Congress to Tackle Economy

WASHINGTON — What to do about the stalled economy is at the top of the agenda as Congress reconvenes Tuesday, the start of a new two-year session with Republicans now in charge of both chambers.<br><br>However, a Bush administration proposal for...

WASHINGTON — What to do about the stalled economy is at the top of the agenda as Congress reconvenes Tuesday, the start of a new two-year session with Republicans now in charge of both chambers.

This story first appeared in the January 6, 2003 issue of WWD.  Subscribe Today.

However, a Bush administration proposal for Congress to enact a second round of business and personal tax cuts faces considerable resistance among Democrats, particularly in the Senate, where procedural rules favor the opposition. The economic stimulus blueprint is scheduled to be unveiled Tuesday.

“This is going to be a politically charged year,” said Steve Pfister, senior vice president of government affairs at the National Retail Federation.

All that is decided on Capitol Hill will occur against a backdrop of the approaching 2004 election, with President Bush angling for reelection and Democrats struggling to reinvigorate their party and kick out Republicans. Debate about the economy and tax cuts will also be influenced by dwindling federal coffers and a growing deficit expected to increase as more money is spent fighting terrorism and protecting the U.S. against further attacks.

The Democrats are regrouping after the November elections, when the Senate switched to a GOP majority and the House remained in Republican hands. However, in both chambers, Republicans hold slim majorities.

Nonetheless, Kevin Burke, president of the American Apparel & Footwear Association, said having Congress in Republican hands means “Bush sees this as a golden opportunity to get his agenda passed.” However, there are potential perils for the President if the economy continues to lag, he said.

“For the top guy, it’s his policies that are seen as the cause of everything going downhill,” Burke said.

Pfister forecast a resurgence of class warfare between the parties, with Democrats “poised to say tax cuts benefit corporate America at the expense of the little guy.”

Likely the one issue both sides might be able to agree on is an extension of unemployment benefits for 800,000 workers that expired in December, advocated by the President. For their part, Democrats are readying their own economic recovery plan, including a probable increase in the federal minimum wage.

Retailers and business in general support the President’s strategy for economic stimulus and have pressed for certain tax breaks, like a temporary reduction of the payroll tax paid by consumers and employers, and construction allowances for retail tenants.

“We would support any kind of tax reform that would put more money back in customers’ pockets,” said Kathryn Lavriha, senior vice president of government affairs at the International Mass Retail Association, who acknowledged the political difficulties facing the President’s tax agenda. “This isn’t a slam-dunk year by any stretch.”

While jump-starting consumer and business spending is a key issue for retailers, fashion importers and domestic producers of apparel and textiles, the direction of U.S. trade policy — and the role of Congress in shaping the Bush administration’s thinking — remains a priority.

Unlike congressional sessions in recent memory, there are no major trade-expanding bills on deck, although the Bush administration is expected this year to send to Congress for approval the just-completed free-trade agreement with Chile and one with Singapore, which is almost finished.

These pacts have yet to stir much controversy, largely because of the small amount of trade the U.S. conducts with either country. Plus, U.S. textile interests — reliable opponents in curbing trade legislation that boosts apparel and textile import competition — are generally pleased with the yarn-forward textile rules of origin for apparel in the Singapore and Chile pacts. However, the textile lobby could cause some mischief over what industry officials say are some exceptions to the origin rules, or Trade Preference Levels, they claim are too generous.

In any event, the domestic textile lobby is ready to cause free traders angst by urging members of Congress from textile-producing states to pressure the Bush administration to continue to honor 2002 pledges to help keep U.S. mills competitive.

The White House made these promises leading up to last fall’s election, when key House GOP seats in the South were endangered. There was voter concern about U.S. trade-liberalizing policies harming domestic manufacturing, including textiles.

“We want Congress to be a watchdog,” said Parks Shackelford, president of the American Textile Manufacturers Institute. “This is still a major industry in the United States that employs hundreds of thousands of people and manufacturing textiles is important to our nation and our economic health.”

It’s the same strategy being deployed by the textile industry’s opposition: importers. While domestic mills lobby for the U.S. to curb Chinese textiles as called for in a World Trade Organization safeguard agreement, importers will press for no interference.

“We’ll be very active in educating and working with new and old members of Congress about the issues for our industry,” said Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel. “We need to do more of an explanation about the benefits of the elimination of global quotas on apparel in 2005 to the U.S. economy and consumer. It’s time to stop the old thing of ‘imports are bad.’”

Shackelford cited a laundry list of Bush trade initiatives needing to be monitored, ranging from its WTO proposal to eliminate all tariffs globally in 15 years to negotiating a free-trade pact with Central America, which starts this week.

At the WTO, the ATMI wants any tariff negotiations to carve out a specific round of talks for textiles and apparel, and for U.S. tariffs not to be touched until major exporting countries lower their tariffs to U.S. levels first. The ATMI is also seeking strong WTO protections of apparel and textile intellectual property rights.

Additionally, the ATMI plans to urge textile-state lawmakers to pressure the Bush administration to negotiate a quota-setting textile and apparel agreement with Vietnam, a burgeoning foreign supplier. The association also wants Congress to increase U.S. Customs Service funding to combat illegal textile and apparel imports, and to continue funding for fabric “tracer” technology to identify where imports originate.

Incoming Sen. Elizabeth Dole (R., N.C.) made the tracer program a campaign issue in her bid to replace retiring Republican Sen. Jesse Helms, a longtime textile industry defender and frequent obstacle to apparel and textile-trade liberalizing legislation.

Although Dole’s allegiance to the domestic textile industry has yet to be tested as a lawmaker — she has taken free-trade positions in the past, unlike her predecessor — it’s incoming Sen. Lindsey Graham (R., S.C.) who’s considered the new industry defender. As a Congressman from the state, Graham has a long textile-protection record. He replaces retiring Republican Sen. Strom Thurmond.

As for how much influence Congress may have over the administration on trade, Jock Nash, Washington counsel and lobbyist for textile giant Milliken & Co., doesn’t have much hope.

“Congress is not able to monitor foreign trade agreements, period,” Nash said. “They are institutionally incapable of doing it. They will be just as removed and ill-informed as all past negotiations and I see no indication things will be different.”