioll 

Senate Committee on Finance 

Hearing on u.s. -Korea Free Trade Agreement 

Statement for Record 

May 26,2011 

As representatives of the nearly 600,000 person fiber, textile and apparel sector, we are writing today to 

express our concerns regarding job losses that will occur in the sector if the United States-Korea Free Trade 

Agreement (KORUS) is passed. We have analyzed the agreement carefully and come to the unfortunate 

conclusion that the textile portions of the KORUS agreement are seriously flawed. If passed in its current 

form, the agreement will open the U.S. market to a massive one-way flow of sensitive textile products from 

South Korea, as well as illegal Chinese imports, while providing no new export business to our textile 

manufactures and workers. 

Instead of expanding markets, the KORUS will result in the continued outsourcing of valuable textile, apparel, 

and other manufacturing jobs. Using export projections from the United States International Trade 

Commission (USITC) and other u.s. government analysis, we are very concerned that 40,000 textile and 

related jobs could be lost under the KORUS. With our nation struggling through one of the worst economic 

periods in its history, we believe this agreement sends the wrong message to our workers and to American 

voters. 

The KORUS agreement represents the second largest free trade agreement (FTA) that the United States has 

entered into behind the North American Free Trade Agreement (NAFTA). In contrast to recent trade 

agreements, the KORUS is also the first agreement since NAFTA where the country in question has a large 

developed textile sector which exports significant amounts of textile products to the United States. 

During the last 40 years, Korea has become a large textile-producing country with a vertically integrated 

industry as a result of extensive support from its government. In 2010, Korea was the second largest exporter 

of textile yarns and fabric to the United States by volume. From a bilateral perspective, U.S. textiles and 

apparel imports from Korea are nearly three times the value of our exports to Korea. This relationship in trade 

added $745 million to the U.S. trade deficit in 2010 alone. 
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In our technical markets, South Korea has emerged as the number one exporter to the U.S. of advanced textile 

reinforcements and coated/laminated membranes which are used for roofing materials, potable water and 

fuel bladders, fabric shelters and structures, and automatic fabrics. At the same time, U.S. producers have 

reported that Korean competitors are engaged in predatory pricing and are selling these products at 20-40% 

below the normal market pricing. During the time period of these reports, Korea has moved from a distant 

number two position to a significant leading position among countries exporting to the U.S. in this category. 

The increase in Korea market share has come at the expense of U.S. manufacturers and workers. 

The Korean threat has increased sharply in recent years by enormous subsidies the Korean government has 

poured into its advanced textile technology. The South Korean government has recently allocated $16 billion 

for specialty fabric manufacturing projects and another $5.6 billion on core technology for production of 

composite fibers and nano-textiles. This intervention by the Korean government into the marketplace 

threatens our technical sectors' ability to innovate and responsively supply the U.S. military and u.s. industry. 

In light of these policies, the government's decision to eliminate U.S. tariffs on technical textiles on day one of 

the agreement is deeply troubling. 

Overall, Korea has substantial capability to produce finished goods for export, while they have limited ability 

to consume finished goods manufactured in the United States. Korea's consumer buying power is about 

equivalent to that of greater Los Angeles, California. As a result, we are greatly concerned about the KORUS 

agreement and the impact it will have on our industry and our ability to remain competitive in the global 

marketplace. 

Our principal concerns include accelerated tariff phase-outs that do not give U.S. producers time to adjust, 

non-reciprocal tariff phase-outs that favor the Korean textile industry in key products, and strong evidence 

that Customs' ability to enforce this agreement will be ineffective. These concerns will have two simultaneous 

effects: 1) Korean textile producers will sharply increase exports of products to the U.S. industry while 

keeping their own industries safe behind tariff barriers, and 2) China will follow past practice and transship 

textile and apparel products at zero duty through Korea. Other major concerns include the vulnerability of key 

textile sectors to Korean dumped and undervalued goods and omissions in the rule of origin which allow 

Chinese producers to take advantage of the agreement to legally ship certain textile components under the 

agreement. 

