WASHINGTON — The House and Senate will reconvene on Tuesday facing key decisions on trade, immigration, health care and taxes that are of vital importance to the retail, apparel and textile industries.

The legislative agenda, however, may be stymied in a partisan atmosphere preoccupied with the Congressional lobbying scandal and midterm elections.

Republican leaders are trying to cope with the federal investigation of GOP lobbyist Jack Abramoff and his ties to powerful members of Congress such as Rep. Tom DeLay (R., Tex.), who was forced to step down as House Majority Leader because of allegations he conspired to launder campaign funds. Abramoff has pleaded guilty to felony conspiracy and fraud charges for bribing public officials. The investigation is said to be focusing on several members of Congress and officials in the executive branch.

In addition, the Congressional calendar will be truncated because lawmakers will leave Washington in October to campaign for the midterm elections, as Republicans battle to maintain majorities in the House and Senate.

"It is going to be difficult to determine what is on the Congressional agenda, since they will be so focused on lobbying reform and leadership elections in the House, which will slow down the legislative agenda," said Paul Kelly, senior vice president, government affairs, of the Retail Industry Leaders Association. "It certainly adds a highly charged political issue to the agenda — that of lobbying reform — and I expect them to pass something because both sides feel they need to insulate themselves from the Abramoff affair."

President Bush's domestic agenda met roadblocks in 2005, forcing him to shelve major initiatives such as overhauls of the federal tax code and Social Security. Escalating defense spending associated with the Iraq War, a ballooning deficit that some experts say might hit $400 billion this year and the fallout from the lobbying inquiry could impede Bush's plans. The President is to give his State of the Union address Tuesday night.

"My guess is the State of the Union will focus on big-picture things like tax reform and making tax cuts permanent, and it will be interesting to see if he raises anything about health care, which is a looming subject, and whether he reiterates his Social Security initiative," said Norman J. Ornstein, resident scholar at the American Enterprise Institute. "But the fact is we have a Congress that is increasingly uneasy and preoccupied with the fallout from the scandals and they have to turn their attention to some reform issues, not out of choice but out of necessity…and they will have to sort out a general approach to legislation."Steve Pfister, vice president of government affairs at the National Retail Federation, said GOP infighting may create a different political calculus.

"You could have a situation where moderate Republicans and conservative Democrats really act as the fulcrum in the House and the voting bloc to pass anything with significance," Pfister said.

While legislation affecting consumer and business spending is a focus for the industry, the direction of trade policy — set by the White House but shaped by Congress in approving and amending legislation — is a high priority.

One of the biggest items on the trade agenda is the global trade talks among the 149 member countries of the World Trade Organization, which are aimed at reaching an agreement to reduce and eliminate tariffs on thousands of products. The industry is monitoring how trade negotiators proceed with a formula to cut tariffs on textiles and apparel, the scope of special treatment for the so-called Least Developed Countries and Developing Countries and whether WTO members will agree to a separate textile sectorial.

"A significant part of our work this year will be ... helping members of Congress understand what [has been proposed]," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition. "So when they go back to their districts and say they are fighting for open markets and reciprocal trade to get U.S. products into India and China and other key markets…they understand there is a text here that, unless drastically changed, will basically create an unequal environment for the U.S."

Importers are pressing for a complete elimination of textile and apparel tariffs and will work to block attempts by the textile industry to weaken ambitious liberalization.

"Our goal is to look for the broadest possible benefits for the LDCs and not try to remove benefits for products those countries can actually make," said Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles and Apparel.

The first test of GOP leadership in the House could come quickly, as lawmakers are expected to take up a budget-reduction package. The industry is awaiting the vote on the bill, which would repeal a trade law that compensates U.S. companies hurt by undervalued and subsidized imports and eliminate a cotton subsidy program. Vice President Dick Cheney cast a vote in the Senate to break a 50-50 tie before Congress adjourned in December. The House must vote a second time on the legislation because the Senate removed a few small health-care related provisions.Perhaps the most immediate trade issue for the fashion industry is implementation of the Central American Free Trade Agreement and the textile and apparel side deals crafted outside of the accord. The administration made commitments to House textile-state lawmakers to secure enough votes for passage, including one that seeks to preserve pocketing and lining business in the U.S. and another intended to protect U.S. cotton and man-made fiber trouser business in Nicaragua.

"Assuming the [six CAFTA] countries implement this year, I think this is something Congress will have to address, particularly as other trade agreements come down the pike," said Missy Branson, senior vice president of the National Council of Textile Organizations.

Sen. Chuck Grassley (R., Iowa), chairman of the Senate Finance Committee, a key supporter of CAFTA, is urging delay of implementation until all countries accept the U.S. meat inspection system. Grassley sent a letter last week to U.S. Trade Representative Rob Portman expressing concern that some of the CAFTA countries "are reluctant" to accept the "import eligibility of all USDA-approved meatpacking facilities."

Negotiations over Vietnam's accession to the WTO are also being closely watched. Importers are awaiting the country's entry into the quota-free global trading arena. Vietnam operates under a textile bilateral agreement with the U.S. that restrains several categories of textiles and apparel. The textile industry is pressing the White House to negotiate a special safeguard with Vietnam, similar to one with China, that could keep apparel and textiles under quota after Vietnam joins the WTO.

WTO accession agreements are also being negotiated with Russia, Ukraine and Kazakhstan, and Congress could vote on legislation this year giving each country Permanent Normal Trade Relations status — bringing tariffs in line with other U.S. trading partners and clearing the way for them to join the WTO.

The November elections could generate Congressional pressure to take a more aggressive stance against China, especially if the economy weakens. A bill introduced by Sens. Charles Schumer (D., N.Y.) and Lindsey Graham (R., S.C.) that would impose a 27.5 percent tariff on all imports from China if it does not revalue its currency within a set time frame appears to have the most traction.One of the most critical issues for retailers is a move toward mandated health coverage at the state level. They are gearing up to lobby against an AFL-CIO-backed initiative to pursue legislation in 30 states that would force employers to provide a specific level of health care coverage.

The first test came in Maryland, where the state legislature recently overrode the governor's veto of a bill that would require all employers with 10,000 or more employees — only Wal-Mart in that state's case — to spend as much as 8 percent of their total wages paid on employee health benefits.

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