China Trade Remains A Priority Issue

James A. Morrissey, Washington Correspondent

A lthough they all admit trade with China is a problem, Congress, the Bush administration and textile manufacturers have different ideas as to what to do about it. The US House and Senate are both working on legislation, the Bush administration says that is not the way to go, and textile manufacturers are pressing for various forms of relief.

In 2007, the overall US/China trade deficit was a record $256 billion, with textiles and apparel accounting for $31.8 billion. That was an increase of 20 percent over 2006.

Textile manufacturers and some of their supporters in Congress are making a major push for enactment of the Hunter-Ryan Currency Reform for Fair Trade Act of 2007, which would impose penalties on China if it continues with what many manufacturers and members of Congress believe is a policy to manipulate its currency in order to gain an advantage in international trade. The Hunter-Ryan bill would discourage currency manipulation by China and any other countries by giving injured parties the right to seek remedies for illegal export subsidies by using US countervailing duty laws.

In addition to viewing the legislation as a short-term remedy, textile manufacturers believe it could help in the long run after import quotas on some 34 categories of “sensitive” textile and apparel products expire at the end of this year.

The powerful chairman of the House Ways and Means Committee, Rep. Charles B. Rangel, D-N.Y., and Trade Subcommittee Chairman Sander Levin, D-Mich., weighed in heavily on the issue as the US/China trade deficit was announced, blasting what they say have been the Bush administration’s “ misguided trade policies.” They decried what they say is failure to enforce US and international anti-subsidy laws, and said the time has come for their committee to look into ways to improve enforcement of international trade agreements and domestic trade laws.

Members of both the House and Senate are sponsoring legislation that would impose a direct punitive tariff of 27.5 percent on Chinese imports to help offset what they say is an unfair import advantage. Textile and apparel importers are opposed to both the tariff approach and the expanded use of countervailing duties, as they believe the legislation, if enacted into law, would result in increased consumer prices and fewer sourcing choices.

Meanwhile, Bush administration trade officials, while admitting there is a problem with China, insist legislation is not the way to address it. Instead, they are pressing ahead with diplomatic pressure and negotiations.

Christopher Padilla, under secretary of commerce for international trade, has outlined a three-pronged approach to addressing the China trade problem, an approach he says is “a combination of dialogue with the intelligent use of leverage.” The administration’s approach would include an “ intensive dialogue” through meetings of the Joint Commission on Commerce and Trade. A second prong of the strategy would make “full and effective use of the dispute mechanism in the World Trade Organization,” and a third element would be for the administration to “vigorously” enforce US and anti-dumping laws.

An Assault On Illegal Trade

As the debate over what to do about China heats up, US government trade officials and textile and apparel manufacturers are attacking what has become another major problem—piracy and other violations of intellectual property rights. It’s viewed as an increasingly serious problem by US textile manufacturers. The Department of Homeland Security (DHS) recently reported it seized $200 million worth of counterfeit or pirated merchandise in 2007, a 27-percent increase over 2006. The departments of US Customs and Border Protection, and US Immigration and Customs Enforcement made more than 13,000 seizures last year and conducted investigations that resulted in 241 arrests, 149 indictments and 134 convictions for intellectual rights violations. Julie L. Myers, assistant secretary for Immigration and Customs Enforcement said, “These criminal organizations are not only stealing the trademarks of US business, they are siphoning millions of dollars from the American economy and often deceiving an unsuspecting public.”

A DHS analysis of the problem said counterfeiting, piracy and other intellectual property rights violations have grown in “magnitude and complexity.” The report said growth in intellectual property rights violations has been fueled in part by the spread of enabling technology, facilitating simple and low-cost duplication of copyrighted products. Textile trade officials confirm that it is quicker and easier to make knock-offs, and as a result, it is a growing problem.

Customs and Border Patrol officers search products coming into the United States as cargo.
Photo courtesy of US Customs and Border Protection.
Photographed by James R. Tourtellotte

Industry/Customs Joint Effort

In a related development, Customs and the National Council of Textile Organizations (NCTO) have implemented a joint anti-fraud effort to gain intelligence from the marketplace and provide Customs officials with the information to help them crack down on illegal trade. They have jointly developed a simple reporting form they believe will streamline the reporting process and enable Customs to act more quickly on violations. The form is available at www.ncto.org under “Report Customs Fraud.”

NCTO Vice President Mike Hubbard says customs fraud has become the “number one issue” on which he receives calls from his members. He says NCTO members are “extremely frustrated because they see high levels of fraud without a corresponding increase in Customs activity.” Although the industry is generally pleased with the efforts being made by Customs Director of Textile Enforcement Janet Labuda, they feel enforcement is lacking as a result of reorganization within Customs and failure of that agency to hire new textile and apparel enforcement personnel in spite of the growing problem. The Bush administration’s fiscal year 2009 proposed budget calls for a major increase in Customs and Border Protection funding, but how much if any of that might filter down to textile and apparel enforcement is a big question.

Look for textile manufacturers, fire marshals and furniture companies to take a long, hard look at a new upholstered furniture flammability proposal being floated by the Consumer Product Safety Commission (CPSC). At the behest of environmental interests, CPSC has issued a Notice of Proposed Rulemaking (NPR) for a mandatory upholstered furniture standard that it says will reduce fire hazards without the use of fire-retardant chemicals. Although CPSC has been wrestling with an upholstered furniture flammability standard for more than a decade, the latest proposal caught the upholstered furniture industry and fire marshals by surprise.

“Fires involving upholstered furniture are a leading cause of fire-related deaths in US homes, and stopping furniture fire in its tracks or slowing its spread would buy consumers precious time to get out of their homes,” said acting CPSC Chairman Nancy Nord. While manufacturers and fire marshals agree that an effective and practical standard is needed, they do not like the looks of the latest proposal. Fire marshals, in particular, are concerned that the proposal does not address the need to do something about foam padding that supports fires. Upholstery fabric and furniture manufacturers are concerned about what it might do to costs and styling and other considerations of importance to consumers.

A Controversial Flammability Rule

Look for textile manufacturers, fire marshals and furniture companies to take a long, hard look at a new upholstered furniture flammability proposal being floated by the Consumer Product Safety Commission (CPSC). At the behest of environmental interests, CPSC has issued a Notice of Proposed Rulemaking (NPR) for a mandatory upholstered furniture standard that it says will reduce fire hazards without the use of fire-retardant chemicals. Although CPSC has been wrestling with an upholstered furniture flammability  standard for more than a decade, the latest proposal caught the upholstered furniture industry and fire marshals by surprise.

"Fires involving upholstered furniture are a leading cause of fire-related deaths in US homes, and stopping furniture fire in its tracks or slowing its spread would buy consumers precious time to get out of their homes," said acting CPSC Chairman Nancy Nord. While manufacturers and fire marshals agree that an effective and practical standard is needed, they do not like the looks of the latest proposal. Fire marshals, in particular, are concerned that the proposal does not address the need to do something about foam padding that supports fires. Upholstery fabric and furniture manufacturers are concerned about what it might do to costs and styling and other considerations of importance to customers.

March/April 2008