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Washington Outlook Archive

Trade Agendas

James A. Morrissey, Washington Correspondent

W hile the Obama administration and the new Congress will be concentrating most of their efforts in the coming months on programs to help the nation's sagging economy, international trade inevitably will become a factor in whatever courses are followed.

US textile and apparel manufacturers see opportunities to address what they consider to be right and wrong with international trade policies in recent years. Retailers and other importers are concerned about what might lead to protectionist policies.

As the presidential election campaign neared its peak last fall, Barack Obama wrote to National Council of Textile Organizations (NCTO) President Cass Johnson outlining his positions on various textile trade issues. Stating his belief that the United States can benefit from international trade, Obama insisted that trade must work for the good of all Americans. He said fair trade policies would mean opening markets for US exports, and that he would insist on strict enforcement of trade remedies affecting illegal subsidized imports. With enforcement a key issue, Obama said it would be necessary to increase the resources of the Office of the US Trade Representative (USTR) to get the job done. He added that he would use tax policies to help US workers and create US jobs, and that he would eliminate tax breaks for companies that encourage outsourcing.

Obama singled out China's currency policies as a major problem that has resulted in a large imbalance "that is not good for the United States, not good for the global economy and likely to create problems for China itself." He said China must change its policies, including its foreign exchange policies, so that it will rely less on exports and more on domestic demand for its growth, and he intends to use "all diplomatic means at my disposal to induce China to make these changes."

Obama also supports a program to monitor Chinese imports following the expiration of all import quotas Dec. 31, 2008. He strongly supports the Berry Amendment, which requires the Defense Department to procure textile products made only in the United States, and inclusion of yarn-forward rules of origin in free trade agreements (FTAs).

What Importers Say
All of this is music to the ears of US textile manufacturers, but it sounded some discordant notes among importers. They fear that President Obama's emphasis on enforcement could lead to protectionist measures that are not in the interests of US consumers, and in the long run do not create job opportunities.

Erik Autor, vice president and international trade counsel for the National Retail Federation, believes the narrow focus on enforcement does not take into consideration the benefits to the overall economy of international trade. He underscores the economic importance of retailers, the hundreds of thousands of jobs they provide, and the benefits they offer consumers by virtue of the utilization of a global supply chain.

Autor says retailers support actions utilizing the dispute mechanism in the World Trade Organization (WTO) to address illegal trade, but they do not want to see US anti-dumping and countervailing duty laws manipulated to block legitimate imports that benefit consumers and the general economy.

At a recent conference sponsored by the US Association of Importers of Textiles and Apparel, speaker after speaker voiced concerns about the direction of trade under the Obama administration and the new Congress. They cited Obama's opposition as a senator to the Colombia and South Korea FTAs and the Central America-Dominican Republic Free Trade Agreement. He also has been highly critical of China's trade policies. The belief is that he will put more emphasis on restricting trade than on liberalizing it.

David Spooner, who served as the Bush administration's chief textile negotiator and as assistant secretary of Commerce of import administration, has voiced a similar concern, but he does not believe protectionism is the way to go. Noting that 95 percent of the US trade deficit is with countries that do not have FTAs with the United States, Spooner says the United States needs to work on more bilateral agreements that would eliminate foreign export subsidies and tariff and non-tariff barriers to US exports.

The Textile Industry's Agenda
Following the election, NCTO's Johnson met with members of the Obama transition team and discussed the textile industry's positions on various issues. Johnson noted that the textile industry has benefited from a number of regional and bilateral FTAs that have enabled manufacturers in the Western Hemisphere to counter Asian competition. However, he warned that China remains a major problem, particularly in view of the removal of all textile and apparel import quotas. He said it is imperative for the Obama administration to move quickly on an import-monitoring program that could lead to initiation of trade-remedy cases if warranted. He believes the USTR in recent years has been too involved in negotiating new trade agreements without paying enough attention to enforcement.

NCTO has recommended that enforcement efforts receive higher priority and that a position of a deputy of compliance and enforcement should be created, and that the USTR should be more aggressive in taking illegal subsidy cases to the WTO. NCTO also believes the chief textile negotiator should be upgraded to ambassadorial rank, which is the practice in many of the countries with which the United States becomes involved in trade negotiations.

The Doha Round
If or when the Doha Round of trade liberalization negotiations ever gets off dead center, NCTO believes the US position regarding textiles needs to be reevaluated. This would mean the textile sector should be negotiated separately from other industrial sectors, and tariff cuts should be reciprocal and should not jeopardize trade preference programs with Western Hemisphere and African nations. The organization also believes there needs to be more emphasis on measures that would encourage greater access for US products in foreign markets.

Industry Opposes Labor Measure
Textile manufacturers are at odds with President Obama on the enactment of the Employee Free Choice Act. That legislation would utilize a card check rather than a secret ballot in union-organizing elections. Under the legislation, the National Labor Relations Board would recognize a union's role as a bargaining agent if a majority of workers vote in favor of organizing. Supporters of the legislation believe it is a way to strengthen worker rights, while its opponents contend it could lead to coercion and eliminate a basic right to secret ballots. Obama's Labor secretary, Hilda Solis, was a sponsor and strong supporter of that legislation when she was in Congress.

Ron Kirk, Obama's choice for USTR, strongly supports free trade, including The North America Free Trade Agreement, but he can be expected to carry out Obama's cautious and conditioned approach to trade agreements, calling for more emphasis on environmental and labor standards.

Capital Spending Gets Boost
The textile industry's efforts to modernize and remain competitive got a shot in the arm under the US government's recently enacted Upland Cotton Economic Adjustment Assistance Program, under which textile manufacturers will receive payments for every pound of raw cotton they process.(See " Cotton Funding Promotes Investment," this issue). Companies receiving payments must use the funds for capital improvements for their property by acquiring, constructing, installing, modernizing, developing, converting or expanding land, plants, buildings, equipment, facilities or machinery.

Anderson Warlick, Parkdale Mills, chairman of the National Council of Textile Organizations, said funds disbursed under the program "can be an important component of our continued efforts to modernize our facilities and maintain competitiveness."

It is estimated that the program could generate some $365 million or more over a five-year period for capital spending.

January/February 2009