Textiles and other manufacturing industries have major concerns with the House-passed climate and
energy bill, fearing it will increase their energy costs and hurt their ability to compete with
foreign manufacturers. The bill, which squeaked through the House by a seven-vote margin, makes
major changes in the way energy is created, sold and consumed. It sets up a complex system for
controlling carbon dioxide emissions by utilities and industries. It also calls for greater use of
renewable energy resources and  measures to increase energy efficiency.

Cass Johnson, president of the National Council of Textile Organizations (NCTO), issued a
statement expressing his organization’s “strong disappointment” with the bill and vowed to make
changes in the Senate, stating, “NCTO, along with virtually every other manufacturing sector,
opposed this bill because it will significantly increase energy costs for domestic manufacturers
and not those of its overseas competitors.” He said that while language has been added to the bill
providing for a border adjustment tax to offset any advantages given to countries that do not
impose carbon emission taxes on their manufacturers, the language is “too discretionary and would
not allow the textile industry, even if the measure is implemented, to benefit because the
trade-impacted industries are not given a high enough priority.”

At a briefing for energy reporters in Washington over the weekend, President Barack Obama
said he is opposed to the border tax. “At a time when the economy worldwide is in recession and we
have seen a significant drop in world trade, I think we have to be careful about sending out any
protectionist signals,” he said, adding that he believes there may be ways to deal with the problem
other than with tariffs.

June 30, 2009

Rep. Jim McDermott, D-Wash., has introduced legislation that would permit duty-free entry into the
United States of apparel made in the Philippines, provided it contains yarn and fabric made in the
Philippines or the United States. Its provisions are similar to the yarn-forward requirement in a
number of US free trade agreements (FTAs).

In introducing the legislation, McDermott, a member of the House Ways and Means Trade
Subcommittee, said the Philippines represents a “tremendous economic potential and enduring
political and security significance to the United States.”

The bill says the United States and the Philippines share the same concerns and challenges
stemming from the removal of textile and apparel quotas worldwide and the import safeguards guards
covering US/Chinese trade. It also notes that the US apparel industry is heavily dependent on
sewing operations outside of the United States, and for the first time, US textile manufacturers
would have a program that utilizes sewing done in an Asian country. The United States has
negotiated an FTA with South Korea, but it is bogged down in Congress in view of strong opposition
from US automobile and textile manufacturers and others in this country as well as from
agricultural interests in Korea.

The law would grant duty-free treatment to apparel products wholly assembled in the
Philippines, provided they are made from US or Filipino yarn and fabric. It specifies a wide range
of products including men’s and boys’ shirts, shorts, underwear and trousers; and women’s and
girls’ skirts, shorts, blouses, slacks, brassieres and swimwear.

Noting that the United States and the Philippines have “mutually benefited from strong
economic and cultural ties that date back many decades,” McDermott pointed to a sharp decline in
trade in recent years. He said  apparel imports from the Philippines have fallen by almost $1
billion since 2000, and US textile exports to the Philippines amounted to only about $20 million
last year.

Kevin M. Burke, president and CEO of the American Apparel and Footwear Association, strongly
endorsed the McDermott bill, saying, “Our efforts to tear down barriers to trade will strengthen
the relationship we share with our 30th-largest trading partner while working to benefit our
textile and apparel industries.”

Peter B. Favila, secretary of the Philippine Department of Trade and Industry, also endorsed
the legislation and urged Congress to approve it “as soon as possible.”

June 30, 2009

A high-powered group of members of the House of Representatives has introduced legislation calling
for sweeping changes in US trade policies including renegotiation of the North America Free Trade
Agreement and other existing free trade agreements (FTAs). The bill’s 106 initial sponsors include
nine committee and 45 subcommittee chairmen and members of the Democratic Caucus; Republican
Caucus; “Blue Dog” Democratic coalition; and Hispanic, Black, Populist and Progressive Caucuses.
Its supporters include some 25 labor union and other organizations, including the American
Manufacturing Trade Action Coalition, which represents some textile companies.