Tariff Phase Out 

Contrary to the precedent established in the NAFT A agreement and all succeeding FT As, 86% of textile 

and apparel product lines are duty free immediately under KORUS and an additional 10% fall under the 

5 year phase. This is the first time an administration has allowed a large number of sensitive products 

from a country with a sophisticated textile industry to receive immediate access to the U.S. market. 

Keep in mind that textile tariffs are relatively high - averaging around 15 percent. The u.s. 

government has essentially given one of our largest competitors a 15 percent price break on the first 

day the agreement becomes law. That is a recipe for U.S. plant closures and U.S. worker layoffs. 

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. Noting that the 
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purpose of this agreement is to provide fair and equitable treatment to all parties, it is concerning that 

our own government would put our domestic industry at such a severe disadvantage. 

Let us provide a pertinent 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. However, the 

KORUS agreement immediately removes the u.s. duty on polyester fiberfill, defeating the purpose of 

the anti-dumping rule and defying logic of equal trade negotiations. 

In the high tech textile area, in 2007, DuPont invested $500 million to significantly expand production 

of its high-performance DuPont'" Kevlar® para-aramid brand fiber for industrial and military uses in 

Cooper River, South Carolina. DuPont manufacturers and exports the fabric Kevlar, a super-tough 

flame retardant industrial textile. Kevlar and fabrics like it are made of the same tough fibers called 

aramids. DuPont is the main manufacturer of Kevlar worldwide, and South Korea is one of two major 

competitors in the aramids sector. In KORUS, South Korea will be allowed to export aramids to the 

U.S. with immediate duty free treatment, while access for DuPont is phased in over five years, putting 

DuPont at a direct disadvantage. 

Customs Enforcement 

The KORUS agreement represents the highest risk for illegal transshipments from China of any free 

trade agreement. This is because Korea has a decades-long history of allowing China to use its territory 

to illegally transship textile goods. The agreement also creates an enormous new incentive for China 

to transship textile products, namely nearly $5 billion in duties paid to the u.s. Treasury that Chinese 

exporters could save by using Korean territory. In 2010, a special operation called "Operation Mirage" 

found that Chinese apparel exporters were under-declaring apparel exports by as much as 90 percent 

in order to evade paying U.S. duties. And, as the Finance Committee recently heard testimony on, 

Chinese exporters routinely transship goods that have dumping and countervailing duty orders on 

them through third-party countries. Senator Wyden's staff was able to do a simple internet search to 

find Chinese firms expressly set up to avoid U.s. duties. 

Unfortunately, KORUS takes a huge step backward in the area of textile enforcement. Despite the 

elevated danger, the KORUS agreement jettisoned key enforcement rules and initiatives from past 

agreements (See Table 1). This includes the ability to seize goods from repeat offenders, to reduce 

Korea's access if it does not enforce the rules of the agreement and the ability of deny fraudulent 

companies from importation for several years. Each of these areas has been essential at deterring 

widespread fraud in other high risk agreements and yet each of these provisions was removed in the 

KORUS agreement. And the agreement was further weakened by rules that were removed which 

helped to prevent the formation of the fraudulent shell companies. Given the removal of these 

important enforcement tools, the industry has been warned by top textile customs experts to expect a 

wave of illegal trade through Korea once the agreement goes into effect. 
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, '] .~ 

Other High Risk KORUS 

Key Enforcement Provisions Agreements 

(Singapore) 

Fraudulent companies that repeatedly abuse program can be Yes No 

removed from the program for two years 

FTA partner's textile access can be reduced if it does not Yes No 

cooperate with U.S. Customs 

Fraudulent textile products can be seized Yes No 

FTA partner required to monitor new entrants to deter use Yes No 

of shell companies 

Non-compliant companies are tracked to ensure that they Yes No 

cannot morph into new illegal suppliers 

Small and medium sized textile producers must supply Yes No 

information to U.s. Customs (significant source of past fraud) 

