Bush Free Trade Agenda Running Into Trouble

s Congress heads toward its year-end recess, time and tide are running against the Bush
administration’s free trade agenda. Troubles for President George W. Bush started last June, when
the Democratic-controlled Congress refused to renew his Trade Promotion Authority (TPA) and started
to play a more active role in determining US trade policy. Three of the trade pacts that were
negotiated before the TPA expired — with Colombia, Panama and South Korea — are on hold for various
reasons and likely will not be acted upon this year, and in the case of South Korea, maybe never.

Colombia is being held up by congressional concern over labor and human rights violations.
Panama is on hold because the president of Panama is wanted in the United States on charges of
killing a US soldier in 1992. And South Korea faces strong opposition from automobile and textile
manufacturers, among others, who fear it will pave the way for more imports without any offsetting
benefits on the export side. Democratic congressional leaders in both the House and Senate have
indicated they have higher-priority issues to deal with. However, in a recent speech in Miami,
President Bush endorsed a letter former Secretary of Health and Human Services Donna Shalala sent
to Democrats in Congress that said: “Latin America is up for grabs. We fully recognize that asking
the US Congress to vote on these trade agreements is politically charged, but nonetheless rejecting
these agreements would be a set-back for US interests for generations. We must not walk away now.”&

The Central America-Dominican Republic Free Trade Agreement (CAFTA-DR), however, may be fully
implemented before a year-end deadline. Final approval of the pact has been held up over a
country-of-origin issue involving pocketing. When legislation approving CAFTA-DR was before
Congress, textile-state senators put a hold on it until the administration agreed to get agreement
from participating countries that the pocketing in apparel benefiting from the preferential trade
treatment had to be made in participating countries.

It is estimated that the pocketing in question amounts to a market in excess of $100 million for
US textile manufacturers.

The pocketing issue
has required a number of changes in the participating countries, and most of these
have been accomplished. When that issue is all wrapped up, President Bush can issue an executive
order implementing the pact without any further consideration by Congress.

Action On China Is Stalled

Congressional fervor to do something about burgeoning imports from China and a continuing growth
in the US/China trade deficit appears to
be cooling. While there are a number of bills pending in Congress in various stages
of consideration, Democratic leaders in both the House

and Senate have said Congress has higher priorities, and the chairman of the House
Ways and Means Committee has stated flatly there will be no further action on trade legislation
this year.

The push to act may have been tempered somewhat by the Bush administration’s
repeated assertion that it is using “direct, robust discussions with Chinese leaders” to address
issues, and that punitive legislation is

not the way to go. That approach was bolstered
by a letter addressed to
all members of Congress and signed by 159 of the nation’s leading retailers,
multinational corporations and trade associations representing importers of textiles and apparel
and other products. Noting that the global economy has provided “significant and important
benefits” to the US economy, the letter also recognized that trade with China is having an impact
on jobs and economic security.

The high-powered group of companies said, however, that the best way to address
problems in international trade requires eliminating barriers abroad and increasing the
competitiveness of US manufacturers. The letter said policies that single out individual countries
as responsible for the United States’ concerns “will not be effective and should be

The letter concluded: “Imposing unfair barriers to trade in the name of currency
valuation or product safety is not a solution to the underlying concerns, and it ultimately
undermines the important work that should be undertaken to prepare our economy and our workers for
the realities of the global economy.”

Textile manufacturers and others impacted by Chinese imports have been pressing for
legislation that would offset what they see as an unfair trade advantage resulting from China’s
refusal to re-evaluate its currency. The legislation that has the most support is the Fair Currency
Act, sponsored by Reps. Duncan Hunter, R-Calif., and Tim Ryan, D-Ohio. The act would define
currency manipulation as an unfair trade practice and make such actions subject to US
countervailing duty and anti-dumping laws. While these bills have considerable support, they

face strong opposition from importers.

Consumer Agency Will Get More Authority

As the flap over tainted imports from China continues to grow, Congress is likely to
expand the authority of and provide more funding for the Consumer Product Safety Commission (CPSC)
in a move that could have some implications for US textile manufacturers. Several bills that would
provide additional funding, expanded authority and staffing have been introduced in both the House
and Senate.

One, introduced by Senate Commerce Committee Chairman Daniel Inouye, D-Hawaii, and
Sen. Mark Pryor, D-Ark., calls for an 11-point program to broaden the scope of the agency and
provide protection for consumers, with particular emphasis on children. In introducing the measure,
Pryor said: “This comprehensive legislation is intended to give the CPSC adequate funding and
authority to keep dangerous toys and other products off our store shelves.” He said the agency has
been in “serious distress” after years of budget cuts and staff reductions.

In addition, Sen. Susan Collins, R-Maine, plans to launch an investigation into the
effectiveness of federal standards for children’s toys and clothing. She said the staff of the
Senate Committee on Homeland Security and Governmental Affairs will investigate whether the CPSC
has adequate authority and resources to do an effective job of checking on the safety of toys and
clothing, particularly those manufactured overseas. She added there already is evidence of some
toxic chemicals in Chinese-exported blankets and clothing. She said the investigation will look
into the “efficiency, economy and effectiveness” of all departments of the government.

A beefed-up and more efficient CPSC could have some benefits for US textile
manufacturers, who have been working for years to get a national flammability standard for filled
bedding products —comforters, mattress pads and pillows — that would preempt a number of state
flammability standards, which today complicate the marketing of those products. They also would
like to see “the right kind” of a mandated standard for upholstered furniture. Action in these
areas has been delayed as a result of limited CPSC staff and the fact they have not been high on
CPSC’s risk agenda. With more funding and staffing, CPSC could move forward on these items and help
the textile industry overcome marketing problems. It also would enable the commission to keep a
closer watch on imports that may contain toxic chemicals.

November/December 2007