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Industry Parses Candidates’ Trade Agendas

U.S. trade policy is approaching a crossroads and the apparel industry will face the fallout of this presidential election year.

WASHINGTON — U.S. trade policy is approaching a crossroads and the apparel industry will face the fallout of this presidential election year.

This story first appeared in the July 8, 2008 issue of WWD.  Subscribe Today.

The presumptive nominees, Sens. Barack Obama (D., Ill.) and John McCain (R., Ariz.), offer different positions. McCain supports an aggressive free trade agenda — touting its benefits even in hard-hit industrial states such as Ohio and Michigan — and more agreements such as the North America Free Trade Agreement and the Central America Free Trade Agreement.

Obama has called for a review and stronger enforcement of existing trade agreements. He threatened to force Canada and Mexico back to the negotiating table to add stronger environmental and labor protections in NAFTA. Obama hasn’t ruled out negotiating similar accords, but he opposes pending trade deals with South Korea and Colombia. Regarding South Korea, he objects to the country’s trade barriers to U.S. auto exports. In Colombia, Obama has cited the assassinations of union activists.

McCain supports both agreements, even traveling to Colombia last week to emphasize the importance of strong trade relations with an ally.

Apparel executives, who imported $95.6 billion in goods in the last year, will be weighing how the policies of each will impact their business.

Where Obama has called for a “crackdown” on China’s currency manipulation and more scrutiny of contaminated Chinese imports, McCain has not addressed the issue on the campaign trail.

Neither campaign responded to requests for comment on trade, including the strategy for dealing with China.

One of the biggest issues for the fashion industry is how a new administration will address apparel imports from China and Vietnam next year. A three-year bilateral quota agreement with China that restricts 34 categories of apparel and textile imports is set to expire at the end of the year. A Vietnam apparel monitoring program, administered by the Commerce Department to evaluate whether goods were being sold in the U.S. below market value or the cost of manufacturing, known as dumping, will expire in mid-January with the end of the Bush administration.

The U.S. textile industry recently worked with members of a House committee to include language in a non-binding report accompanying a spending bill that urges the administration to extend the Vietnam monitoring program and expand it to include China. The House spending bill and report face many hurdles this year. If the spending bills are not completed this year, the next Congress will have to draft and introduce new measures next year.

The textile industry plans to step up the pressure on a new administration to confront China on alleged subsidies and currency manipulation and a new president will likely have to face the issue head-on. Apparel importers said they plan to oppose punitive action against China.

“The question will be how will the candidates — Obama and McCain — interpret this report, which only comes from the House Appropriations Committee and not from the Senate Appropriations Committee,” said Stephen Lamar, executive vice president of the American Apparel & Footwear Association. “It’s an interesting shot across the bow for sure and it clearly shows the continued engagement of the textile industry in trying to raise the awareness and policy perception of this issue but it does not constitute an endorsement of continuing the Vietnam import program. An administration can do with that language, which is nonbinding, what it wants to do.”

Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, said the domestic groups and the UNITE HERE union have been working to secure a specific commitment from the Obama and McCain campaigns on restricting or monitoring imports from China.

“There is a trade-off,” between the two presidential candidates, Tantillo said. “With Obama there is greater hope that he might actually adopt or consider what we would define as proactive remedies. With McCain, the best hope is that you have a split environment [on trade] and the lack of bipartisanship creates a stalemate.”

Cass Johnson, president of the National Council of Textile Organizations, pointed to Obama’s criticism of China and its trade practices on the campaign trail as a positive.

Obama has cosigned a bill in the Senate, introduced by Sens. Debbie Stabenow (D., Mich.) and Jim Bunning (R, Ky.), which would essentially allow currency manipulation to be considered a subsidy and make it actionable under existing countervailing duty laws. The textile industry supports that legislation.

“I would say that we’re going to have much more willingness to use federal policy to encourage domestic production and support the growth of domestic production whether through tax initiatives or regulatory initiatives,” if Obama is the next president, said Bruce Raynor, general-president of UNITE HERE!, which has endorsed Obama.

Apparel importers and retailers are also watching the trade debate unfold and which candidates will likely advance some of their priorities, such as moving trade deals with Colombia and South Korea forward.

“I think McCain’s rhetoric is that we need to move forward on trade liberalization and Obama’s is we need to move forward on trade enforcement and oversight,” Lamar said. “I think people have expressed concern about [Obama’s] views on trade. He has come out of the box saying he will renegotiate NAFTA and talking about a standstill on trade. He has told people he is not supportive of Colombia, which is one of the industry’s top priorities.”

Conversely, McCain is a “dyed in the wool free trader,” which is encouraging to those in the industry who are pressing for expanding global commerce, Lamar said.

“McCain has said that he will have an aggressive trade agenda and he also wants to negotiate more free trade agreements,” said Julia Hughes, senior vice president of trade for the U.S. Association of Importers of Textiles & Apparel. “He is a free trader and has been a free trader and I don’t see him falling off the boat.”

Hughes said Obama is harder to predict.

“Labor is very important to him, as is the treatment of U.S. workers, job prosperity and retraining programs,” she said. “Those are the highest priorities for the Democrats, but that doesn’t mean they are necessarily protectionist in their views either.”