Changes Likely In Textile Trade Issues

S Trade Representative (USTR) Susan C. Schwab says the Democratic takeover of Congress is
not likely to put the brakes on the Bush administration’s push for free trade, but that’s not
exactly how industry lobbyists and congressional leaders see it.

The Bush administration has negotiated 25 free trade agreements (FTAs), and at least five
more are in various stages of negotiation or consideration. It has supported trade preference
agreements for the Caribbean, South America, Africa and other areas of the world; and it has played
a major role in promoting the Doha Round of trade liberalization negotiations. Schwab believes
these issues have bipartisan support and that a bipartisan spirit can be carried forward. She says
talk of partisan power clashes are “contradicted by the facts,” and that Republicans and Democrats
have worked together on trade issues for more than 70 years. She contends the mission of opening
markets, spurring development and keeping the United States in the fore of promoting free trade “
transcend party identification.”

As the administration’s top trade official, Schwab sees a number of specific issues the new
Congress will be dealing with where there is widespread bipartisan support. With respect to the
stalled Doha Round, she says the United States must continue to press for a resolution of
differences between developed and developing countries, and the bipartisan support for the latest
US offer to the World Trade Organization (WTO) should help get the talks off dead center if other
countries will respond favorably. She warns that the risks of failure are “profound,” and that “we
cannot let an effective round slip through our fingers.”

Some Issues Resolved

Four key textile trade issues are off the table, as they were dealt with in the waning days of
the 109th Congress. Permanent normal trade relations for Vietnam was approved, the African Growth
and Opportunity Act and the Andean Trade Preference Act were extended, and a FTA with Haiti was
enacted. Put off until this year are ratification of FTAs with Colombia and Peru. And the
administration is in the process of negotiating free trade agreements with South Korea and

By far the most important trade issue — and the most contentious — that must be dealt with
before July is the question of extending trade promotion authority to the president. Formerly known
as “fast track,” this authority permits the president to negotiate trade agreements and present
them to Congress for an up or down vote with no amendments. While trade promotion authority may
have been rubber-stamped by the Republican-controlled 109th Congress, its future in the new
Congress is definitely uncertain.

Importers See Challenges And Opportunities

Despite all of the optimistic talk by administration officials, importers see
both pitfalls and opportunities with the Democratic takeover of Congress. Without question, there
will be much more congressional oversight and questioning with regard to textile trade issues. This
can have both pluses and minuses. On the plus side, importers see strong congressional support for
such things as trade liberalization for Latin American nations and for more FTAs, although they are
getting increasingly disillusioned by them. Importers have some reservations about how FTAs will be
structured and whether they will be used to promote free trade or will have restrictive rules of
origin, which importers view as harmful to themselves and consumers.

Chinese Trade

China looms as a major issue. While the Bush administration has taken some steps to slow down
Chinese imports with such things as renewed quotas on textiles and apparel, it generally has not
wanted to pick a fight with China over trade issues. During the election campaign and in a number
of post-election comments by newly elected members of Congress and the leadership, it has been
popular to take pot shots at China. And there is plenty of ammunition. The USTR’s annual report to
Congress on China’s implementation of its WTO commitments was highly critical. The USTR said that
while China has made some moves toward a market economy, it is falling far short on what needs to
be done, and in the past year there were worrisome signs that progress has slowed.

Everything from currency manipulation to what are viewed by some as other unfair trade
practices will be on the congressional agenda. Sens. Charles Schumer, D-N.Y., and Lindsay Graham,
R-S.C., plan to re-introduce their bill that would place a 27.5-percent duty on Chinese imports to
offset China’s pegged currency exchange rate, which textile manufacturers and others say amounts to
an unfair subsidy. The senators held off action on their bill during the past session of Congress
in order to give the administration more time to negotiate a satisfactory solution to the problem.
Following a year-end conference with China at which the currency problem was a centerpiece, US
government trade officials reported no progress toward resolving the issue.

Eric Autor, the National Retail Federation’s (NRF) international trade counsel, says some
Democrats have been calling for “draconian action on China” that will hurt retailers and their
customers if carried out. He is concerned that an effort will be made to strengthen US trade laws
with respect to such things as dumping and what are seen by many as other illegal trade subsidies.
Autor believes US trade laws already are skewed in favor of manufacturers at the expense of
importers and consumers. He says the textile industry is looking to trade laws as another form of
protectionism. While the NRF and other importers have generally favored the idea of FTAs, Autor
says they are becoming increasingly disillusioned with them, and he fears that a Democratic
Congress will press for labor standards and environmental protection to be included in them at the
expense of free trade. 

Textile Lobbyists Expect Change

 Textile industry lobbyists also see change taking place on trade issues. They agree with
importers that there will be much more scrutiny and oversight on trade issues — and they see that
as a positive development. Auggie Tantillo, executive director of the American Manufacturing Trade
Action Coalition, which includes textile manufacturers, looks for much more discussion and debate
on trade issues. This is particularly true with respect to renewing fast track. He says that issue
will provide a “great opportunity for legitimate debate on the future of trade.” Other trade
issues, such as future FTAs and trade with China, will be subject to much closer scrutiny than they
would have been under a Republican-controlled Congress.

What Will Congress Do?

Members of Congress who will be in key positions of authority also see the need for change in
trade policies, and for the most part this means a go-slow approach. More than 30 newly elected
members of Congress campaigned against further trade liberalization, and Democrats are not likely
to give the administration free rein. They have made it clear they will press for labor standards
and environmental protection to be included in future trade agreements. They are quite concerned
about China and have vowed to do something about currency manipulation and other trade subsidies.
Rep. Charlie Rangel, D-N.Y., the new chairman of the House Ways and Means committee, which
initiates trade legislation, says he does not think the Bush administration has dealt with China in
order to “go to bat for American industries.”

Some FTAs have to be voted on by Congress, and down the road it could be considering such
things as a Free Trade Area of the Americas, and even the Doha Round if it can be brought back to

All in all, Washington certainly will see winds of change, but not necessarily any

January/February 2007