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WASHINGTON — Taxes and China.
Those are the two main concerns for fashion executives following the three presidential debates between President Barack Obama and Republican challenger Mitt Romney, and as the presidential election race enters its final 13 days, the debates saw clear differences between the two candidates in their economic plans as well as on issues including trade, tax reform and the role of government.
Global trade figured in all three debates and the candidates’ views differed on how it can be used to boost the U.S. economy and create jobs.
China has been a flash point in the fashion industry, where importers remain concerned about Romney’s hard-line stance while textile executives, who feel that China is putting them at a competitive disadvantage, welcome it.
“From a trade policy perspective…it was very discouraging to hear him take such a protectionist view and seemingly a view he believes in because it is part of his five-part [economic] plan,” said Julia Hughes, president of the U.S. Association of Importers of Textiles & Apparel. “Candidate Romney continued to talk about his desire to name China a currency manipulator…and mentioned tariffs, as well. That continues to raise concern among people in the industry that he is out of touch with what is really going on today, which is that the currency differential has really shifted and there really have been a lot of changes in currency decisions since the issue first got a lot of play.”
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Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association, said, “What we’re looking for in a candidate is someone who understands the nuances of free trade and the importance of opening up markets around the world and allowing U.S. goods not only to be exported to these markets, but to be made offshore and imported to the United States. That is an enormous issue.”
Burke said he is concerned when he hears both candidates “beating up” on China, especially when Romney said he would declare China a currency manipulator his first day in office, whereas “China has actually taken care of its currency.”
“The Chinese government has smartly addressed the issue,” Burke said. “The responsible politician needs to say that the Chinese government has addressed the issue and that the currency issue is not the problem it was two years ago.”
He noted that both candidates brought up the issue of dealing with Chinese counterfeiting, which is a high priority for the AAFA.
“President Obama mentioned the unfair trade cases he has brought against China, and we agree with that,” Burke said. “The access issue with China is a big one for us.”
Cass Johnson, president of the National Council of Textile Organizations, said, “[Romney] is outlining a more aggressive strategy and the key is not necessarily labeling China a currency manipulator, but imposing countervailing tariffs on imports. That is the hammer.”
Johnson said if Romney wins the election, industry executives believe cracking down on China’s currency will be the “most important deliverable from what he is offering to do.”
Workers United, the main textile and apparel union, takes a more nuanced position on China’s currency and supports Obama’s strategy of diplomacy.
“I think you have to treat China as a country and the people of China with a great deal of respect,” said Noel Beasley, president of Workers United. “Branding them in the way Gov. Romney attempts to brand them and saying he would brand them on the first day of his administration portrays the people of China as the enemies of American working people, which I don’t believe. I think Gov. Romney is running on a very simplistic position on China, hoping it will play to the broad voting public. I think President Obama has a more complicated task of trying to maintain diplomatic relations with China at the same time he is trying to push a progressive agenda.”
Beasley said he would have liked to have seen more of discussion on the role of unions in the economy during the debates, as well as the plight of HMX Group, the maker of such labels as Hart Shaffner Marx and Hickey Freeman, which employs union workers and filed for bankruptcy protection on Friday.
“They [Obama and Romney] wear the suits those workers made and we are glad that they do,” he said. “I would like to know that they are on the side of saving those jobs.”
Tax reform in conjunction with deficit reduction also figured prominently in the debates and is a key issue for the fashion industry. Obama and Romney have both said they would lower the corporate tax rate, but the most significant difference lies in their approach to extending the expiring Bush era tax cuts.
Obama has touted the elimination of tax cuts for families with incomes above $250,000 and individuals with incomes above $200,000 as a way to reduce the deficit and help the middle class, while Romney has championed extending tax cuts for everyone, including high income earners.
“I think both President Obama and Gov. Romney have been supportive of the framework of tax reform,” said David French, senior vice president for government relations at the National Retail Federation. “Both have acknowledged it is an important priority next year and…that the corporate tax rate is holding us back as a country.”
French said there are “credible arguments” to be made that many small businesses that file under the personal income tax rate would see their taxes raised under Obama, adding that “it stifles those business opportunities to retain their earnings and reinvesting business if you raise the personal tax rate in a soft economy.”
Bill Hughes, senior vice president for government relations at the Retail Industry Leaders Association, said, “Gov. Romney focuses on lower rates for small business entrepreneurs…as a way to get them investing and growing the economy and jobs. President Obama indicates he is also for helping small businesses, but he believes the wealthy have to pay their fair share and that [raising their taxes] would…contribute to more fairness in the middle class.”
Burke said, “No matter what the solution is, in order for our industry to thrive, people have to be confident about their jobs and that they have money in their pocket. If they don’t have disposable income in their pocket and they’re afraid of where they’re going to be, then we’re not going to be able to sell new clothes and shoes. Tax policies implemented going forward are going to have a direct impact on the overall economy.”