The Midterm Elections: Industry Mulls Impact Of Possible Power Shift

There's a lot at stake for the fashion industry in the upcoming Congressional midterm elections and the outcome could dictate how companies operate.

WASHINGTON — There’s a lot at stake for the fashion industry in the upcoming Congressional midterm elections and the outcome could dictate how companies operate.

The entire House and a third of the Senate are up for grabs on Nov. 7. Democrats are out to regain control of Congress while Republicans try to hold on. Observers believe at a minimum the Republican majority will shrink, which has industry executives and associations reassessing their lobbying strategies and legislative wish lists. If the one-party status quo remains — the GOP controlling the White House and both chambers of Congress — there will still be challenges after the elections.

The top national issues this election year — the war in Iraq, the war on terrorism, the economy and ethics scandals — will weigh heavily on voters’ minds and shape the election results.

If Democrats regain the majority or make inroads in the House or Senate, priorities will change for both parties. That will have an impact on the industry’s key legislative issues, which broadly include trade, tax and health care policies, port security, customs and border patrol issues, immigration and the minimum wage. Should the GOP lose control of either chamber, the Bush administration would find it tough to move its domestic and foreign policy agendas and lose control of key committees. (See related story, this page.)

House Democratic Leader Nancy Pelosi (Calif.), a likely Speaker if Democrats take control of the House next year, laid out the Democrats’ priorities in a speech at Georgetown University on Oct. 5.

Pelosi pledged to raise the minimum wage and “repeal current tax incentives that serve to export American jobs overseas.” She also promised to cut taxes to spur economic growth, help businesses become more competitive and keep tax rates low for the middle class.

“This is our recipe for jobs and growth, making our country more competitive, our economy fairer, college more affordable, health care more accessible, our tax code more equitable, all achieved with fiscal discipline,” said Pelosi.

Academics and political experts predict Democrats won’t have the muscle to effect major policy changes even if they wrest control because they won’t have the votes to override a presidential veto. But they will control the agenda, which will create more legislative logjams on Capitol Hill for the next two years.

This story first appeared in the October 19, 2006 issue of WWD.  Subscribe Today.

“Either side in the majority will have a difficult time building coalitions” on such narrow margins “because the other side will go out of its way to not be helpful,” said Eric Heberlig, associate professor of political science at the University of North Carolina at Charlotte. “Getting the President to sign anything will be an even bigger challenge. Business organizations aren’t going to have as easy a time as they’ve had in the past 10 years in getting their priorities considered.”

Retailers, who are largely supportive of Republicans on Capitol Hill because they have similar views on economics, business and trade policies, are evaluating a shift in their lobbying strategies should Democrats prevail.

“If Republicans maintain control, we will try to pick up where we left of in our priority areas and we will look for opportunities to continue advancing issues such as tax depreciation for retail properties, reform of the estate tax, free trade agreements and a more rational role for government in all aspects interacting with businesses,” said Rob Green, vice president of government and political affairs at the National Retail Federation. “It would give us the chance to hit the ground running as opposed to if there is a majority change in one or both chambers, where we would go from offense to defense on some issues.”

Green said organized labor’s agenda will receive “increased prominence,” adding he expects to see a renewed push for an increase in the minimum wage under Pelosi and Rep. George Miller (D, Calif.), who would take over the House committee with jurisdiction, in addition to a push for comprehensive immigration reform, with Rep. John Conyers (D., Mich.) chairing the Judiciary Committee.

“Overall, I would say the [retail] industry has done pretty well with a Republican government — a government that wants to open up trade, wants to allow cargo to move freely, while ensuring the homeland is safe and a government that wants people to have more money in their own pockets for spending, savings and investment,” said Paul Kelly, senior vice president and chief lobbyist for the Retail Industry Leaders Association. “Democrats have fought that all the way and at this point it is hard to imagine that a Democratic government would be [supportive] of the industry’s” issues.

Kelly said a potential change in the House Ways & Means Committee, from Rep. Bill Thomas (R., Calif.), a “strong free trader,” to Rep. Charles Rangel (D., N.Y.), who is more “skeptical of free trade agreements,” would be problematic for retailers and the trade agenda as a whole.

Rangel is supportive of some trade-expanding measures, as in a bill he introduced this year that provides an extension of apparel and textile trade benefits for sub-Saharan African countries, Haiti and the four Andean nations.

Kelly said Democrats might also make a push for changing homeland security policies and resurrect attempts to pass legislation that would require 100 percent screening of all cargo containers coming into the U.S., an issue retail lobbying groups spent an enormous amount of time and money fighting against in a comprehensive port security bill that Congress passed just prior to adjourning to campaign.

The political dynamic would change the most on Ways & Means because Thomas is retiring, said Stephen Lamar, senior vice president of the American Apparel & Footwear Association.

“Under any of the [post-election] scenarios, there will definitely be leadership changes and at a minimum we know there will be a new chair of Ways and Means,” said Lamar, adding it was difficult to gauge how trade issues and legislation would be affected if Democrats take control of one or both chambers.

“You’ve got some Democrats that are very eager to see the trade agenda move forward and other Democrats who want to see it move forward but want to put a different stamp on it, and still others who don’t want to see any trade agenda move forward,” said Lamar. “We’re not sure yet how Democratic leaders in the House would manage those divisions.”

The U.S. textile industry is unsure what a Democratic-controlled House or Senate would mean.

“I’m not sure there would be a dramatic shift in some of the individual trade issues because there are Democrats [most notably Rangel] who are pushing for certain items such as liberalizing [preferential trade] arrangements with Haiti or liberalizing arrangements with sub-Saharan African countries,” which textile producers oppose, said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.

A shift in power would also further dampen the prospects of renewal of presidential trade promotion authority, which requires Congress to vote up or down on trade bills without amendment. It expires at the end of June and Congress must renew it.

“If Democrats take control of the House, they are going to be less inclined to give President Bush that tool in his closet for the next two years,” said Tantillo. “I think the probability of passing [TPA] will decrease fairly significantly and that will impact trade policy in a number of ways,” including hurting the chances of a successful outcome to the stalled round of global trade talks, as well as any future trade agreements the administration sends to the Hill.

Organized labor’s demands will play a big role in shaping the Democrats’ agenda, said Missy Branson, senior vice president at the National Council of Textile Organizations.

“They are spending $40 million-plus on this election and if the Democrats win, trade votes will not be at the top of the union’s pay-back agenda,” Branson said. “I think minimum wage and health care reform — making it more accessible to more people — will be top priorities.”

Branson said she expects oversight to consume a lot of the Democrats’ time and Pelosi has pledged to launch several investigations into the administration’s policies.

“We have a very good working relationship with Democrats, especially on the House side,” said Branson. “It will be a little more challenging on the Senate side because there aren’t any Democratic senators in the Southeast, which is the hub of our manufacturing base.”

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