By  on February 2, 2006

WASHINGTON — President Bush's warning against protectionism and effort to spotlight the benefits of global trade in the State of the Union address boosted importers seeking an ambitious trade agenda and disappointed U.S. textile executives pummeled by globalization.

In laying out his domestic agenda — scaled down from previous years — Bush spoke Tuesday night about strengthening American competitiveness and job growth, as well as making his tax cuts permanent and initiatives for energy, health care, immigration and medical liability reform. Facing a trade deficit that may reach $800 billion this year, the president cautioned against taking a more protectionist stance against growing economic superpowers such as China and India.

"In a dynamic world economy, we are seeing new competitors, like China and India, and this creates uncertainty, which makes it easier to feed people's fears," Bush said. "So we're seeing some old temptations return. Protectionists want to escape competition, pretending that we can keep our high standard of living while walling off our economy."

He did not direct his remarks toward specific trade issues and legislation, but they weren't made in a vacuum. Political pressure to restrain China's growth and force further currency revaluation may gain strength in advance of the midterm elections in November, especially if the economy weakens.

China's surge in apparel and textile exports to the U.S. this year resulted in an import restraint agreement between the two countries that restricts more than $6 billion worth of Chinese apparel and textile imports and runs through 2008. The deal pleased domestic manufacturers who charged that they were being forced to unfairly compete with China, and brought certainty to importers' sourcing plans.

The administration is also leading the charge to reach a global trade treaty by the end of the year among 149 countries of the World Trade Organization, who are seeking to reduce and eliminate tariffs on thousands of products. The industry is divided over the current round of global trade talks, particularly on the issues of a formula to cut tariffs on textiles and apparel, the scope of special treatment for Least Developed Countries and developing countries, and whether WTO members will agree to a separate textile pact.

"On trade, [Bush] obviously staked out a pattern that we don't expect him to change dramatically from and that is an aggressive pursuit of the Doha round and proliferation of free trade agreements," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition. "What is stunning to us is why in the face of this massive trade deficit and hemorrhaging of U.S. manufacturing jobs there isn't some questioning of current U.S. trade policy."Cass Johnson, president of the National Council of Textile Organizations, said: "The President is acknowledging that trade is a very difficult topic [in an election year], particularly when the public doesn't see the benefits and China is a big part of that ... because they play by a different set of rules and that makes people angry."

Importers came away from the speech with the feeling that the President is in their corner.

"Obviously, the reality will be in what the administration does substantively in all of the various arenas where we are in trade negotiations — Doha and free trade agreement talks — and that is clearly still a concern for us," said Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel. "But I do think from our perspective this was probably as positive a speech for the State of the Union as one would have hoped to see."

Stephen Lamar, senior vice president of the American Apparel & Footwear Association, said Bush set up the "dynamic between protectionism and isolationism versus opening markets around the world.

"What I read into it was that without delving into specifics, which he never does, he recognizes a full trade agenda is part of a successful economic agenda and we need to compete by knocking barriers down abroad rather than erecting barriers at home," Lamar said.

Another pillar of Bush's agenda is economic strength and job growth, and he touted the creation of 4.6 million new jobs in the last two and one half years, "more than Japan and the European Union combined."

Job growth has been less robust, however, if measured from the inception of his presidency in January 2001. From that point, the economy has added 2 million jobs, primarily in the government sector. The manufacturing sector has lost 2.8 million jobs in the five years since Bush took office.

"I think the performance of the economy generally over the last couple of years has been very strong," said Carl Steidtmann, an economist with Deloitte Research. "In the first half of his term, the economy was in the 2000-2001 recession, and as you go into recessions job losses pick up and even as you come out of recessions the economy continues to shed jobs ... but we've seen job growth start to come back."

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