The bill, known as the Trade Reform, Accountability, Development and Employment (TRADE) Act,
directs the Government Accountability Office to conduct a comprehensive review of the major trade
pacts that have served as a model on which US trade agreements have been based before any new
agreements can be negotiated or ratified. It calls for a number of key provisions dealing with such
things as national security, product safety, human rights, and social and environmental
considerations to be included in all trade pacts. It also addresses issues such as currency
manipulation, Buy American and sweat shops. The bill calls on the president to submit a plan to
address through negotiations what the bill’s sponsors say are gaps in current trade agreements.
This, in effect, would require renegotiation of the Colombia, Panama and South Korea  FTAs,
which were approved by the Bush administration but are awaiting ratification by Congress.  It
would create a special congressional super committee headed up by the  House Ways and Means
and the Senate Finance Committee chairmen, and membership would include the leaders of other
committees whose jurisdiction is affected by trade agreements.

The legislation calls for elimination of what it calls  the “undemocratic fast track”
process whereby an administration can negotiate a trade agreement which then must be voted up or
down by Congress without any opportunity for amendments. The legislation would replace fast track
with a new process that would give Congress more power to set out mandatory negotiating objectives
for future trade agreements, and Congress would have to certify that its goals have been met before
an agreement can be signed.

As the legislation was introduced, Rep. Mike Michaud, D-Maine, chairman of the House Trade
Working Group, said: “We all know that we live in a globalized world, but we need to ensure trade
is fair for our workers and economy. The trade act shows what we are for in future trade agreements
and paves the way on how to fix our existing agreements.”

June 30, 2009

Inez Moore Tenenbaum, former South Carolina superintendent of education, has been confirmed by the
Senate to head the Consumer Product Safety Commission (CPSC), a demoralized agency that has
suffered as a result of budget and staff cuts. Noting that the CPSC has fallen on hard times,
Tenenbaum said her major assignment will be to implement a sweeping consumer safety law enacted
last year that grants new authority and funding to the agency. “There are a great number of
challenges facing the CPSC,” she said, adding that the “good thing” is that Congress voted last
year to revitalize the agency.

A Democrat who ran unsuccessfully for the Senate in 2004, Tenenbaum received high praise from
South Carolina’s Republican senators.

Sen. Jim DeMint said: “I am confident she has the determination and skills to lead this
important commission. I look forward to working with her to ensure our nation continues to have the
safest products in the world.”

Sen. Lindsey Graham, likewise, hailed the appointment, saying Tenenbaum will “hit the ground
running” and will provide the agency with the leadership it needs.

June 23, 2009

A bipartisan group of members of the House of Representatives has introduced legislation designed
to offset what they believe is a multi-billion-dollar trade advantage many overseas countries enjoy
as a result of their value added tax (VAT) systems. The House sponsors of the legislation include
several from textile-manufacturing states. The measure is similar to legislation introduced
recently in the Senate by Sen. Lindsey Graham, R-S.C.

The legislation, titled “The Border Tax Equity Act,” directs the US Trade Representative to
negotiate agreements with countries that use a VAT, but if negotiations fail, the United States
would impose an offsetting assessment at the US border on imported good and services, and would
issue rebates equal to the amount of the VAT taxes paid to other countries by US exporters.

Textile manufacturers say countries accounting for 95 percent of US trade have some form of a
border tax that is adjusted to benefit their industries. They say this amounts to an annual tax
advantage of more than $474 billion.

Following introduction of the legislation, George Shuster, Cranston Print Works,co- chairman
of the American Manufacturing Trade Action Coalition, said, “Border-adjusted tax schemes stand out
as one of the very worst offenders when identifying the reasons why the United States has suffered
terrible job and output losses, trade deficits and spikes in debt in recent years.” He added,
“Unless the United States addresses the competitive disadvantage caused by foreign border tax
schemes, it will never level the playing field for domestic manufacturers.”

Because a VAT for the United States is seen by many as a form of a national sales tax, it has
been politically impossible to enact such a tax. Supporters of the equity tax act feel it is an
approach to the problem that could have considerable support.

June 23, 2009