The problem with illegal transshipments from China is made even worse by Custom's own record over 

the last five years on textile fraud. While industry reports and Customs own fraud indicators show 

increasing problems with illegal textile fraud, particularly from China, Customs internal response has 

been to reduce resources and priorities for textile fraud enforcement. Virtually every statistic shows 

Customs interdictions are down as resources have been shifted away. Customs commitment on textile 

fraud is nowhere better illustrated that the fact that Customs has cut its textile headquarters staff by 

40 percent during the last five years. At the same time, Customs records show that it has shifted 

trained textile personnel away from ports that handle significant amounts of textile claims. 

Finally, the industry was dismayed by u.s. Customs refusal to send a training team earlier this year to 

South Korea in advance of the FTA to train Korean Customs on new textile and other rules in the FTA. 

This sends another unfortunate message that despite its protestations, enforcement remains a low 

priority for the U.S. government. 

All of these concerns were reinforced when The Korean Federation of Industries stated that it expects Korean 

textile exports to increase by 25 percent during the first year of the agreement. The Congressional Research 

Service also cited an ITC study delivered to USTR before the negotiations began which concurred that Korea 

textile producers, not U.S. producers, are expected to be big winners if this agreement is enacted into law. 

We would also note that while KORUS will give South Korean goods duty-free entry into the U.S. market, U.S. 

exports to Korea will be subjected to a 10% Value Added Tax (VAT). It is important to address this inequity as 

part of any trade agreement as border taxes are another persistent example of foreign practices that place 

domestic companies at a competitive disadvantage. 

The U.S. textile industry voiced its concerns regarding KORUS to the Bush Administration and the Office of the 

United States Trade Representative (USTR) when the agreement was first signed and then again to the Obama 

Administration this summer when it became apparent the they were prepared to renegotiate certain texts. 

Unfortunately, the Administration chose not to pursue these concerns, and the final textile chapter remains 

unchanged from its hastily negotiated text finalized in 2007. 
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As it now stands, KORUS will inflict swift, accelerating, and lasting damage across the American textile and 

apparel sector supply line, including fiber production, yarn spinning and texturizing, fabric weaving, knitting 

and finishing, and end product assembly, We expect to see a significant increase in job losses as well as the 

U.s. trade deficit as a consequence of this flawed agreement and the failure to address these concerns, 

A recent analysis by the Economic Policy Institute estimates that 159,000 good paying American jobs will be 

lost if the KORUS agreement passes Congress, Of that total, we estimate that between 9,300 and 12,300 jobs 

will be lost in the u.s, textile and apparel sectors 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; this increases the job loss estimate to nearly 40,000 textile and related jobs due simply to the 

textile text in the KORUS agreement, It is important to note that these figures do not account for the job 

losses as a result of illegal Chinese transshipments which are expected to be significant, 

With job creation a central priority for Congress, we do not believe that the KORUS agreement meets that goal 

of expanding markets and creating U,S, jobs, We continue to urge that the textile chapters of the agreement 

be renegotiated to ensure that the U.s, textile industry and the jobs the industry provides in our communities 

are not put in danger. However, In light of the fact that the reasonable requests made by the industry were 

ignored, we have no choice but to oppose the agreement, 

Thank you for providing us the opportunity to provide comments on the U.s,-Korea Free Trade Agreement, If 

you have any questions or require additional information, please do not hesitate to contact us, 

Sincerely, 

Cass 

~~ 

Johnson 

President 

National Council ofTextile Organizations 

Karl Spilhaus 

President 

National Textile Association 

PaulO'Day 

President 

American Fiber Manufacturers Association 

4", £ ",,), 

Auggie Tantillo 

Executive Director 

American Manufacturing Trade Action Coalition 

Ruth Stephens 

Executive Director 

U,S, Industrial Fabrics Institute 
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ON: U.S.-Korea Free Trade Agreement 

TO: Senate Committee on Finance 

BY: U.S. Chamber of Commerce and U.S.-Korea Business Council 

DATE: May 26, 2011 
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Thank you for this opportunity to share the views of the members of the U.S. Chamber of 

Commerce and the U.S.-Korea Business Council on the economic benefits and geopolitical 

implications of the U.S.-South Korea Trade Agreement. 

