By  on October 25, 2006

WASHINGTON — Importers are worried the Bush administration's plan to review apparel and textile imports from Vietnam and possibly initiate antidumping cases will lead to trade disruptions.

Policy changes can have a major impact on companies. The Commerce Department initiated safeguard quotas against China last year, interrupting trade flow and vexing manufacturers trying to bring goods into the country.

"If the safeguards were the devil they knew, this is the devil they don't know," said Stephen Lamar, senior vice president of the American Apparel & Footwear Association.

Though different in scale and method, the cases of Vietnam and China are instances in which U.S. textile manufacturers won protections against non-market economies seeking to join the World Trade Organization. China agreed to safeguard quotas when it joined the WTO in 2001, but the system created uncertainty as importers didn't know when quotas would be applied or fill up. This led to a U.S.-China deal setting fresh quotas through 2008.

Vietnam hopes to join the 149-member WTO this fall. However, a deal the Bush administration made with Sens. Lindsey Graham (R., S.C.) and Elizabeth Dole (R., N.C.), who sought to protect manufacturers in their states, might lead to more headaches for importers. Seeking to unblock pending legislation normalizing trade relations with Vietnam, U.S. Trade Rep. Susan Schwab and Commerce Secretary Carlos Gutierrez agreed to an apparel and textile monitoring program once Vietnam joins the WTO. If biannual reviews find imports that are sold for less than fair value, the administration could initiate antidumping cases.

The results of the first review, which would continue through the Bush administration, are expected six months after Vietnam joins the WTO.

Senior fashion executives met with Schwab and Gutierrez Tuesday to air their views on the new policy.

"We want to be open and transparent, and we offered them the opportunity to feed into any type of monitoring program that we create,'' said a U.S. trade official, speaking on condition of anonymity. "Some companies are interested in talking to us and interested in being part of that process, others have different evaluations."

The government is "stepping in as the plaintiff on behalf of the [domestic] textile or apparel industry in terms of initiating a case," said Cass Johnson, president of the National Council of Textile Organizations.Domestic textile producers have shied away from using the antidumping laws, since they lack the standing necessary to bring the expensive cases against apparel imports. Antidumping cases, which apply to individual goods, can result in punitive tariffs against the offending country.

For a case to proceed, the administration would have to find that dumping — when an exporting country sells goods at unfairly low prices — occurred. In addition, the domestic industry would have to prove "material injury." The U.S. International Trade Commission would ultimately rule on the case.

"This deals with illegal, unfair activity, and if you're not doing anything wrong, this letter or this activity that the government is talking about is beyond the reach of what you're doing," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.

Erik Autor, vice president and international trade counsel for the National Retail Federation, countered, "Every time somebody wants a political deal cut on getting protectionist measures through the trade remedies law, it's couched in terms of enforcing U.S. law, and it's not [in this case] because it's being applied on a very ad hoc basis, driven by political concerns for a handful of special interests. This is going to seriously chill business in Vietnam. It creates a more heightened atmosphere of unpredictability."

The antidumping program should be a useful trial balloon for the textile groups that will gauge the impact a similar move might have on China when its quotas expire at the end of 2008.

"This is the prelude, this is a test for China," said Julia Hughes, senior vice president of international trade at the U.S. Association of Importers of Textiles & Apparel.

The impact of possible antidumping cases on imports from Vietnam is unclear, but growth will likely be slowed. Over the past year, the country's imports jumped 21.7 percent to 1.1 billion square meter equivalents, capturing 2.2 percent of the market.

"People feel a bit betrayed by the administration for making this commitment," Hughes said. "Companies developed partnerships there, and they feel the administration doesn't understand the full impact."

Importers question how the initiating process will work, including what will constitute evidence of material injury. There are also questions on how the administration will determine that dumping has occurred.The government says it has simply moved to enforce existing laws.

"To the extent that there is a change of policy, it was a change in policy that was decided back in 1994 when we decided to end the quota system and realign textiles and apparel trade with the regular rules of trade," said the U.S. trade official. "Dumping and countervailing duty rules are the fundamental rules of the road for trade."

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