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Textiles in an Election Year: Industry Execs Descend on D.C.

The final round of talks on the Central America Free Trade Agreement starts next week, as the White House searches for détente on the divisive issues.

WASHINGTON — The battle between free trade and protectionism has a reached a fever pitch and might have found a chief mediator.

Industrialist Wilbur Ross is maneuvering to help reach a compromise between importers and the domestic industry over a Central America Free Trade Agreement, which has become emblematic of the Bush administration’s and Congress’s balancing act between championing global trade and protecting jobs in a presidential election year.

Ross, a newcomer to textile politics who is chairman and chief executive officer of W.L. Ross & Co. and ceo of Burlington Industries, has called a meeting in Washington for today at the offices of the Business Roundtable — a high-brow association of leading ceo’s — to bring together corporate executives from some of the leading U.S. apparel, retail and textile companies.

Invited guests include U.S. trade officials and executives from J.C. Penney, Gap, Limited, Wal-Mart, Target, Jockey, Levi’s, Kellwood, Sara Lee, VF Corp., Phillips-Van Heusen, Warnaco, Cone Mills, Dan River, Parkdale Mills, Galey & Lord and Ashboro Elastics, according to sources.

Notably missing from the guest list is textile titan Roger Milliken of Milliken & Co., who has maintained a steadfast no-compromise position to protect what’s left of the U.S. manufacturing base. Lobbyists for the major trade associations are apparently also excluded from today’s meeting.

The final round of CAFTA talks also comes at a time when the Bush White House’s global goal for easing trade barriers and tariffs have been questioned by the European Union and the Chinese. At the same time, the ambitious U.S. bid to create a Free Trade Area of the America’s has been recently pared back, making CAFTA the only potential Bush trade victory in the wings.

Ross, who did not return calls to his New York office Tuesday, recently launched a trade coalition to address a trade policy he claims has unnecessarily cost the U.S. hundreds of thousands of manufacturing jobs, ranging from steel to textiles to high tech industries.

Today’s planned meeting marks Ross’ first solo attempt to address a deeply divided textile and apparel sector grappling with free-trade principles and massive domestic employment losses.

Importers are welcoming Ross’ intervention, but the domestic textile industry is, for the most part, uncharacteristically quiet.

Peter McGrath, president of J.C. Penney Purchasing Corp., said Ross is emerging as “the natural leader” of the textile industry. McGrath’s hope is that Ross will provide middle ground to a uniform front forged by a coalition of textile and fiber groups that opposes any flexibility in CAFTA rules of origin.

But McGrath acknowledged how difficult it will be for anyone to bridge the gap.

“All of the parties are interested in trying to work through some sort of positive solution, but there are a lot of years of bitter fighting between the sides,” he said. “I don’t think everything will fall into perfect harmony right away.”

Jock Nash, Washington counsel for Milliken & Co., said, “Presumably, Wilbur has the interests of domestic manufacturing in mind.” But Nash said he hasn’t “heard an idea I like yet” from the previous CAFTA discussions led by Grant Aldonas, undersecretary of international trade at the Department of Commerce. “We at Milliken are concerned about domestic manufacturing, not hemispheric manufacturing,” Nash added.

Augustine Tantillo, Washington coordinator of the American Manufacturing Trade Action Coalition, said he is waiting to see how it all plays out, but he isn’t holding out much hope for a compromise.

“The industry, for the most part, has communicated to the government that times are so difficult for us we can’t entertain the type of flexibility retailers and importers want because we won’t be able to deal with China,” Tantillo said. “You can’t talk about CAFTA in a vacuum.”

On the other side, Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel, called today’s meeting a “momentous event, whether it is successful or not.”

“Everyone has to give kudos to Wilbur for making the effort to bring together diverse voices within the industry,” she said. “I would be skeptical, however, that the outcome can lead to a consensus in one meeting. But we have an open mind.”

As the clock ticks down on the phaseout of quotas on all textile and apparel products at the end of 2004, as mandated by the World Trade Organization, both sides are staking out positions.

The Bush administration recently agreed to impose quotas on robes, dressing gowns, knit fabric and bras from China to help the beleaguered domestic textile industry brace itself from an expected onslaught of Chinese imports in 2005. That move rankled importers who aggressively fought against the safeguards but lost and now are fighting even harder for a “commercially viable” CAFTA — one in which they hope allows the use of fabric from around the world.

Enter Ross, whose agenda today is expected to include discussion on some of the most contentious textile and apparel issues fracturing the CAFTA talks, according to sources. The U.S. hopes to finish the CAFTA negotiations with Nicaragua, Costa Rica, Honduras, El Salvador and Guatemala by the end of the year, but labor and environmental issues are expected to fuel a heated debate on Capitol Hill next year, which will make passage of the trade deal difficult.

Resolving apparel and textile issues — politically sensitive areas in all five of the Central American countries, as well as in the U.S. — is also seen as critical.

Ross is expected to take up the issue of cumulation — a lightning rod put forward by the Central Americans that seeks to allow companies to use fiber, yarn or fabric inputs in apparel production in the region from any country that has a free-trade deal with the U.S. or Central America, such as Jordan, Mexico and sub-Saharan Africa, and receive duty-free entry into the U.S. The U.S. has said that concept is WTO compatible, but has not said whether it will pursue it in the negotiations.

Another major issue expected to arise is a “short supply” list, which means products that cannot be made in the U.S. in a timely or commercial manner can be imported from anywhere in the world under preferential treatment if they are deemed in short supply. The U.S. has already declared 24 items in short supply in other trade agreements and the Central Americans want to nearly double the list of items.

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