By  on February 3, 2006

WASHINGTON — U.S. Trade Representative Rob Portman launched negotiations for a free trade agreement with South Korea on Thursday.

"This will be our most commercially significant free trade negotiation launch in over 15 years," said Portman during a news conference at the Capitol, referring to the talks that created the North American Free Trade Agreement.

Portman hopes to wrap up the agreement this year and submit it to Congress in the spring of 2007 before President Bush's trade promotion authority expires in July. That authority allows trade bills to go before Congress without amendment.

The possibility of a pact with South Korea raises some red flags for U.S. textile firms, but isn't necessarily as controversial as NAFTA or the Central American Free Trade Agreement.

Two-way trade between the U.S. and South Korea is about $70 billion a year. South Korea is the sixth largest apparel and textile exporter to the U.S., with shipments of 2 billion square meter equivalents, valued at $1.9 billion for the year ended Nov. 30.

"South Korea is a very large exporter, so the outcome will be very important to the industry," said Cass Johnson, president of the National Council of Textile Organizations. "It will be essential that we have a yarn-forward rule of origin without significant exception."

The rule would require that goods receiving duty-free treatment under the agreement be made of yarn produced in either South Korea or the U.S.

However, South Korea is not considered a low-cost producer for apparel.

"Like Japan 30 years ago or Singapore, as they became a developed country they've essentially moved their apparel production to other places," said Erik Autor, vice president and international trade counsel for the National Retail Federation. "From a sourcing perspective, I'm not sure that this is really that big a deal."

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