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Washington Outlook Archive
James A. Morrissey, Washington Correspondent

The Good, The Bad And The Ugly Of 2003

James A. Morrissey, Washington Correspondent

N o matter how you look at it, 2003 was not a good year for the US textile industry — and for that matter, importers of textiles and clothing aren’t particularly excited about what happened either.

For openers, the domestic industry lost upwards of 42,000 jobs as more than 40 plants closed, imports of textiles and apparel were up 15 percent to new record levels, and some of the biggest names in the industry went in and out of bankruptcy as they battled to survive in a vastly changed world of textile trade and commerce.

It was a year of heavy jockeying as governments and companies prepared for the planned removal of all textile and apparel quotas by the end of 2004. Back in January, the industry was shocked when US Trade Representative (USTR) Robert B. Zoellick put forth what he said was an “ ambitious new proposal” for World Trade Organization (WTO) members to eliminate all tariffs on consumer and industrial products by 2015. That hit US textile manufacturers below the belt, as they are counting on tariffs to provide some protection from imports after the quotas are removed. The proposal was enthusiastically endorsed by US importing interests, but the number-two ranking official at the WTO dismissed the proposal as “intellectual theory, but not realistic.”

Throughout the year, the administration vigorously pursued efforts to negotiate bilateral and regional free trade agreements. It concluded agreements with Chile, Singapore and Vietnam; and held a number of negotiations on a Central America Free Trade Agreement with Nicaragua, Guatemala, Costa Rica, El Salvador and Honduras. Trade officials also were busy laying the groundwork for a much broader Free Trade Area of the Americas.

In each of these negotiations, domestic manufacturers and importers are at odds over the rules of origin governing which products can enjoy duty- and quota-free access to the US market. US manufacturers want strict yarn-forward rules of origin that require products to be manufactured from yarn and fabric made in the participating countries. They want no tariff preference levels (TPLs) that permit a given amount of inputs from non-participating countries. On the other hand, importers don’t like the yarn-forward rule, and they want to be able to make broad use of TPLs. Their goal is to have flexibility in their sourcing. So far, there have been mixed results for both sides.

Domestic manufacturers have been successful thus far in establishing the yarn-forward rule of origin concept, but most of the pacts have permitted TPLs. You can count on these issues to be contested every inch of the way as free trade pact negotiations move forward next year.

Bush Administration Makes Promises Of Aid To Industry
The Bush administration’s highly touted seven-point program to “improve conditions in the US textile industry” has run into a barrage of criticism from the domestic industry and its supporters in Congress. This year’s annual progress report was blasted as a “complete failure long on promises and short on results.” Even the Commerce Department’s top textile trade official, James C. Leonard, admitted accomplishments were “fairly small but positive.”

The China Threat
China became the number-one exporter of textiles and apparel to the United States. Other industries joined textiles in charging that China’s closed markets, currency manipulation and other types of subsidies were creating major problems for them as well. Back in February, the USTR sent Congress a tepid report that said China was not living up to its commitments that were a condition of its acceptance into the WTO. However, Zoellick didn’t seem too alarmed when he said, despite some shortcomings, “most private sector representatives remain enthusiastic about the actual and potential benefits for the US as a result of China’s WTO membership.” That tune had changed noticeably by October, when Secretary of Commerce Donald L. Evans warned that China’s failure to open its markets and to stop subsidizing its industries is fueling protectionist sentiment as US manufacturers are forced to compete on an “unlevel playing field.”

The American Textile Manufacturers Institute was much more strident in its appraisal of the Chinese threat. In a report issued in July, it warned that if present trends continue, China will take over two-thirds of the US textile market within 24 months, and the result will be “the largest wave of job losses and plant closings in history.”

In November, US textile manufacturers won what they believe could be a significant victory when the Commerce Department agreed to begin negotiations with China aimed at imposing import quotas on knit fabrics, dressing gowns and bras where the industry claims “market disruption.”

Predictably, importers of textiles and apparel saw things in a different light. Laura Jones, the outspoken executive director of the US Association of Importers of Textiles and Apparel, said the domestic industry has failed to provide factual evidence that Chinese imports are disrupting markets and displacing American jobs. She said instead of seeking more protection, the industry should be making preparations for the removal of textile and apparel quotas and the time when retailers and their suppliers base their buying decisions on “where they can get quality goods on time and at the right price.” Importers say the time is long past when the textile industry should be relying on “failed protectionism.” In October, the four major trade associations representing retailers and importers sent the White House a proposed “Textile Revitalization Act” proposing tax incentives and other government assistance to help make the US textile industry competitive, but textile manufacturers said the proposal falls far short of what is needed.

The Textile Lobby
There was considerable change among the various organizations representing the domestic textile industry and importers in Washington. Textile industry leaders took some major steps toward their long-sought goal of “speaking with one voice.” At the same time, retailers and importers have beefed up their Washington involvement. Big-name retailers such as the Gap, JCPenney, Sears, Target and others weighed in heavily on textile issues such as China, free trade agreement negotiations and the Vietnam bilateral.

At least on the surface, the textile industry came closer to presenting a united front when in June six major fiber, textile and apparel associations — which have had their differences in the past — formed a new coalition to seek government relief from imports. Later in the year, that group was augmented by 10 more associations and the Union of Needletrades, Industrial and Textile Employees. And then, in October most of the major textile and fiber associations joined a much broader manufacturing lobbying group — the Free Trade for America Coalition — that will conduct a nationwide education and lobbying effort focusing on the impact of current US trade policies and how they are wiping out manufacturing jobs. The two coalitions have announced major grassroots efforts to mobilize workers and make textile trade an issue in next year’s congressional and presidential elections.

Government Regulations
On the regulatory front, the textile industry certainly fared much better than it did in the international trade arena. For years, the Labor Department has been working around the fringes of a mandatory ergonomics standard to address repetitive motion injuries. In February, the Occupational Safety and Health Administration put off for at least one year reporting requirements that the textile industry felt were cumbersome and expensive. The Labor Department also issued new procedures for providing adjustment assistance to workers who lose their jobs as a result of imports. The expanded rules now include various types of training, job search and relocation allowances, financial assistance while enrolled in training, and a tax credit for health insurance.

In October, the Consumer Product Safety Commission voted unanimously to expand its upholstered fabric flammability standard to address the risk of residential fires caused by cigarettes and small open-flame sources such as candles, lighters and matches. Although upholstered fabric manufacturers have sought such a standard for years, the regulation of cigarettes had been a no-no. The proposal still has to go through a rather long standard-writing process, but the commission’s action was welcome news to fabric manufacturers.

With the deadline for removal of quotas looming and the WTO engaged in tariff-cutting negotiations, the US textile industry is in for an equally bumpy road in 2004 — a road that will shape the very future of the industry.

December 2003



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