Trade Bill Is A Major Concern For Textiles

In a move that is strongly opposed by US textile manufacturers, the chairman of the House Ways and
Means Committee has introduced legislation that will make major changes in the textile provisions
of two trade agreements and also promote investments in African facilities by US companies. Rep.
Bill Thomas, R-Calif., will seek quick approval of the bill during the waning days of the current
Congress, under suspension of the House rules.

The Washington-based National Council of Textile Organizations (NCTO) said the bill is a
job-destroying trade package, and it urged textile-state members of Congress to protest against the
action with the House leadership.

The bill would create a tariff preference level (TPL) with Haiti that would permit imports
from other countries using a value-added approach. Under that approach, if 50 percent of value
added to products is done in Haiti or any other free trade agreement (FTA) country, the goods may
enter duty-free. The value-added TPL would begin at 221million square meter equivalents (SMEs) and
would grow to 537 SMEs in five years.

NCTO contends value-added TPLs are unenforceable and the US government would have to rely on
an honor code, which it says invites massive fraud and primarily encourages China to transship.The
Thomas bill also extends until September 2008 the current provision in the African Growth and
Opportunity Act (AGOA) that allows duty-free access for AGOA apparel made with fabric from anywhere
in the world up to a limit of 3.5 percent of all US apparel imports. In addition, it adds a new
rule of origin that would require 50-percent African content, which would grow to 60 percent by
2015, when AGOA is due to expire. The bill also would provide a US tax credit for US corporations
investing in sub-Saharan Africa.

NCTO President Cass Johnson said the Thomas bill would primarily benefit China and undercut
the Central America-Dominican Republic Free Trade Agreement, the North American Free Trade
Agreement, and Caribbean Basin Trade Preference Agreement and other FTAs. For the first time, the
legislation would allow duty-free access for yarn and fabric from Africa.

September 26, 2006