For Textiles, 2010 Could Be A Busy Year In Washington

ith congressional mid-term elections looming later this year, look for increasing
emphasis in Washington to be placed on job creation. Congress and the Obama administration will be
casting a wide net during the coming year to find ways to put Americans back to work. The
job-creating potential of international trade will be one area of particular interest to textile
and apparel manufacturers. Administration trade officials, who rarely mention the impact of
imports, place a good deal of emphasis on the need for export promotion, while members of Congress
stress the need to address both imports and exports – and, in some cases, major trade reform.

For many U.S. manufacturers, one of the most immediate priorities is the extension of
duty-free treatment to a wide range of imported components  that are not produced in this
country. Textile manufacturers have a laundry list of such components that includes such things as
acrylic and rayon yarns, and animal hair and other noncompetitive products. Congress failed to act
on the miscellaneous tariff bill during last year’s session, and, as a result, the existing duty
suspensions expired December 31. In the waning hours of last year’s session of Congress, the bill
was blocked by Sen. Debbie Stabenow, D-Mich., who said the basic purpose of the tariff concession
legislation was being subverted by the inclusion of finished products that are made in this
country. While U.S. textile manufacturers agree in principle with what she was doing, they are
concerned that her action raises the costs of imported components, and that will make their
products less competitive until duties are once again suspended. In view of the overall support for
the tariff concessions, Congress could act on the bill fairly soon.

Trade Preference Agreements

Congress and the Obama administration are expected to look at ways to improve and revise the
many trade preference programs (TPAs) that the United States has with a number of countries. The
House Trade Subcommittee is soliciting comments on its plans to assess the operation, impact and
future course of TPAs. The United States currently has regional TPAs with countries in Central
America, the Caribbean, Africa and Asia; and also with Canada and Mexico. In addition, it has a
General System of Preferences (GSP) that covers 131 countries.

The National Retail Federation (NRF) has proposed a 10-year extension of the GSP special
duty treatment and has recommended for the first time that textiles, apparel and footwear be
included, a move that is opposed by U.S. textile manufacturers. NRF and other importers of textiles
and apparel believe extending or making permanent the GSP authorization would make long-term
planning easier.

A majority of House Democrats, 129, and four Republicans have signed on to legislation
calling for a major review and sweeping changes in both existing and future TPAs. A similar bill is
pending in the Senate. Both bills place emphasis on economic results, enforcement and compliance;
and set out additional criteria for such things as overseas human and labor rights, environmental
considerations, national security and product safety. The legislation would give Congress much more
involvement and oversight in connection with trade agreements by replacing the president’s current
Trade Promotion Authority, known as “fast track,” with a requirement for the administration to
certify to Congress, in advance of any agreement, that a proposed pact meets the mandatory
negotiating objectives in the bill. And it would require periodic performance reports.

The outlook for trade agreements with Colombia and South Korea, negotiated by the Bush
administration and awaiting congressional ratification, remains in doubt. President Barack Obama
has made strong appeals for both to be ratified. Some efforts to resolve problems with the Colombia
pact have been made recently, but they may not have gone far enough yet to satisfy Congress.
Textile manufacturers support the Colombian pact because it has a strict rule of origin and offers
export opportunities for yarns and fabric. Opposition to the South Korean agreement is much
stronger. U.S. textile manufacturers flatly oppose it, as do U.S. automobile and agriculture
interests, which are concerned about lack of market access.

Customs Reform

Chairman Max Baucus, D-Mont., and Ranking Republican Charles Grassley, R-Iowa, of the Senate
Finance Committee have introduced customs reform legislation, which they say is designed to promote
legitimate trade but crack down on illegal shipments into the United States. They contend that U.S.
Customs and Border Protection in recent years has concentrated most of its resources on the
agency’s national security mission at the expense of trade. Their bill calls on Customs to
prioritize customs enforcement and at the same time devote more resources to facilitating
legitimate trade. It provides for creation of two high-level positions whose responsibilities will
be to upgrade enforcement and trade facilitation. The National Council of Textile Organizations,
which for years has been pressing for more resources to be devoted to cracking down on illegal
trade, supports the bill, pointing out that the textile sector attracts more fraud than any other
industrial product sector. NRF, whose members are the largest importers of textiles and apparel,
also supports the legislation, saying it believes the bill “strikes a balance” between the agency’s
trade and homeland security duties.

China Trade Issues

Although the U.S. trade deficit with China remains a major issue, not many people in
Washington or Beijing see much happening here. Leaders of both countries are strongly committed to
avoiding what could be construed as protectionist measures. Members of Congress and lobbyists for
textiles and other import-impacted industries repeatedly point to what they see as China’s currency
manipulation and other illegal subsidies, and they have introduced legislation to address those

The Obama administration for the most part is opposed to going the legislative route. The
U.S. government has made some use of its trade remedy laws by imposing tariffs on Chinese tires and
steel pipes, and other cases are pending. Lobbyists for textile manufacturers believe their best
course for relief most likely is to use anti-dumping and countervailing duty laws, and they are
gathering data and exploring possibilities in that area of relief.

The Obama administration has taken the position that the best course for dealing with Chinese
trade issues is through diplomatic engagements rather than legislation or other stronger tactics.
The administration believes China has been a strong partner in efforts to overcome the worldwide
economic crisis, and it is not about to pick a fight.

Global Trade Agreements

The Obama administration has announced plans to move forward with a Trans-Pacific Strategic
Economic Partnership Agreement with Australia, Brunei, Chile, New Zealand, Peru, Singapore and
Vietnam. Though discussions are just beginning and any agreement has a long way to go, U.S. textile
manufacturers are up in arms about including Vietnam, which they view as “another China.” They say
Vietnam has a nonmarket economy that manipulates its currency, relies heavily on exports for growth
and has a rising trade deficit with the United States. While admitting Vietnam could be a problem,
U.S. Trade Representative Ron Kirk says he hopes Vietnam could be brought into a “high standard”

On another front, leaders of the World Trade Organization are making what may prove to be a
last-gasp effort to revive the Doha Round of trade liberalization negotiations in the coming year.
The U.S. government remains committed to it, but the developing and developed countries remain far
apart, and the outlook for a successful conclusion is anything but bright.

Consumer Product Regulation

Congress seems committed to giving a rejuvenated Consumer Product Safety Commission (CPSC)
additional funds and staffers to crack down on unsafe products, particularly those intended for use
by children. It has authorized $118.2 million for the coming fiscal year – an increase from $105.4
million authorized in 2009 – and has promised annual increases for the next five years. Most of the
CPSC’s additional resources will be directed at toys and other products used by children, but it is
possible the commission later this year could act on a pending national upholstered furniture
flammability standard. In addition, the commission could continue the process for writing a
flammability standard for bedding that has been under consideration for some time.

January/February 2010