WASHINGTON — The nation’s trade deficit, which remained at $45.6 billion in August, has become a focal point for Congress and the Obama administration, which worked in concert this week to see that three new free trade agreements were approved with the aim of boosting exports and creating jobs.
The U.S. Commerce Department’s latest report on international trade released Thursday showed that exports fell 0.7 percent to $177.6 billion in August, while imports remained steady at $223.2 billion.
Congressional leaders, with the backing of President Obama, took aim at the trade deficit on Wednesday night, passing three long-stalled trade deals with South Korea, Panama and Colombia that the U.S. International Trade Commission estimates will increase exports collectively by over $12 billion and that the White House predicts will create more than 250,000 American jobs.
The passage of the trade pacts was hailed by apparel importers, who saw their apparel and textile shipments from foreign countries fall 5.45 percent in August compared with a year earlier.
Apparel and textile imports from China fell 6.1 percent in the month, as combined imports from Vietnam, which is gaining share on China, rose 6.3 percent. Shipments from all other top-10 countries, with the exception of India, declined.
With passage of the accords, apparel importers will have greater flexibility in their sourcing choices and potential new markets for their products, while U.S. textile producers face more unwanted competition but also some new export markets. The trade pacts with South Korea, Colombia and Panama represent a combined $1.1 billion in apparel and textile imports shipped to the U.S. in 2010. Of the three deals, South Korea and Colombia are more important for the industry. Trade volumes with Panama, never considered an apparel production hub, are insignificant and not expected to grow with enactment.
The Obama administration, which has spent nearly three years resolving outstanding issues on the FTAs — ranging from strengthening labor provisions in a side deal to the Colombia agreement, to better access for U.S. auto exports in the South Korea pact — recently achieved a breakthrough on an impasse with Congressional leaders to move them forward. The administration made renewal of the Trade Adjustment Assistance program, which helps workers who lose their jobs due to foreign trade through extended government benefits and job training, a condition for advancing the trade deals.
Congress also passed a fourth measure that contained renewal of the TAA program, as well as the Generalized System of Preferences, which provides duty free benefits for about 4,800 products from 131 designated countries, through 2013.
South Korea is the 10th largest apparel and textile supplier to the U.S. for the year ended July 31, based on import volume of 1.3 billion square meter equivalents, with textiles and home furnishings accounting for over 90 percent of the volume. Colombia is ranked 43rd, but many U.S. brands and retailers have taken advantage of a one-way preferential trade agreement that gave apparel imports from Colombia duty free treatment. While importers acknowledge that South Korea won’t ever become a top platform for apparel production — its share of apparel imports to the U.S. fell to 7 percent in 2010 from 43 percent in 1995, the majority still support the trade deal as an opportunity for their exports of finished apparel and footwear into the lucrative South Korean market.
President Obama is expected to sign the implementing legislation soon, but it will take some time to implement the three trade deals. South Korea’s National Assembly is now considering the trade agreement and the legislatures of Colombia and Panama have already ratified their respective agreements, according to a spokeswoman for the U.S. Trade Representative’s office. The U.S. will hold discussions with the three countries to review their laws and regulations and ensure compliance with obligations in the separate trade pacts, before they enter into force, she said.
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