WASHINGTON — Industrialist Wilbur Ross, in his new role as a mediator, has taken a step forward in building a consensus among a small group of high-level executives divided over critical issues in the Central America Free Trade...
WASHINGTON — Industrialist Wilbur Ross, in his new role as a mediator, has taken a step forward in building a consensus among a small group of high-level executives divided over critical issues in the Central America Free Trade Agreement.
Whether Ross has the clout to finesse a broader consensus among all segments of the domestic textile industry is still unknown, but his success Wednesday cannot be overlooked.
The ad hoc group of retailers, importers, apparel manufacturers and domestic textile executives who met here for five hours Wednesday agreed in principle to support the hotly debated inclusion of Canada and Mexico in the CAFTA agreement with five Central American countries through a provision known in trade parlance as cumulation.
That provision, which has pitted the textile industry against retailers and importers, would allow companies to use fiber, yarn or fabric inputs in apparel production in the region from designated countries outside of the signatories of CAFTA and still receive duty-free entry into the U.S. It also supports strict enforcement of rules against illegal transshipments, including severe penalties for countries failing to implement effective enforcement of these provisions.
The group also agreed to include a mechanism for admitting other free-trade partners into cumulation if they agree to the strong enforcement provisions. The U.S. is negotiating the CAFTA with Nicaragua, El Salvador, Honduras, Guatemala and Costa Rica.
Domestic textile associations staunchly oppose allowing nonsignatory countries to participate in a regional trade agreement and some said Wednesday they do not endorse the compromise orchestrated by Ross, chairman and chief executive officer of W.L. Ross & Co. and ceo of Burlington Industries.
It is unclear how Ross’ group, which includes some textile executives, will interact with a large group of textile and fiber associations that has carefully crafted a unified coalition to battle against flexibilities, such as cumulation, in CAFTA’s rules of origin, as well as the flood of imports from China.
Importers, retailers and apparel manufacturers hailed Wednesday’s agreement in principle and remained optimistic about the future of the CAFTA negotiations, slated for completion by the end of the year.
In an exclusive interview with WWD in a car whisking him to the airport for a flight to New York, Ross claimed the meeting was a success, though he acknowledged a lot of hurdles remain.“Getting these disparate people together in one room is apparently an unusual event,” Ross said. “What is even more unusual is they agreed on fairly fundamental issues as opposed to being at each other’s throats.”
Ross admitted he has the support of a limited group of people and said everyone “has to go out and try to proselytize and get other people on board with it.”
“I’m sure there will be naysayers on all sides of the equation before we finish, but at least it’s a good start,” said Ross, who then paraphrased Benjamin Franklin when he added: “We must all hang together or surely we will hang separately.”
The fractious sides have had difficulties reaching any type of compromise on trade policy throughout time. “Historically, the industries have spent more time dealing with differences than with commonalities,” Ross said.
That was one reason he did not invite another textile titan, Roger Milliken of Milliken & Co,. who is a member of Ross’ own trade coalition, to his meeting Wednesday.
“I think one problem, historically, is that people just take rigid position, with nobody yielding, and as a result, the government does what it feels like doing rather than getting a clear direction from a middle-of-the-road group,” said Ross. “I would hope at some point Mr. Milliken would conclude that this is better than some alternatives people have discussed.”
But Ross’ battle to find a consensus in the broader textile industry will be much larger and much more difficult. In addition to Milliken’s counsel in Washington, the American Textile Manufacturers Institute and the American Manufacturing Trade Action Coalition both have said they would not endorse this latest agreement.
“I’m afraid that either Wilbur knew what he was doing or that he didn’t know what he was agreeing to because it would be a nightmare and a disaster,” said Jock Nash, Washington counsel for Milliken. “Any politician that votes for this is voting to end the U.S. textile industry.”
Nash said the agreement in principle contains “principles that led to the downfall of this industry, not principles to save it.” He also noted the textile companies represented at the meeting all have significant investments in Mexico, which is presumably one reason they would support the concept of cumulation.“Where were the interests of the domestic corporations?” he asked rhetorically. “Who represented them at this meeting?”
Cass Johnson, interim president at the ATMI, said his association has not and will not change its position on cumulation, which it opposes.
“When all is said and done, what it comes down to is, will the agreement pass Congress?” Johnson asked. “We have 170 members in Congress who signed a letter saying they will not support a CAFTA [with flexibilities allowing the use of foreign fabric outside of the trade region].”
In response, Ross said simply: “I didn’t expect anyone to change their position instantaneously. There is a lot of history here.”
Despite the apparent lack of support from some textile trade associations, Ross has big backing from retail and wholesale importers.
“We had a meeting of the minds among these divergent groups on some of the main issues,” said James Jacobsen, vice chairman of Kellwood Co. “I think a full cross section of the industry or supply chain was represented and hopefully we can move toward a recommendation [to the government]. What we have to deal with more than anything is the changing global economy with the end of quotas [at the end of 2004]. Other parties recognize with this change we all have to get together.”
Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel, said, “This is a compromise from a very influential group of executives. It’s a starting point. It’s wrong for anyone to reject this initiative out of hand. Now it’s time to see if we can’t craft something that works for every segment of the industry.”
“I believe this is the breakthrough we’ve been looking for in our negotiations with the textile industry,” said Kevin Burke, president and ceo of American Apparel & Footwear Association. “We are very optimistic that both sides made great strides today and it was a very positive meeting that will hopefully lead to a free-trade agreement that will benefit both apparel and textile industries.”
Meanwhile, the ad hoc group, comprising executives and representatives from Target Stores, Asheboro Elastics, Burlington Industries, Coats North America, Cone Mills, Dan River, Galey & Lord, Gap Inc., Jockey International, Kellwood Co., Limited Brands/Mast Industries, Parkdale Mills, J.C. Penney, Phillips-Van Heusen Corp., Sara Lee Branded Apparel, VF Corp., Wal-Mart and Warnaco agreed to establish a working group to find a compromise on short supply.The working group, which will meet today, plans to reconcile two different proposals put forward on how to revamp the short-supply process, which all sides argue is too time consuming and cumbersome, and give a joint recommendation to the Department of Commerce on Monday.
If the government deems a product in “short supply” it means it cannot be made in the U.S. in a timely or commercial manner and therefore can be imported from anywhere in the world under preferential treatment.
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