Textile Firms Seek Help With Exports

Editor’s note: James A. Morrissey Sr., 81, died peacefully in his sleep Saturday,
Sept. 4, 2010, at his home in Potomac Falls, Va. He is survived by his wife of 51 years, Constance
M. Morrissey; four children, James A. Morrissey Jr., Erin M. Ingrisano, Patrick E. Morrissey and
Michael C. Morrissey; 10 grandchildren; and sister, Marilyn Roberts. Morrissey was a long-time
contributor to
Textile World, holding the position of Washington correspondent following a
28-year career as director of communications for the American Textile Manufacturers Institute. He
also is a member of the Public Relations Society of America Hall of Fame.

Morrissey will be greatly missed by
TW staff and the readers of his bimonthly “Washington Outlook” column and his
weekly online reports from Washington. If you have remembrances of his contributions to the textile
industry that you would like to share with TW, please email your thoughts to
Morrissey@TextileWorld.com.

W
hile U.S. textile and apparel companies are setting their sights on increasing exports,
it has become clear they will not get very far without more support from governments here and
abroad. The Obama administration is committed to doubling U.S. exports over the next five years,
and while that goal is laudable, it is easier said than done. As textile and apparel imports
continue to rise, many companies see exports as the only route to survival.

With more than $12 billion in exports annually, the U.S. textile industry already is the
third-largest textile exporter globally. Because most textile and apparel manufacturers are
considered small to medium-sized companies, many lack resources to move in a big way into overseas
markets and significantly increase their exports. However, yarn and fabric makers have experienced
considerable success doing business in countries with which the United States has preferential
trade agreements, such as the North America Free Trade Agreement (NAFTA) and the Central
America-Dominican Republic Free Trade Agreement (CAFTA-DR). That arena is where future
opportunities lie.

Assistance Sought


U.S textile makers have urged the government to pave the way for more exportation. Measures
include: working with other nations to reduce trade barriers; calling on other governments to
eliminate subsidies, including currency manipulation, to their manufacturers; increasing Customs
enforcement, particularly with regard to preferential trade agreements; and making credit and other
financing available to companies that want to export their products. In addition to these steps,
U.S. apparel makers support ratification of the Panama, Colombia and South Korea free trade
agreements (FTAs), which they say would provide access to 100 million new customers. They also call
for successful conclusion of the Doha Round of trade liberalization negotiations and negotiation of
a Trans-Pacific Partnership.

Financial Support


Access to financing has become both an immediate and a long-range need for exporters. In a
letter to U.S. Trade Representative (USTR) Ron Kirk, Cass Johnson, president of the National
Council of Textile Organizations (NCTO), pointed out that U.S. textile makers “have experienced
tremendous difficulty” in securing financing through private lenders as well as from the
Export/Import Bank (Ex-Im Bank). He said the problem is compounded by the fact that many overseas
countries offer their exporting industries cheaper financing, giving them a competitive advantage.
As private financing is expensive or not available at all, manufacturers have turned to the Ex-Im
Bank, which provides credit guarantees, credit insurance and financing to U.S. exporters. This,
however, has turned out to be an exercise in futility in many cases.

The problem is with the Ex-Im Bank’s criteria for assessing risk. When offering credit
insurance, the bank affixes a risk based on the country receiving the exports, and the bulk of U.S.
textile exports go to NAFTA and CAFTA-DR nations — many of which are considered high-risk. This
results in costs associated with credit insurance or guarantees that are prohibitively high for
textile manufacturers.

Gail Strickler, assistant USTR for textiles, said the Office of the USTR is well aware of
this problem and is trying to resolve it. She told Textile World her office has been working to
have risk assessment based on the credit record of the ultimate U.S. customer or the U.S. exporter
rather than on the credit assessment of the importing country. While many of the NAFTA and CAFTA-DR
countries are considered credit risks, the ultimate consumers of textiles and clothing entering the
United States under preferential programs — such as Walmart, Sears, and JCPenney — pay their
bills and are not viewed as credit risks.

Strickler said the USTR has been working for months with the Ex-Im Bank and private factors
to urge them to reassess their risk criteria and make the financing of exports less expensive. She
noted that on a number of occasions, her office has been able to step in and help companies get
better financing, and while there has been some success, she said, “we still have a long way to
go.” U.S. textile manufacturers have seen little movement in this regard, but they consider
financing problems a major deterrent to exporting, and they feel more needs to be done. Strickler
is urging companies experiencing financing problems to contact her office to seek assistance.

Johnson told the USTR that if NCTO’s recommendations in connection with the National Export
Initiative are implemented, the goal of increasing exports from today’s $12 billion to $24 billion
“is within reach.”

Korea FTA Reopened


Because the two most powerful members of Congress in terms of trade issues have problems
with the United States/South Korea FTA (KORUS), the Obama administration has been forced to reopen
negotiations, and that is providing an opening for U.S. textile lobbyists to seek modifications in
the pact, which they say in its present form could have “a profound negative effect” on textile and
apparel jobs. The FTA was signed by the Bush administration in June 2007, but Congress has refused
to ratify it. Senate Finance Committee Chairman Max Baucus from the beef-producing state of Montana
and Sander Levin, House Ways and Means Committee chairman from Michigan, the heart of automobile
manufacturing, have problems with how the agreement treats U.S. beef exports and automobile imports
and market access.

Five textile industry associations and the Service Employees International Union have
written to Kirk calling for major changes in the tariff phase-out schedule, Customs enforcement and
the rule of origin. The Congressional Textile Caucus has raised the same issues, saying the current
agreement will place domestic manufacturers at “a distinct disadvantage.” Its members call for the
United States to revisit the agreement and revise the textile provisions, which they say could
“cause great harm to the domestic industry.”

Kirk said he hopes outstanding issues can be resolved by President Barack Obama’s scheduled
trip to South Korea in November, but he told a South Korean newspaper it is unlikely that any
sections of the agreement other than beef and autos will be reopened. That’s not likely to deter
textile manufacturers and their supporters in Congress from pressing for reforms in the textile
sections. While some issues may be resolved by Obama’s meetings in South Korea, legislation
enacting the agreement into law, from a practical standpoint, could not be passed until next year.

Possible Action On Currency Issue


As the November election draws closer and members of Congress are anxious to show they are
doing something to create jobs, there is an increasing possibility that Congress will act on
Chinese currency manipulation. Up to this point, currency reform legislation pending in Congress
has served to put pressure on the Obama administration and the Chinese government to permit the
Chinese renminbi to appreciate against other currencies, but the tentative steps taken by the
Chinese government to date have not impressed members of Congress. The legislation would declare
currency manipulation an unfair practice and permit use of anti-dumping and countervailing duty
laws to offset what the legislation’s supporters see as an illegal subsidy. The call for
congressional action was intensified by a Department of Commerce decision saying countervailing
duties could not be viewed as an illegal subsidy in an aluminum industry case.

September/October 2010