Textile Issues On Government’s Agenda

t looks like a busy and perhaps crucial year for textiles as the 108th Congress and the
administration get down to work on an agenda ranging from taxes to trade and a new look at
government regulations. For the first time since the Eisenhower administration in 1953, Republicans
will not only have the White House, but will also control both houses of Congress.

Where textiles are concerned, this is both good and bad. On the plus side, President Bush is
expected to offer an economic stimulus package early in the session in an effort to get the economy
moving again. On the other hand, with Republicans in control of both houses of Congress, President
Bush’s ambitious international trade agenda is in for much clearer sailing, and that could spell
trouble for textiles unless the industry can extract the safeguards it says it needs. On the
regulatory front, there is likely to be more emphasis on voluntary efforts and cost/benefit
evaluations of mandatory rules.

Trade Issues:
Armed with new Trade Promotion Authority (TPA), the Bush administration will be pressing
forward with a far-ranging agenda to promote free trade. The administration quickly negotiated free
trade agreements with Singapore and Chile. Once these pacts are finalized, they will have to be
considered by Congress. Under the new TPA legislation, Congress can only vote it up or down and
cannot make any amendments.

Also on the administration’s agenda are free trade agreements with Morocco, Central America,
South Africa, all of Latin America and the 10 nations that comprise the Association of Southeast
Asian Nations (ASEAN). Textile state representatives will weigh in heavily with efforts to
influence all of these free-trade pacts, as well as the Doha Round of trade liberalization
negotiations at the World Trade Organization (WTO).

Look for members of the Congressional Textile Caucus and textile-state senators to continue
leaning on the administration to step up its activities to combat piracy of textile designs and
illegal transshipments, and to do something about what the US industry sees as unfair subsidies
resulting from currency manipulation by Asian nations.

The Environment:
The Environmental Protection Agency (EPA) is expected soon to issue a final anti-air
pollution regulation that will have an impact on textile finishing operations. Under development
for more than five years, the so-called Maximum Achievable Control Technology standard could come
at any time.

During the comment period on the standard, the American Textile Manufacturers Institute
(ATMI) raised major concerns with the proposed standard, charging that it made erroneous
assumptions about emissions and could force some companies to drop certain product lines, including
some used by the Armed Forces. The EPA is about to issue a proposed standard covering emissions
from boilers. The standard could cause problems for textile facilities that still burn coal.

Consumer Product Regulations:
Textile manufacturers for the most part seem to be comfortable with the new chairman of
the Consumer Product Safety Commission (CPSC), Hal Stratton, who they believe will take a balanced
approach to regulations and put more emphasis on need, scientific data and economic feasibility.

In a major development, CPSC has issued a notice of proposed rule-making calling for an
overhaul of the 50-year-old Flammable Fabrics Act, saying the act is out of step with today’s
products and cleaning and care practices. In addition, the commission is in the process of
gathering information with the thought of developing a new standard covering small flame exposure
to upholstered fabric. And in a related development, the California Bureau of Home Furnishings and
Thermal Insulation is in the process of revising its standard covering small open-flame exposure to
upholstered furniture.

United States Proposes Eventual Elimination Of Tariffs

US Trade Representative (USTR) Robert B. Zoellick has put forth what he describes as an “
ambitious new proposal” for WTO members to eliminate all tariffs on consumer and industrial
products by 2015. The proposal was quickly endorsed by US textile and apparel importing interests,
but it went over like a lead balloon with textile manufacturers.

In presenting the proposal to the WTO in Geneva, Zoellick said the plan to achieve zero tariffs
would benefit both developing and developed countries and would result in significant savings for
American consumers. “The proposal would turn every corner store in America into a duty-free shop
for working families and would benefit the average American family of four with an extra $1,600 a
year,” he said.


USTR Zoellick

The plan calls for industrial and consumer goods tariffs that currently are 5 percent or lower
to be removed by 2010 and all remaining tariffs to be reduced to 8 percent.

Tariffs on certain “highly traded” commodities should be reduced “as soon as possible,” but
no later than 2010. Between 2010 and 2015, countries would be required to make equal annual
reductions until all tariffs are gone by 2015.

Kevin M. Burke, president and CEO of the American Apparel and Footwear Association (AAFA),
enthusiastically endorsed the proposal, saying the “scope and reciprocal nature of this initiative
are unprecedented and long overdue.” He said the proposal not only removes US import barriers, but
also eliminates barriers imposed by other countries.

US textile manufacturers saw the proposal in an entirely different light, charging that it
would jeopardize the jobs of “millions of additional workers” in the United States, as well as in
Mexico, Central America, the Andean region and Sub-Saharan Africa that depend on preferential
textile trade programs. ATMI said the proposal is “an outright gift to China,” which it said is
already flooding the United States and other markets with textiles and apparel.

While the Zoellick proposal calls for a separate program to identify and eliminate non-tariff
barriers that would run on a parallel track with industrial tariff negotiations, that did not
satisfy ATMI. It said that same promise was made to the industry in the round of trade negotiations
that ended in 1994, and those barriers still remain today. ATMI is sticking with its position that
the United States should not make any further tariff concessions until other countries agree within
two years to reduce their tariffs to US levels and eliminate all non-tariff barriers. The proposal
is far from a done deal. The less developed countries are just as reluctant to give up their
tariffs as the US textile industry is, so there will be any number of proposals and
counterproposals before final agreement is reached by 2005.

Chile And Singapore Pacts Please US Textile Industry, But Not Importers

The US textile industry is generally
pleased with the new free trade agreements with Chile and Singapore, but importers of textiles and
apparel, to say the least, are not all that excited. Under the agreements, textile and apparel
imports will become tariff-free immediately if they meet the country-of-origin rule, which
specifies that goods must be made from the yarn stage forward in one of the participating
countries. And that’s where importers have problems. They feel the Singapore agreement will be
virtually worthless because Singapore has very little textile manufacturing, and the time and
distance involved in using US fabric make trade impractical.

Both agreements call for tough Customs enforcement and protection of patents and designs. In
addition, the agreements contain provisions granting duty-free treatment to a limited amount of
imports, known as Tariff Preference Levels (TPLs), that contain yarn and fabric made in
non-participating countries. While the US industry strongly objects to TPLs, in the case of Chile,
importers should benefit from some additional trade that likely would contain yarn and fabric made
in Asia or the Far East. In the best of all worlds, importers would like to see all textile trade
completely free of quotas and tariffs.

January 2003