WASHINGTON — President Bush signed legislation Tuesday that will give him long-sought trade promotion authority that’s expected to nudge pending bilateral trade pacts and open the door to regional and global trade negotiations.
This story first appeared in the August 7, 2002 issue of WWD. Subscribe Today.
“Since the authority lapsed in 1994, other nations and regions pursued trade agreements while America’s trade policy was stuck in park,” Bush said before signing the Trade Bill of 2002 in the East Room of the White House. “Starting now, America is back at the bargaining table in full force.”
With his new authority, Bush will be allowed to negotiate trade deals, which Congress can accept or reject, but not alter. The administration has been lobbying aggressively for TPA for the past year, arguing that many trade agreements have been stalled because countries were reluctant to negotiate a bill that could be eventually picked apart by Congress.
The comprehensive trade package, passed by the Senate last Thursday, also includes provisions dropping apparel duties for Andean countries, the Caribbean Basin and sub-Saharan Africa.
U.S. Trade Representative Robert Zoellick has said the administration now plans to move quickly to wrap up free-trade pacts with Singapore and Chile and complete global trade talks in the World Trade Organization, as well as a Western Hemisphere pact by 2005. It also plans to launch new negotiations with Central America, Australia, Morocco and a regional pact with South Africa, Lesotho, Botswana, Namibia and Swaziland.
The two most ambitious and contentious trade talks on the administration’s agenda are the Western Hemisphere trade negotiations known as the Free Trade Area of the Americas and a global round of trade talks under the auspices of the WTO. The goal is to complete the WTO and FTAA negotiations by Jan. 1, 2005 and implement sweeping trade liberalization by the end of that year. Latin America is in the throes of an economic downturn that has threatened the economies of Argentina, Paraguay, Uruguay and Brazil, which poses complications for the administration’s desire for a sweeping trade pact with 34 Latin American nations.
“Free trade is also a proven strategy for building global prosperity and adding to the momentum of political freedom,” Bush reiterated in his speech. “Trade lifts whole nations out of poverty and puts them on the path to prosperity.”
However, Bush might have a hard time convincing Latin America that trade fuels economic growth, particularly as those countries struggle with financial collapses. The third negotiating phase of the FTAA ends in October at a ministerial meeting in Quito, Ecuador, where ministers are expected to review a second version of a draft agreement.
FTAA has the potential to reconfigure apparel sourcing and would have major implications for the U.S. retail industry, which now imports more than two-thirds of all apparel it sells. Reaching a consensus on FTAA will be difficult. The pact involves a diverse set of countries, from some of the wealthiest (the U.S. and Canada) to some of the poorest (Haiti) to some of the largest (Brazil) and some of the smallest (St. Kitts and Nevis.) Brazilians have also been ambivalent about the pact and its timetable.
“I don’t think they will wrap up the discussions before the 2005 deadline,” said Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel. “One of the complications you are looking at is how to negotiate with so many countries with different perspectives on certain elements of the agreement.”
Alan Tonelson, a research fellow at the U.S. Business & Industrial Council, said: “We are also going to run into the American political cycle soon and if we don’t get an agreement by early 2004, you can postpone expectation until well after a new administration takes office or this one gets reelected.”
Presenting a different view, Charles Bremer, vice president of international trade at the American Textile Manufacturers Institute, said: “Among us all — the countries of South America, ourselves, Canada and Mexico — there must be 15 different free trade agreements that are all structured differently. Anyone who thinks we can have a uniform, comprehensive FTAA within three years is out of their minds.”
Jonathan Gold, director of international trade policy at the International Mass Retail Association, said retailers are watching the negotiations closely because a trade pact could mean that some of the apparel and textile trade in Asia could return to the Western Hemisphere.
Despite the uncertainty of FTAA, the issue of whether or not the U.S. should negotiate one rule of origin for apparel and textiles is hotly debated among importers and the domestic textile industry. Importers support one rule and are rallying against a strict rule of origin, claiming it inhibits trade. Domestic textile groups claim it will be impossible to set one tariff schedule for thousands of products and argue strict rules of origin are needed to protect the industry from import surges and dumping.
On another front, the U.S. is focused on global trade talks, which were launched in Doha, Qatar, last November. The WTO negotiations, aimed at lowering trade barriers around the world between 144 member countries, has progressed in many areas, including agriculture and services. Market access talks, which will include industrial tariffs, have not yet begun, though negotiators are currently trying to reach an agreement on a timetable for the talks in Geneva.
U.S. negotiators have put textile and apparel tariffs on the table, but the administration claims it will seek reciprocal market access. WTO negotiators are expected to soon announce the final outcome of the most contentious issue, the calculation of quota growth rates on textiles and apparel.
According to sources, the U.S. has refused to budge on recalculating the quota growth rates and making them retroactive, which would accelerate the elimination of quotas on textiles and apparel as embodied in the Uruguay Round that created the WTO. Quotas are currently set to expire on Dec. 31, 2004. Developing countries, led by India, have been fighting to speed up quota phaseout.
Many bilateral agreements are also on Bush’s trade agenda. The U.S. is expected to wrap up such pacts with Chile and Singapore by the end of the year, with a “yarn-forward rule of origin” proposed for both. Importers and retailers claim time and distance will render the pact useless with the strict origin rules, but domestic textile firms claims the rules will allow them to export more fabric and yarn to the region and protect it from import surges.