WASHINGTON — First the quotas, now the tariffs.
This story first appeared in the November 27, 2002 issue of WWD. Subscribe Today.
The Bush administration unveiled a proposal Tuesday that would require all 144 World Trade Organization member nations to eliminate tariffs on all industrial goods, including apparel and textiles, by 2015.
But it will be a hard sell to make to developing countries, which have maintained excessively high tariffs on many industrial products for decades, as well as to U.S. industries, such as textiles, which claim they benefit from substantial U.S. tariff protection.
Domestic textile groups, some of which blasted the new proposal Tuesday, have members who have already been grappling with the 10-year phaseout of quotas on textiles and apparel, which will be lifted at the end of 2004.
However, it won’t be a hard sell to make to U.S. importers and retailers, who lauded the new proposal, calling it an unprecedented reciprocal global trade deal.
Whether or not the U.S. proposal can withstand at least two more years of WTO negotiations is uncertain. Every WTO member can make a proposal on industrial tariffs. The European Union and Japan have already submitted vastly different proposals on how to liberalize those tariffs.
According to the two-step plan, which the U.S. will present to WTO members in Geneva next week, members would be required to eliminate all tariffs at or below 5 percent by 2010, cut all other tariffs through a formula to less than 8 percent by 2010 and eliminate tariffs in “highly traded goods” such as steel and furniture, as soon as possible, but no later than 2010.
The second step calls for all WTO members to make equal annual cuts in remaining tariffs between 2010 and 2015.
Tariffs on a few textile and apparel categories, including silk apparel and silk fabric, are already under 5 percent and would be eliminated by 2010. Most apparel and textile tariffs, according to the proposal, would be reduced to 5 to 7 percent by 2010, and then reduced incrementally to zero by 2015.
The proposal also calls for a separate program to identify and eliminate non-tariff barriers, such as burdensome licensing requirements, which would run on a parallel track with the negotiations on industrial tariffs. The U.S. will put forward an initial list of such barriers in January.
“We are seeking to eliminate tariffs in 10 years with no exceptions, no peak tariffs and no residual high tariffs,” U.S. Trade Representative Robert Zoellick said at a press conference Tuesday. “Our goal is total free trade.”
Zoellick insisted the proposal offers “historic” opportunities for developed countries, citing World Bank reports, which claim they could gain $500 billion in export revenue with complete liberalization.
Senior trade envoys in Geneva from rich countries hailed the U.S. move as a bold step, but many of their counterparts from poor nations said it would be difficult to achieve as developing nations need more time to strengthen their industrial sectors.
“Developing countries will have to make the greatest industrial tariff cuts and the richer countries will get all the benefits, as they are more competitive,” said an envoy from a developing country, who spoke anonymously.
Tariff cuts should be according to each country’s level of development, added another developing country WTO ambassador.
Zoellick also played down the impact tariff elimination will have on the U.S. textile and apparel industry. Asked whether the proposal would adversely affect the beleaguered textile industry, Zoellick said it would do the opposite by creating more export jobs.
“The textile and apparel industry said, ‘Most of all, we need a fair shot at reciprocity,’” Zoellick said. “What our guys said to me is, ‘Look, we’ll compete, but get [them] down to an equal level.’”
Zoellick said firms will export more and create more jobs if tariffs are lower on U.S. apparel and textile exports. “Each step along the way, [consumers] are buying more, more people are working at Wal-Mart and more people are producing those clothes,” he said. “The elimination of tariffs pushes the number of good-paying export jobs higher.”
He said U.S. exports already support 12 million U.S. jobs.
“This proposal not only removes U.S. import barriers, but it also eliminates barriers that are imposed on U.S. branded apparel and footwear by other countries,” said Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association. “Since WTO member countries would be required to eventually eliminate tariff and non-tariff barriers on all products from all nations, it will enable AAFA’s members to enjoy greater success to all markets.”
The U.S. textile industry, on the other hand, isn’t buying the argument for tariff elimination.
Bush created an interagency task force in January to help the domestic textile industry, a move that fulfilled political promises made last year to Capitol Hill lawmakers from textile-producing states in exchange for their votes on trade promotion authority. The mandate of the Textile Working Group is to minimize the impact of trade on the domestic textile industry and develop and implement an aggressive export program for U.S.-made textile and apparel products to increase global sales and profitability.
“If this proposal goes forward, there will be no minimization on our industry,” said Charles Bremer, vice president of international trade at the American Textile Manufacturers Institute. “How do you minimize a bullet between the eyes?”
ATMI Chairman Van May said in a statement that the tariff proposal is contrary to the assurances given by the administration to the domestic textile industry “and our supporters in Congress that we would not be traded away in the Doha round.” May called on the USTR to reassess the proposal and come back with one that does not make any reductions in U.S. textiles and apparel tariffs until other countries reduce their levels.
Bremer, who said 75 percent of all U.S. textile exports go to Mexico and Canada under NAFTA, claimed all such U.S. preferential programs would be destroyed. That, in turn, will hurt U.S. textile companies.
“To give the equivalent tariff treatment to China, India and Pakistan to that which is enjoyed by our preferential trading partners is to consign the latter to certain death,” he contended.
Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel, countered that countries will be more competitive with the elimination of duties because it will “level the playing field” even among trade between other countries.
“Each preferential trade agreement brings with it special opportunities that will not be eliminated because duties go away,” Hughes said. “The U.S. trade policy is not based on protecting preferential trade arrangements with other countries.”
Jock Nash, Washington counsel for Milliken & Co., said the administration has not supplied ample evidence of job increases because of export increases.
“We have seen that when we lose domestic market share as a result of a trade-preference program or free-trade agreement, we have never made up for lost sales or lost jobs to our domestic base by selling more offshore,” Nash said. “We can’t survive on zero tariffs. We need other countries to bring down their tariff levels to ours. Then the administration can come back and talk to us.”