Regional Trade Pacts Face Rocky Road

ollowing the collapse of the World Trade Organization’s (WTO’s) recent trade
liberalization talks, Bush administration trade officials are zeroing in on efforts to negotiate
regional and bilateral trade pacts — but that may be a lot easier said than done. Some of the
issues that caused the breakdown of the WTO talks are at the heart of the proposed regional pacts.

The question of agricultural subsidies looms large, and organized labor is conducting a
major grass-roots effort to block some of the proposed free trade pacts. Further complicating
matters is the insistence by textile industry lobbyists and their supporters in Congress that rules
of origin for textile products should require apparel to be made of yarn and fabric manufactured in
participating countries. In addition, they don’t want any tariff preference levels that permit a
given amount of apparel to be made from inputs from non-participating countries. Those measures are
strongly opposed by retailers and other importers of textiles and apparel.

Number one on the administration’s agenda is a Central America Free Trade Agreement (CAFTA).
Negotiations are underway with Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. US Trade
Representative Robert B. Zoellick hopes to conclude these negotiations by the end of this year so
Congress can vote on an agreement in early 2004. Obviously, this push is an effort to move a vote
as far as possible from next year’s election campaigns, as votes on trade issues are not popular in
election years. CAFTA enjoys considerable support right now, but the fallout from the WTO
negotiations could cause problems as some of the CAFTA countries were not exactly supportive of the
United States during the recent WTO meetings.

Another of the administration’s high-priority items, a Free Trade Area of the Americas
(FTAA), is in for much rougher sledding. The target date for FTAA is January 2005, when all quotas
on textiles and apparel are scheduled to expire. Already, an alliance of labor unions,
environmentalists and farm groups has organized a nation-wide grass-roots campaign to oppose FTAA.
Dubbed the “Blue-Green Machine” to signify the joining together of blue-collar workers and
environmentalists, this effort will culminate in a major protest surrounding a FTAA ministerial
meeting in Miami. Further complicating this issue is the fact that Brazil is a co-chair with the
United States on FTAA negotiations, and the recent WTO meetings underscored sharp differences
between the two countries on agricultural issues. In addition, the powerful sugar lobby has urged
the administration to go slowly with FTAA.

Despite all of these difficulties, administration officials remain optimistic that the
regional pacts can be concluded on schedule.

Bush’s Plan To Revive Manufacturing Unpopular

The Bush administration’s highly touted plan to revive the manufacturing segment of the
country has gone over like a lead balloon with textile manufacturers and some of their supporters
in Congress. With a good deal of fanfare, Secretary of Commerce Donald L. Evans unveiled a
five-step plan to “rescue” American manufacturing that calls for: establishment of an Unfair Trade
Practices Team to track and confront unfair trade competition and practices; creation of an Office
of Industry Analysis to assess the economic impact of new rules and regulations; consolidation of
all Commerce Department export promotion functions under a new assistant secretary for trade
promotion; an effort to expedite implementation of standards to ensure that American manufacturers
are “export ready” to sell into global markets; and continuation of consultations with
manufacturing industries with respect to their trade problems.

Auggie Tantillo, Washington coordinator for the American Manufacturing Trade Action
Coalition, said that while he welcomes the fact that manufacturing trade problems have “finally
gotten attention” at the highest levels of the administration, he does not think the Bush plan is
the answer. “We don’t need more statistics and reports,” he said. “What we need are direct policy
initiatives that will lead to a very specific plan to deal with China and other trade problems.”

Cass Johnson, interim president of the American Textile Manufacturers Institute, was even
more critical. He said the plan shows the Bush administration “simply does not get it.” He said
assigning the responsibility to a “fourth-level bureaucrat will not get the job done.”

New Coalition Strengthens Textile Trade Efforts

Textile industry lobbyists and industry leaders believe a newly formed manufacturing trade
coalition will strengthen their efforts to stem the tide of growing import competition, which they
say is causing massive plant closings and job losses. The Free Trade For America Coalition
(FREETAC) includes farmers, cattlemen and agribusiness; chemicals; metals; all of the major textile
and fiber trade associations; and steel, paper and textile unions. Its members represent some 3,000
corporations and 2 million employees.

FREETAC is the creation of Wilbur L. Ross Jr., who, among other things, is set to acquire
control of Burlington Industries Inc. and Cone Mills Corp. and has been a leader in the effort to
limit steel imports. Ross claims the American standard of living is “being systematically
destroyed” in the international trade arena, and he says the American public and its elected
representatives must be made aware of what he says is “an economic disaster.”

Although the various textile and fiber associations have been actively involved in
textile-specific trade issues, they feel they have much in common with FREETAC and believe it can
help them reach a broader audience, and presumably gain more political support for their efforts.
Like the textile associations, FREETAC will conduct public education and lobbying efforts to call
attention to the basic causes of the growing US trade deficit, such as foreign currency
manipulation, evasion and circumvention of US trade laws, and what it sees as “unfair trade
agreements.” In addition, the coalition will focus on what its members see as US laws that “deny
timely relief” to injured industries, their employees and communities.

With the 2004 presidential and congressional election campaigns underway, there is little
doubt that international trade already has surfaced as one of the major issues.

November 2003