Textile Executive Cites Major Problems With US Trade Policies

At a congressional hearing into the impact on the US economy of the offshoring of jobs and
globalization, James R. Copeland, chairman, Copeland Fabrics, issued a call for a “comprehensive
new trade policy” that will enable US manufacturers to compete in today’s global economy.

In an opening statement, Rep. Brad Miller, D-N.C., who serves as chairman of the House
Science and Technology Committee’s Subcommittee on Investigations and Oversight, said the United
States can no longer avoid questions about offshoring jobs and the consequences of globalization.
He invited Copeland to testify as a manufacturer who has chosen to keep manufacturing in
Burlington, N.C.

In a wide-ranging presentation, Copeland laid much of the blame for the US trade deficit and
the loss of manufacturing jobs on what he said is an “uncompetitive trade policy,” saying that
policy is responsible for much of the steep decline in manufacturing employment and investment that
is hindering economic growth in the United States. Copeland added that “US manufacturing will
continue to suffer unless Congress and the Bush administration intervene with policies that
encourage rather than discourage manufacturing investment in the United States.”

Pointing out that the United States had a $708 billion trade deficit in 2007, including $499
billion in manufacturing and $89 billion in textiles and apparel, Copeland warned that the country
cannot continue indefinitely to withstand the problems associated with a runaway trade deficit.

He said the United States runs trade deficits in products where it normally should have a
comparative advantage because of the way foreign governments intervene with subsidies, manipulated
currencies, tax breaks and other policies to make their industries competitive.

Copeland was particularly harsh on China, which he called an “800-pound gorilla in
international trade.”

“Most of China’s industry is government-owned or quasi-government-owned,” he said. “The
Chinese government buys their capital equipment or guarantees the purchase. Chinese companies often
end up paying zero capital costs, a tremendous advantage that no US competitor can overcome.”

Copeland also pointed out that China’s currency is pegged to the dollar and is undervalued by
some 40 percent, making Chinese goods 40 percent cheaper in the market. He claimed that retailers
and other importers “have exactly what they want, as they can buy at the China price and sell at
the US price.”

The North Carolina textile executive called for a number of specific reforms that he believes
would help make US manufacturers competitive including the following:

A trade policy should be implemented that places more emphases on reciprocity. Copeland spoke
of how the United States has reduced its tariffs on industrial goods to 3 percent while the average
worldwide bound tariff is 30 percent. He also criticized the way the World Trade Organization
permits countries such as China to self-label themselves as “developing” in order to get special
tariff treatments.

The value-added tax (VAT) advantage enjoyed by some countries should be offset. Countries
utilizing a VAT system impose taxes on the cost of an import plus shipping, handling, and insurance
and tariff expenses. The VAT is rebated to those countries’ exports. Since the United States does
not have value-added taxes, this results in a trade disadvantage.

Currency manipulation should be made an actionable subsidy. Charging that the lack of action
by the administration and Congress is “inexcusable,” Copeland said this issue needs to be addressed
by the Currency Reform for Trade Act of 2007, which would make currency manipulation subject to US
anti-dumping and countervailing duty laws.

Trade enforcement should be separated from the Office of the US Trade Representative.
Copeland said it is unreasonable to expect an office that on one hand is charged with negotiating
trade agreements with other countries to turn around and impartially punish them when they run
afoul of US trade laws.

Negotiation of free trade agreements with countries that cannot buy US goods should be

Copeland concluded by saying: “Despite the hardships it has faced, the health of US
manufacturing quickly can be restored if the United States addresses its manufacturing policy
competitiveness issues.”

May 27, 2008