The U.S. Chamber is the world's largest business federation, representing the interests of more 

than threc million busincsses of all sizes, sectors, and regions, as well as state and local chambers 

and industry associations. The U.S.-Korea Business Council is the leading business organization 

promoting the bilateral U.S.-Korea economic and commercial relationship and is composed of 

U.S. companies that are significant investors in and exporters to the Republic of Korea (South 

Korea). The Council is secretariat for the U.S.-Korea FTA Business Coalition, which represents 

nearly 1,000 American companies, business and agricultural organizations, and chambers of 

commerce that support approval of the pending trade agreement with South Korea. 

The members of the Chamber aud Council vigorously support the U.S.-South Korea trade 

agreement CKORUS"). This groundbreaking market opening agreement will bring significant 

benefits to American workers, businesses, farmers, consumers, and the U.S. ecouomy. South 

Korea, a $1 trillion economy with 49 million consumers, is already the seventh-largest U.S. 

export market and trading partner. In this context, KORUS is the most commercially significant 

bilateral U.S. trade agreement in nearly two decades. The comprehensive scope of this 

agreement, and its strong protections and provisions eliminating non-tariff barriers to trade, set 

important new benchmarks for future trade agreements. Moreover, the agreement also has 

siguificant implications for U.S. national economic security and gcostrategic priorities, including 

promoting trade liberalization in Asia and globally. 

Approval and implementation of the agreement with South Korea, along with the agreements 

with Panama and Colombia, are among the most important actions that the U.S. Congress can 

take to achieve President Obama's goal of doubling U.S. exports in five years-creating new 

jobs and economic opportunities in communities across the country-and to building an 

infrastructure that promotes regional prosperity and stability. 

Economic Benefits 

Trade and investment with South Korea already contributes significantly to the U.S. economy 

and supports tens of thousands of U.S. jobs. Two-way trade in manufactured and agricultural 

goods reached nearly $88 billion in 2010. U.S. goods exports to South Korea rose to $38 billion 

in 2010, and South Korea was the fastest growing export market for U.S. manufactured goods 

that year, increasing 39.6%. South Korea was also the fifth-largest market for U.S. agriculture 

exports last year. Two-way trade in cross-border services amounted to $19 billion in 2009, with 

U.S. exporters running a $6.2 billion trade surplus in services exports that year. South Korea is 

also an important export destination for U.S. small and medium-sized enterprises, which 

accounted for more than 89% of all U.S. companies exporting to Korea in 2008 and $14.2 billion 

of U.S. exp0I1s to Korea that year. 

U.S. producers face significantly higher tariffs in South Korea than Korean producers face in the 

already open U.S. market. Currently, lion-agricultural U.S. goods face an average applied tariff 

in Korea of 6.2%, and U.S. agricultural products face an average applied tariff of 54%. Under 
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KORUS, nearly 95% of bilateral trade in consumer and industrial products will become duty free 

within five years and tariffs on almost all goods will be eliminated within ten years. 

Additionally, nearly two-thirds of U.S. agricultural exports to South Korea will become duty-free 

immediately, and the agreement will phase out over 90 percent of all South Korean tariffs on 

major U.S. agricultural exports over 15 years. 

We expect the elimination of these tariffs to boost significantly U.S. exports to South Korea. 

The United States International Trade Commission (USITC) estimated in September 2007 that 

the agreement could increase U.S. exports by 510 billion to 51l billion annually. 

