By  on July 7, 2009

WASHINGTON — The Obama administration has put major trade initiatives on the back burner because of the congressional battle over health care reform and energy and climate change legislation.

As President Obama spends political capital on those priorities, the administration has turned the trade policy focus toward enforcement of existing pacts and World Trade Organization rules.

Last month, the government filed its first WTO case against China over export restraints on raw materials that the U.S. charges provide an unfair advantage to Chinese industries and limits access and raises costs for countries importing the goods.

Most trade experts expect Obama will approve some antidumping and countervailing duty cases, which could have implications for the apparel and textile industry.

“The atmosphere in Congress is very hostile to trade,” said David Spooner, an assistant secretary of commerce for import administration under President George W. Bush. “Meanwhile, the administration has big fish to fry, like health care and climate change, and…is very reluctant to alienate swing votes on things like health care reform to pass trade agreements.”

The President’s overall trade policy framework remains a work in progress. U.S. Trade Representative Ron Kirk, the point man on global commerce, said last month that Obama plans to outline a new trade game plan in the “near future.” The lack of specifics has been another factor in delaying measures on Capitol Hill.

Obama took a tough stance on trade during the presidential campaign, singling out the unfair trade practices of China and urging the protection of U.S. workers and industries hit hard. But he has tempered his stance since taking office, balancing his emphasis on enforcement with warnings against protectionism while citing the benefits of more liberalized trade regulations.

By contrast, Bush’s aggressive free trade agenda included negotiating several bilateral deals and focusing less on enforcement, although the U.S. did file some WTO cases during his two terms and imposed quotas on Chinese imports.

Democrats have a 60-seat majority in the House, and with the victory of Al Franken in Minnesota, the party’s margin in the Senate increased to the 60-vote threshold necessary to overcome Republican filibusters. But the trade agenda often divides the Democrats’ caucus.

“I don’t see anything major on trade policy advancing anytime soon,” said Erik Autor, vice president and international trade counsel at the National Retail Federation.

Pending trade deals with Panama, South Korea and Colombia will likely not be taken up by Congress this year. Most trade experts don’t expect much progress in the global round of trade talks, although the administration has made efforts in recent weeks to help revive the so-called Doha Round, which seeks to strike a global accord on eliminating or reducing duties around the world.

While action on key trade legislation faces long odds, Congress is likely to decide the fate of a Pakistan aid bill that establishes duty free manufacturing zones in the war-torn border region with Afghanistan. The House approved a broad aid bill that includes the Reconstruction Opportunity Zone program. But a Senate-passed bill does not include the item, so the two bills will have to be reconciled in conference committee. Importers have been lobbying for an expansion of the zones to include more apparel products and more flexibility in where they can be located.

Currently, the zones do not allow key apparel categories to qualify for duty free treatment, and they would be situated in a dangerous area hundreds of miles from established manufacturing hubs in Pakistan.

“The one piece of legislation that is most likely to move is one that is part trade but mainly national-security oriented and that is the ROZ legislation,” said Julia Hughes, senior vice president of trade for the U.S. Association of Importers of Textiles & Apparel. “It is the only piece of [trade] legislation that President Obama has spoken about and says he supports action on this year, and we think that is pretty important.”



Industry officials also expect trade enforcement legislation to gain momentum.

House Ways & Means Chairman Charles Rangel has introduced a bill that would strengthen enforcement, and a group of 106 House lawmakers recently introduced the so-called TRADE Act, which would mandate a onetime review of existing trade agreements by the General Accountability Office that would need to be completed before new trade negotiations were launched or Congress considers pending trade deals. The TRADE Act also would establish standards to protect workers, establish new standards for the President’s trade promotion authority and allow Congress to set “readiness” criteria to select future negotiating partners and objectives.

“Things that are enforcement oriented in nature will have an easier time of it in Congress,” said Cass Johnson, president of the National Council of Textile Organizations.

Regarding longer-term issues, the House Ways & Means and Senate Finance Committee staffs have been reviewing trade-preference programs for a potential reform bill, as well as a possible Customs-reauthorization bill. It is unclear whether either initiative will move this year.

A program to promote economic growth in the developing world by providing preferential duty free entry for about 4,800 products from 131 countries and territories and a trade preference program for the Andean region are expiring at the end of the year. Some industry officials see this as an opportunity for a broader reform of four regional trade-preference programs that provide broad duty free benefits to developing countries in Africa, the Caribbean and the Andean region.

“One of the things we’re looking at is whether the programs would be better if we tried harmonization across them,” said a Ways & Means Committee aide for the Democratic majority, who requested anonymity. “Some of the proposals presented to us include things like creating one program for all lesser-developed countries and one program to encompass developing countries.”

Retailers and apparel importers have led a coordinated effort to streamline the preference programs, create a uniform rule of origin and eliminate duties on more products from more countries.

“I think we can see a situation where a lot of energy gets focused on trade-preference reform,” said Stephen Lamar, executive vice president of the American Apparel & Footwear Association. “I think there is potential, but it’s unclear that all of the trade leaders in Congress have embraced a common vision on how trade reform moves forward with content and a timetable.”

Two bills that have been reintroduced — one to provide duty free access to all the least-developed countries, including for the first time Bangladesh, Cambodia and Sri Lanka, and another that would eliminate duties on apparel imports from 15 least-developed countries are “on the table,” the Ways & Means aide said. However, the aide said the committee will seek to strike a balance that does not “hurt countries that are already-existing [preference program] beneficiaries.”

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