By and  on November 9, 2006

WASHINGTON — The Democrats' victory in the House, and possibly the Senate, may have wide-ranging implications for trade, wage and tax policies that affect apparel manufacturing and retailing.

House Minority Leader Nancy Pelosi (D., Calif.), who is in line to become the first woman speaker, has outlined an aggressive agenda that includes raising the minimum wage and repealing incentives that "serve to export American jobs overseas." As the Democrats took control of the House for the first time in 12 years, Pelosi promised to cut taxes to spur economic growth, help business become more competitive and keep middle-class taxes low.

Both President Bush and Pelosi said on Wednesday that they would work together to find common ground in a political landscape turned upside down. That might be easier said than done. There have been fears, particularly among retailers and importers, that Democrats will stifle new free trade deals. Others, however, see a potential for dialogue that will energize cooperation on trade issues.

"Any change in philosophy toward free trade will be ultimately, we believe, problematic for our industry and ultimately problematic for the consumer," said Peter Boneparth, chief executive officer of Jones Apparel Group, referring to the Bush administration's free trade strategy. "I'm hopeful that's not the case. I'm hopeful that despite the changes in Congress, free trade continues to be the mantra for the U.S."

In discussing core industry concerns, executives and lobbyists acknowledged the need for national unity and a cohesive plan for Iraq.

"It is very exciting in the fashion business to have change, and a major change like this is invigorating….I think the country now has a sense of trust, and consumer confidence builds great business," said Bud Konheim, ceo of Nicole Miller, who urged a "rational approach to protection and free trade.''

The impact of the shift in power could cut both ways, said Brad Figel, global director of government and public affairs at Nike Inc., the world's largest athletic company, who heads the Washington lobbying office.

"It is not good for business if the trade agenda stalls — that's the downside," Figel said. "But if there is a consensus moving forward [and a more open dialogue between Democrats and Republicans] and trade legislation passes on a bipartisan basis, it will be terrific."Figel said the Bush administration needs to "rethink its approach to moving trade legislation through Congress" because "they can't get it done by one or two votes anymore," Figel said.

Several trade bills are in the balance, including legislation granting permanent normal trade relations to Vietnam — an important apparel hub for importers, but a threat to domestic textile producers — a free trade agreement with Peru and several expiring trade preference programs for sub-Saharan African countries and four Andean countries.

There could be a renewed push to place more restrictions on imports from China if Democrats follow through with legislation targeting everything from illegal subsidies to currency manipulation initiatives.

The President's trade promotion authority, which expires in July, is also in jeopardy. The authority requires Congress to vote up or down on a trade agreement without amendment, which has created tension on Capitol Hill. The Bush administration's chances of getting a trade deal through Congress would be slim without it. The global round of trade talks, which is already on life support, will be affected if trade promotion authority is not renewed.

Rep. Charles Rangel (D., N.Y.), who is likely to be the next chairman of the House Ways and Means Committee, suggested that the administration has been too easy on China. "I don't think this administration has taken up any issues with the Chinese in going to bat for American businesses," Rangel said. "I realize it is difficult when you owe a country trillions of dollars to talk about censure for violating trade laws, but we need to try to protect American industries, whether we are talking about currency or intellectual property rights.''

Retail and apparel executives lost business- and trade-friendly GOP allies on Capitol Hill, while organized labor picked up several Democratic power brokers who will try to elevate an agenda more favorable to domestic manufacturers and workers.

"We've lost allies, but we also have members on the Democratic side of the aisle who we can reach out to," said Steve Pfister, senior vice president of government relations at the National Retail Federation.

Kevin Burke, president and ceo of the American Apparel & Footwear Association, said, "It will slow some pro-business issues up a bit, but I don't think the Democrats are going to shun those issues."Textile executives hope the change in power will put the brake on the administration's aggressive trade agenda.

"There is going to be much more significant oversight and scrutiny," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.

Tantillo's counterpart, Cass Johnson, president of the National Council of Textile Organizations, said, "The trade agenda is continuing to shift toward an anti-free trade stance."

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