KORUS will also remove significant non-tariff market access balTiers in South Korea to U.S. 

goods, services, and investment. It guarantees transparent and predictable regulatory and rule 

making procedures in South Korea, and includes commitments to apply a negative list approach, 

under which all sectors are liberalized except where South Korea has taken a specific 

reservation, and will automatically include future liberalization actions taken by Korea under the 

agreement. KORUS includes possibly the strongest ever protections for intellectual propelty 

within a bilateral U.S. trade deal, which is of great importance given the significant impact that 

counterfeiting and piracy in South Korea have had on U.S. companies in the enteltainment, 

software, ICT, and other sectors. 

KORUS includes strong provisions and protections on investment and competition policy, and 

will help ensure the fair and transparent application of competition policy for all U.S. companies 

doing business in South Korea. Under the agreement, the Korean government has committed to 

provide national treatment to U.S. stakeholders so that they will have equal footing in regulatory 

proceedings and in standards-setting processes. South Korea has also agreed to allow 100 

percent foreign ownership of telecommunications providers and eeltain broadcasting channel 

operators, areas in which foreign investment has been restricted until now, and committed to 

opening previously closed sectors, such as legal and health care services, to U.S. companies. In 

addition, the agreement inclndes important new commitments on customs administration and 

rules of origin, and streamlined procedures that will facilitate more trade by ensuring timely and 

efficient clearance of cllstoms. 

KORUS includes the strongest financial services chapter in a U.S. bilateral trade agreement. It 

will create a more level playing field for U.S financial services companies in South Korea and 

establish a more competitive market environment, which we expect will generate significant new 

business and benefits for U.S. firms in this sector. Even though U.S. financial services 

companies have in recent years made major investments in South Korea, it remains a challenging 

market because of complex regulatory procedures and other non-tariff bUlTiers. KORUS will 

address these through commitments that are the most progressive made with any U.S. trading 

partner to date and that will increase transparency, predictability, and accountability in its 

financial services sector. These commitments will promote greater sectoral stability and 

international regulatory cooperation, and will increase-not decrease-sound regulatory 

oversight of the financial system. KORUS also includes provisions that will allow for crossborder data flow, which will enable U.S. based back office support to U.S. firms' operations in 

South Korea and bring U.S. best practices there. 
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We expect these and many other provisions in KORUS to level the playing field for U.S. 

workers and businesses in South Korea, and to stimulate new demand there for U.S. goods and 

services-which will generate new American jobs and growth. 

Job Creation Benefits 

KORUS holds great potential to grow new U.S. American jobs. Increased demand in South 

Korea for U.S. manufactured and agricultural products-and increased imports to the United 

States from South Korea resulting from the FT A-will create new American jobs at ports, in 

transportation and logistics, warehousing, marketing, advertising, retail sectors, and other 

sectors. U.S. exporters would not only need prodnction workers but also engineers, designers, 

and marketing specialists. All of these new employees will help drive retail and other servicessector growth in their communities. 

South Koreml companies arc expanding their investment in the United States, and have created 

tens of thousands of Amcricanjobs in manufacturing as well as in distribution and supplier 

networks across the country. These jobs contribute to economic growth in local communities, 

generating jobs in services and other sectors. By reaffirming the openness of the U.S. market 

and attractiveness of the United States as a destination for investment, KORUS has the potential 

to accelerate this trend. 

President Obama has said that at least 70,000 U.S. jobs would be supported by KORUS. This 

figure is a conservative estimate and does not capture the potential for growth of U.S. services 

exports to Souflr Korea. An updated assessment of the potential economic effects of the 

agreement prepared in January 2011 by USITC economic stafr at the request of the Senate 

Committee on Finance Subcommittee on Trade estimated that the agreement could generate as 

mm1y as 280,000 U.S. jobs. 

