WASHINGTON — President Bush untied one of the complex trade knots his administration is facing Thursday, but there’s still a tricky tangle of trade issues to be resolved.

In a move to avert a threatened trade war with the European Union, the President agreed to lift punitive tariffs on imported steel. Bush declared that the 20 months of temporary tariffs, which the World Trade Organization had ruled illegal, had served their intended purpose by giving ailing U.S. steelmakers time to reorganize. His decision immediately prompted the EU to drop its threat to levy more than $2 billion in retaliatory tariffs on U.S. goods, including textiles and apparel.

But several other issues remain to be addressed on the trade front.

Next week, Bush is to meet with Wen Jianbao, China’s premier, at a time of strained U.S.-Chinese trade relations. Chinese officials have complained about the administration’s decision last month to impose temporary quotas on imports of selected Chinese textile and apparel products. That move was intended to help beleaguered U.S. textile mills, which have lost 312,500 jobs since the President took office in January 2001.

But the move to impose safeguard quotas — which were allowed under the terms of the U.S.-China bilateral trade deal that paved the way for China’s WTO entry — was also seen as a signal by many in the industry that the White House might be willing to take broader actions to limit Chinese imports in 2005. That’s when the nations of the WTO are set to drop quotas on textiles and apparel.

While textile lobbyists reacted positively to the China move, they remain divided on the terms of the Central America Free Trade Agreement, which the administration is racing to complete before the month’s end.

As reported, corporate turnaround expert Wilbur L. Ross, the new chairman of Burlington Industries, has been in Washington this week striving to forge a deal on the apparel rules of origin in the pact.

On Wednesday and Thursday, Ross met with an ad hoc group of about 20 textile and importer concerns, which apparently agreed to support Mexico’s desire to piggyback on CAFTA, which would amount to an incremental step toward the administration’s long-term goal of creating a Free Trade Area of the Americas. The outcome of those meetings has been new discord in an otherwise publicly unified front among domestic mills regarding CAFTA.By advocating that non-U.S. or Central American fabric be used in apparel receiving duty-free treatment under CAFTA, Ross is ruffling feathers with a swath of the domestic textile industry.

“They don’t accurately represent the textile industry,” said Jock Nash, a lobbyist for textile giant Milliken & Co.

Cass Johnson, acting president of the American Textile Manufacturing Institute, is equally miffed by Ross’ maneuvering. In addition, Johnson on Thursday said he received an e-mail from Parkdale Mills’ chief executive officer Andy Warlick disavowing any support of Ross’ CAFTA compromise.

Parkdale, which sent a sales representative to the Wednesday meeting, was cited on a news release backing a CAFTA compromise with retailers and importers.

“I can assure you this was not the case,” Warlick wrote in an e-mail to the ATMI obtained by WWD. Warlick could not be reached for comment, but his office confirmed the message was genuine.

Ross’ ad hoc group of textile producers and importers only endorsed the idea of “cumulation,” or piggybacking the North American Free Trade Agreement and other free-trade pacts on CAFTA. The group didn’t address the more controversial issue of Trade Preference Levels, which would allow a certain amount of duty-free apparel produced in Central America to be made from any foreign fabric.

The tempest over CAFTA’s textile origin comes at a time when an umbrella group of 17 textile, fiber and labor organizations have made the trade pact’s contents a litmus test for President Bush, who is facing reelection next year, and for members of Congress who will vote on the pact next year and most of whom also are up for reelection.

This coalition has amassed support for their CAFTA position from more than 170 Capitol Hill lawmakers, including key Republicans, who last month signed a letter to that effect.

House textile caucus member Sue Myrick (R., N.C.), who signed the CAFTA letter, said, “If the industry works out something different” and agrees to some foreign fabric, “then we’ll support what the industry wants.”

Myrick attended the Wednesday Ross meeting and was encouraged to see warring textile importers and domestic producers engaging in detente.“What can be said about this meeting is there were people talking for the first time in years. To me, that is very positive,” she said. “I try and represent the views of the people who put me in office. It’s up to the industry to decide, not government, what works for them.”

For their part, U.S. importers of textiles and apparel have been buoyed by the combination of Bush lifting the steel tariffs and Ross apparently making some inroads in changing the textile industry’s mind on CAFTA.

Kevin Burke, president and ceo of the American Apparel & Footwear Association, said lawmakers are anxious for importers and mills to work out their differences.

The AAFA, along with retailers, contends allowances for foreign fabric in CAFTA is needed to make the pact commercially viable.

“Congress doesn’t want to stand between two industries,” said Burke. “When CAFTA hits Congress, all heads will turn to the textile caucus and say, ‘What should we do with this?’”

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