Obama Details Textile Policy Stance

Democratic presidential nominee Barack Obama pledges to support five key textile industry policies.

Barack Obama spoke Wednesday in Raleigh, N.C.

WASHINGTON — With North Carolina a key swing state in Tuesday’s presidential election, Democratic nominee Barack Obama has pledged, if elected, to support five key textile industry policy positions, including a monitoring program for Chinese apparel and textile imports.

This story first appeared in the October 30, 2008 issue of WWD.  Subscribe Today.

It was the most definitive statement Obama has made on trade, especially as it affects the apparel and textile industry, and ties into the broader agenda he has pushed during the long campaign of saving jobs and supporting the American manufacturing sector.

Obama outlined his textile industry agenda in a letter responding to a questionnaire by the National Council of Textile Organizations.

The Illinois senator also said he would back a yarn-forward rule of origin in free trade agreements, which requires that yarn and fabric be made by one of the partners in a trade pact; a “Buy America” textile provision for the Defense Department; diplomatic action against China’s undervalued currency, which he acknowledged is “currency manipulation,” and stronger enforcement of existing trade agreements.

“I am especially aware of the trade challenges faced by those working in our textile industries,” Obama said in a letter to the NCTO that was made public on Wednesday. “When safeguards on textile imports from China expired in 2004, imports surged and thousands of jobs were lost.”

Obama said he supports the recent call by House Ways and Means Committee chairman Charles Rangel (D., N.Y.) for an import monitoring program administered by the U.S. International Trade Commission.

“As president, I would use monitoring to help ensure that imports from China do not violate applicable laws and treaties,” he said.

Key components of Obama’s broader economic plan include an increase in the minimum wage that rose to $7.25 an hour in July to $9.50 by 2011, an elimination of tax breaks for companies that move operations offshore, stricter enforcement of trade agreements to help minimize the adverse impact of unfair trading practices by foreign countries on the U.S. workforce and a commitment to usher through Congress and enact the Employee Free Choice Act that makes it easier for workers to organize a union.

An Obama administration will be tough on countries that deliberately violate global trade rules.

Obama’s focus on the plight of the American worker and scrutiny of global trade has prompted many trade experts to predict a pause in the aggressive trade agenda promulgated by the Bush administration, if he is elected president.

NCTO president Cass Johnson said Obama’s letter was a “strong response in most of our key areas.”

“The standout, obviously, is China monitoring,” Johnson said. “He has agreed to monitor Chinese imports and that correlates with the tough position [the Obama campaign has] taken in their statements on China, but this is a concrete step. They also said they would consider using a variety of trade remedy measures if they are seeing a surge from China.”

Republican presidential candidate John McCain did not respond to the questionnaire. According to recent polls, he and Obama are in a virtual dead heat in North Carolina, a key textile producing state.

The textile industry’s main policy initiative this year has been pushing the Bush administration, presidential candidates and Congress to establish a monitoring program on Chinese imports because the industry fears there will be massive import surges from China when quotas are lifted at the end of the year on 34 apparel and textile import categories there.

Obama also said he would use all of the trade enforcement tools in his toolbox, including a general China safeguard that does not expire until 2012, to help protect injured industries such as textiles. The safeguard calls for punitive action by the White House if a country is found to have injured a domestic industry because of import surges.

The Bush administration has declined to impose sanctions in five cases under the China safeguard where the International Trade Commission found injury.

“When domestic industries make use of trade remedy laws that call for presidential determinations, such as the section 421 provision applicable to imports from China, I will decide those cases on their merits, not on the basis of an ideological rejection of import relief like that of the current administration,” Obama said.

Despite the strong support from Obama, Johnson said some gray areas remain about his potential trade philosophy as president.

“When he says he will press China ‘diplomatically,’ it is not clear what that means,” said Johnson, adding that the Bush administration has been pressing China diplomatically, but the value of the country’s currency remains too low, putting U.S. companies at a competitive disadvantage.

“The real key for us is will [he] push for passage” of a pending bill in the House that would make currency manipulation a subsidy and actionable under U.S. trade remedy laws.

Several China-related bills have languished in Congress, but many trade experts anticipate they will be resurrected under an Obama administration. The bills in the House and Senate range from redefining currency manipulation, making it easier for the U.S. Treasury Department to designate China a currency manipulator and bring a case to the World Trade Organization, to including undervalued currencies in the calculation of punitive duties under trade remedy laws.

The most punitive China-related legislation, sponsored by Sens. Charles Schumer (D., N.Y.) and Lindsey Graham (R., S.C.), which would have imposed across-the-board tariffs of 27.5 percent on Chinese imports if China did not revalue its currency in a set period of time, could also come into play again.

Obama said in his letter that “the massive current account surpluses accumulated by China are directly related to its manipulation of its currency’s value.” He added China must “change its policies, including its foreign exchange policies, so that it relies less on exports and more on domestic demand for its growth.”

“That is why I have said that I will use all diplomatic means at my disposal to induce China to make these changes,” Obama added.