KORUS inclUdes all of the labor protcctiollS and environmental provisions specified in fire May 

10,2007, Congressional-Executive Agreement on Trade Policy, which ensure that U.S. trading 

partners promote and protect global labor and environmental rights and standards. 

Geostrategic Benefits 

KORUS is also important for U.S. security and geostrategic goals, both in the Asia-Pacific 

region and globally. Implementation of KORUS will strengthen the United States' relationship 

with South Korea, one of our country's strongest partners in advancing regional and global 

security. U.S.-South Korea tics have long focused on defense and security and, by cxpanding 

trade and investment, KORUS will broaden this relationship by deepening economic links. 

North Korea's continuing provocations, including thc sinking of the Cheollallnavy ship and fire 

attack on Yeonpyeong Island last year, firmly reinforce the importance of the U.S.-Korea 

security alliance for protecting regional stability. 

KORUS is a corc component of U.S. strategies to secure a competitive edge in Asia, as the 

region becomes increasingly interwoven by tradc agreements that leave out the United States. It 

provides a model for ways that major developed economies can successfully tackle challenging 
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regulatory and other market access barriers to create a fair and competitive business 

environment. KORUS' strong rules and protections arc seen as the baseline for the ongoing 

Trans-Pacific Partncrship negotiatiollS which, if successful, could lay the foundation for a 

possible future free trade area of the Asia-Pacific region. 

The South Korean government has been steadfast in reiterating its commitment to open markets 

and in cautioning against protectionism during the recent global economic downturn. South 

Korea has increased its international leadership role as well through the G-20, partnering closely 

with the United States to address shared global challenges. In fact, South Korea was the chair of 

the ambitious and successful G-20 summit last November. Approval and implementation of the 

FT A will semi a powerful signal to other major economies that the United States is committed to 

advancing global economic recovery and prosperity through open markets and the removal of 

barriers to opportunity and fairness. 

South Korea is also an important provider of international development assistance, and plays an 

increasingly active role in peacekeeping and disaster relief efforts. U.S. and South Korean 

leaders say bilateral relations today arc at their strongest level ever-and it is in America's 

interests to take every action that will reinforce this. By further integrating the two countries' 

economies, the FT A will deepen and add to the resiliency of this partnership. 

The Cost of Inaction 

The window of opportunity for the United States to take full advantage of the potential to create 

new jobs and growth throngh KORUS is, however, shrinking rapidly. South Korea and the 

European Union (EU) have concluded and approved a trade agreement that will enter into effect 

on July 1. This agreement will eliminate nearly 99% of all duties on trade in manufactured and 

agricultural goods between the EU and South Korea within five years. It will provide EU 

manufacturers, farmers, and services providers many of the same protections and market opening 

provisions that their American counterparts will enjoy under KORUS. Without KORUS, 

American workers and producers risk losing out on the chance to increase their business and 

market share in South Korea while European exporters enjoy vast new market access there. We 

have already seen these kinds of market share losses in Colombia and Panama with the delay to 

act on passing these two important agreements as well. A study by the U.S. Chamber found that 

as many as 345,000 U.S. jobs and $35 billion in U.S. exports will be lost if the EU-Korea FTA 

and the pending Canada-Korea FTA enter into effect and KORUS does not. 

Since the U.S. and South Korean govemments first announced the launch of trade agreement 

negotiations more than five years ago, our organizations have worked to inform the wider U.S. 

public about the important potential benefits of KORUS to the U.S. economy and geostrategie 

goals. During the nearly four years since the agreement was signed on June 30, 2007, U.S. 

exports to and trade and investment with South Korea have increased, but at nowhere near the 

level that could have been possible had the agreement been implemented then--costing 

American workers and exporters valuable opportunities to grow their business in Korea. 

We recognize that concerns raised by U.S. stakeholders with respect to certain measures in 

KORUS needed to be addressed in order for the agreement to move forward. We applaud the 
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