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At 100 Days, USTR Schwab Facing Multiple Challenges

Susan Schwab, the Bush administration's chief trade negotiator and a power player at the nexus of politics and international commerce, is as label-conscious as any consumer.

WASHINGTON — Susan Schwab, the Bush administration’s chief trade negotiator and a power player at the nexus of politics and international commerce, is as label-conscious as any consumer.

But Schwab isn’t searching for trendy or high-status brands when she shops. Her eye is on something else.

“I look at every single label, every single piece of clothing I have purchased within the last 30 years,” she said last week during an interview at her office across the street from the White House. “I know exactly where it was made.”

Schwab, 51, whom President Bush picked to succeed Rob Portman in the cabinet-level job, on Saturday will mark the end of her first 100 days as U.S. Trade Representative, a frenzied period in which World Trade Organization talks to reduce tariffs fell apart. She is trying to help restart the so-called Doha round, which got under way five years ago in the wake of the Sept. 11 attacks with the goal of helping impoverished nations.

Importers want to gain better access to world markets and production capacity through a Doha agreement. But U.S. textile groups tend to be wary of the negotiations because they might generate even more competition.

In broad strokes, the Bush administration’s trade agenda is intended to open markets and boost trade so countries will use more U.S. services and buy more goods tagged “Made in the U.S.A.” In turn, American consumers would have their choice of a wider range of foreign-made products.

Critics of the President’s strategy, however, counter that the administration has pursued a trade plan that has helped move more manufacturing jobs abroad because of low labor standards in other countries and unfair competition from subsidized imports that have helped propel the trade deficit to a record $726 billion.

Leading U.S. trade policy is fraught with megachallenges, from domestic and international political squabbling to the record $202 billion trade deficit with China and lingering protectionist sentiment in Congress and among many Americans.

U.S. textile and apparel producers have had some success in winning restraints on imports, notably from China, though employment in the industry over the past decade has plunged to 608,900 from 1.4 million, a drop of 56.5 percent.

This story first appeared in the September 13, 2006 issue of WWD.  Subscribe Today.

When it comes to her personal fashion, Schwab, who was director of corporate business development at Motorola Inc. and was dean of the University of Maryland’s School of Public Policy, said buying U.S.-made products makes a difference.

“I am willing to pay a premium for an American product, but some consumers aren’t that way and some consumers can’t afford to be that way,” she acknowledged.

Schwab said people tend to have a theoretical sense of trade and a practical way of living that don’t always complement each other.

“The average American consumer may worry somewhat about the U.S. manufacturing base and goes out shopping, and they don’t necessarily look at the labels of what they’re buying,” she said.

However, U.S. consumers benefit from trade, as does the economy, she said.

“Look at countries whose markets are more closed than ours to textiles and apparel,” she said. “For example, look at Europe and look at their double-digit unemployment. Trade protectionism does not get you there….It does not secure your manufacturing base. It doesn’t help your consumers. It just prolongs the agony and you end up building up a protective welfare system where nobody benefits.”

For the interview, Schwab, who speaks expressively, using her hands to help make her points, wore U.S.-made clothing: a navy knit ensemble from St. John, a staple of her wardrobe.

“This is a line that I have been wearing for more than 15 years, sort of classic tailored, and it travels really well, which is rather important in this job,” she said.

She is on a trip to Brazil and Australia this week in an effort to build momentum to get the Doha talks on track. With this trip, Schwab will have spent about 50 of her first 100 days in office on the road, logging more than 63,000 miles in eight countries.

She bluntly said that Doha is “obviously in big trouble.” .

The talks, which fell apart over agricultural issues in July, are aimed at lowering global tariffs, making it less expensive to manufacture apparel and textiles in one country and sell it in another.

The Bush trade agenda has two tracks: the multilateral talks in the WTO and a series of bilateral trade pacts. The administration has negotiated and put into effect free trade agreements with 10 countries. There are also deals with Costa Rica and the Dominican Republic that are waiting to be implemented. Pacts with Peru, Colombia and Oman await Congressional approval.

The deals that are in force cover 44 percent of U.S. exports in goods, a percentage that will jump to 52 percent if the accords that are pending and being negotiated come to fruition.

Importers have seen the free trade agreements as a bit of a mixed bag, opening up markets, and often restricting apparel producers in other countries to using domestic or U.S. yarns and fabrics to get duty-free treatment. Textile firms, on the other hand, see the exceptions to rules — like allowing foreign fabrics in some types of goods — as opening a back door to powerhouses such as China.

It is an open question whether some of the trade pacts on deck, such as one with South Korea, will be wrapped up before the July 1 expiration of the president’s trade promotions authority. That authority eases trade agreements through Congress by letting the president submit them for a vote, but stripping legislators of the ability to amend the agreements.

Schwab is also navigating the often tense relationship with China, which produces one-third of all apparel and textiles shipped to the U.S. During her first trip as USTR to Beijing last month, Schwab pushed China to live up to its WTO commitments to protect intellectual property rights, open its markets to foreign firms and eliminate illegal subsidies to its domestic industries.

“It’s taking on China as a responsible stakeholder in the international trading system and that’s where they should be, and that’s the way we need to treat them,” she said.

Dealing with China might, at times, require more than encouragement on issues like market access and subsidies, acknowledged Schwab.

“If we’re going to address the core problem, we need to be willing to use all of the tools at our disposal, the entire range of tools in the tool kit, from jawboning at one end to taking a [WTO] case and retaliating at the other,” she said.

Domestic textile producers maintain that the Chinese government gives its producers an unfair advantage in the form of subsidies and nonperforming loans, as well as an undervalued currency.

Schwab said government can help industries by combating unfair trading practices, such as illegal subsidies, but can’t hold back market forces.

U.S. apparel and textile producers, she said, have been adjusting to these forces.

“I think a number of them are doing well,” she said. “We continue to work with the industry to ensure it’s health going forward, but I don’t think this industry or, indeed, any other industry, would want our office to either be picking winners and losers, if we were capable of doing it, or pretending that we’re capable of doing it. Governments ultimately will fail if they try to stand between entrepreneurs and the marketplace.”