The U.S. specialty fabrics industry, a thriving textile sector in the U.S., took a direct hit Wednesday when the House and Senate majority voted in favor of the Korea-U.S. free trade agreement (KORUS).

Under the win/lose terms of KORUS, South Korean goods will immediately enjoy duty-free entry into the U.S. market; but U.S. exports to South Korea will still be subjected to a 10 percent Value Added Tax (VAT). Through its 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 its VAT rate above the current 10 percent at any point in the future. According to Ruth Stephens, Executive Director of the United States Industrial Fabrics Institute (USIFI), “It was a major error on the part of U.S. negotiators not to address this inequity as part of KORUS, as border taxes are a persistent example of foreign practices that place domestic companies at a competitive disadvantage.”