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Frenzy in Capital on Vietnam Quotas

An as-yet-unsigned quota agreement caps Vietnam’s textile and apparel exports to the U.S. at roughly $1.7 billion to $2 billion.

WASHINGTON — The news that the U.S. is investigating charges of illegal transshipping through Vietnam provoked a trade skirmish in the capital Tuesday between U.S. manufacturers and importers.

As reported, the U.S. Trade Representative’s office in Monday evening briefings told industry representatives that the U.S. was looking into claims that Vietnam’s import figures have been inflated as a result of the transshipment of goods that were actually made in China. Representatives of the domestic industry and importers who attended the briefings confirmed their content Tuesday, though USTR officials did not respond to inquiries.

Representatives of the domestic industry pressured the Bush administration to withdraw its current quota offer and instead unilaterally impose quotas at lower levels.

David Spooner, special textile negotiator at USTR, was said to have told industry groups Monday that U.S. Customs officials recently found “illegal” apparel shipments labeled as “Made in Vietnam” that were actually made in China.

The domestic industry also called for a complete investigation into the alleged transshipments.

“To maintain any integrity in the process, the U.S. government should withdraw its quota offer until it can determine how much of the sponsored Vietnamese trade actually originated in Vietnam,” said Parks Shackelford, president of the American Textile Manufacturers Institute.

It’s a hot-button issue because the proposed quota levels are based on current import figures from Vietnam.

U.S. negotiators are still offering an agreement to Vietnam with a clause that would allow the U.S. to reduce the base levels in categories where Customs officials determine the numbers were inflated due to transshipments.

The as-yet-unsigned agreement caps Vietnam’s textile and apparel exports to the U.S. at roughly $1.7 billion to $2 billion, according to industry calculations.

If Vietnam does not sign the agreement by Friday, however, the U.S. is threatening to impose quotas unilaterally.

The unilateral quotas would be based on Vietnamese imports for the year ended November. The current, higher proposal would be based on imports for the year ended in February.

The U.S. is seeking, in the agreement, to impose quotas on 38 apparel and textile categories on May 1, according to industry sources. The bilateral agreement would not expire until Vietnam becomes a member of the World Trade Organization. It is unclear when and if that might happen.

The contentious negotiations, which have gone on for 10 days here, have caused a rift between U.S. trade officials and domestic textile and import trade and lobby groups.

The American Manufacturing Trade Action Coalition and National Textile Association also have called on the government to immediately place unilateral trade restraints on Vietnam.

“You can’t make a commitment to our industry to preserve our interests and then grant Vietnam 100 to 300 percent increases on their trade,” said Augustine Tantillo, Washington coordinator for AMTAC. “Vietnam was a clear opportunity to help the domestic industry and [U.S. trade officials] had an open field but still fumbled the ball.”

The Bush administration in a deal in 2001 to garner enough House votes to renew the president’s trade promotion authority, agreed to help domestic mills better compete with foreign suppliers.

The administration is looking to the Carolinas and other points south as a key battleground in the 2004 presidential election. It continues to court the industry and Grant Aldonas, undersecretary of international trade at Commerce, is expected to be in High Point, N.C., today to meet with textile and furniture manufacturers, who have suffered steep employment losses.

While the domestic industry is advocating a halt in the talks and unilateral action, importers and retailers claim Vietnam should not be penalized for shipments that never passed through its ports.

“U.S. Customs recently sent jump teams to Vietnam and gave factories there a clean bill of health,” said Erik Autor, vice president and international trade counsel at the National Retail Federation. “These goods were not transshipped through Vietnam so our question is why should the Vietnamese be punished for something they are not a part of?”

Jump teams are mobile inspection units that operate overseas.

“They are using this issue as an excuse to basically hit Vietnam with punitive quotas that is going to kill business in Vietnam,” said Autor.

The U.S. Association of Importers of Textiles and Apparel claims imports from Vietnam will embargo well before the end of the year, based on the currently proposed quota levels.

If they are imposed this year, quotas would affect at least 35 major firms sourcing in Vietnam, including Gap, Limited, J.C. Penney and Kmart, who have placed orders that will have to be canceled and rerouted to other countries, according to the group.

In calendar year 2001, apparel and textile imports from Vietnam reached $49.3 million, according to Commerce figures. In 2002, total imports in this sector totaled $951.7 million.

For the first two months of 2003, textile and apparel imports reached $428.3 million.