WASHINGTON — As one of the most divisive and mud-slinging elections in U.S. history hurtles to a close, the fashion and retail industries are holding their collective breaths to see which way the new president will tilt on key decisions impacting trade and the economy.
With the polls tightening in key battleground states and Hillary Clinton battling to maintain her overall lead, both she and her rival, Donald Trump, stepped up their attacks over the weekend — Clinton on Trump’s character and Trump on everything from Clinton’s e-mail scandal to the state of the economy.
For the industry, the key questions remain on what either candidate would do on trade — most urgently, the looming Trans-Pacific Partnership deal — and on such issues as the minimum wage, Made in the U.S. and immigration.
Trump is firmly a protectionist when it comes to trade and he has vowed to not only drop TPP, but even renegotiate the North American Free Trade Agreement and impose tariffs on all imports from China and Mexico. He has also said he will label China a “currency manipulator,” all of which sends chills through the business industry.
Clinton has voiced opposition to the 12-nation pact on the hustings, under pressure from the left wing of her party, which rails against job losses associated with trade deals. If she does stay true to her word, experts believe there could be an impact on the U.S. economy, mainly in the area of lost economic opportunities.
The trade and business community is banking on Clinton to make changes to TPP and then give her approval if she wins the presidency. Most trade experts believe Clinton won’t just walk away from the pact after the U.S. invested seven years in the negotiations and expanded political investment on the foreign stage.
TPP is one of the largest trade deals the U.S. has ever negotiated. It includes the U.S., Australia, Japan, Mexico, Canada, Vietnam, Malaysia, Peru, Singapore, Chile, Brunei and New Zealand. Their respective governments must now ratify it in order for it to be enacted. If implemented, it would encompass nearly 40 percent of the world’s gross domestic product.
It’s also seen as a potential cornerstone of President Obama’s legacy and a potential boost for U.S. exports and the economy overall.
Congress could pass TPP in a lame-duck session after the election, which would give President Obama the opportunity to sign it into law. Congressional leaders have repeatedly signaled they do not have the votes to pass it but some officials believe the door is still open for a vote on TPP after the election.
If Congress fails to pass TPP after the election, the next president would have to reintroduce implementing legislation to Congress. Assuming it is Clinton, she could try to negotiate side deals to TPP, renegotiate it altogether — a far riskier proposition — or walk away from it.
Clinton’s views on TPP have taken some twists and turns. As secretary of state under President Obama, she was tasked with carrying out the president’s priorities and lobbied for the trade deal, at one point during the negotiations calling it the “gold standard” of trade deals. As a presidential candidate, her views changed, particularly under pressure from key primary challenger Sen. Bernie Sanders, who vigorously opposed TPP.
Clinton now says she opposes the TPP deal as it is written, which some view as leaving her wiggle room to ultimately support it, and has outlined three criteria for trade deals: create jobs, raise incomes and increase national security.
Many industry officials believe Clinton will pivot to support TPP once she is in the White House, although not quickly or easily.
“I don’t think she will walk away from the TPP agreement,” said Hun Quach, vice president for international trade at the Retail Industry Leaders Association. “I think she sees the strategic importance of our economies being connected. She sees opportunities for U.S. companies and U.S. workers in being involved and working on TPP. I don’t think that she is interested in walking away from these major partners who have committed to strong labor and environmental standards and opening up their markets for U.S. exports.”
Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, said he expects Clinton to “re-brand” TPP if elected. He said she will have to work with the left wing of her party and labor groups such as the AFL-CIO that have been vocally opposed to the trade deal.
“All of that says to me that she will be very slow to try to craft a new deal and if she does craft a new deal, it will be quite different as she tries to totally re-brand it,” he said.
There is disagreement over whether the U.S. could successfully renegotiate TPP, as many of the countries involved have made it known they would not come back to the negotiating table. Some experts have said there is a better opportunity to negotiate side deals on key issues.
Joshua Teitelbaum, former deputy assistant secretary for textiles, consumer goods and materials at the U.S. Commerce Department, who played a key role on textiles in the TPP negotiations, said: “Ultimately, renegotiation for TPP is something I’m sure other countries would not be receptive to.”
Teitelbaum, who is now with Akin Gump Strauss Hauer & Feld LLP, noted that while Obama administration officials have stated that renegotiation is not on the table, there are other mechanisms such as side letters with which to resolve outstanding issues.
Mickey Kantor, U.S. Trade Representative under President Clinton, said the other TPP partners might be receptive to changes to the deal “depending how vigorously they are advocated by a Clinton administration.”
“It will take hard work. You are talking about 11 other countries — two of our three largest trading partners among them — Canada and Japan,” Kantor said. “You would have to draft and propose changes that are also attractive to the other countries and not try to run over them.”
Kantor said Clinton has “always been a trade skeptic.”
“She voted against the Central American Free Trade Agreement [while a senator] and has always been concerned about jobs, incomes and other matters that some believe are affected adversely by trade,” he said. “The idea that any president coming into office would accept a pending trade agreement without any changes, without any alterations, without discussion, without any concern would be naïve.”
Projections on potential economic losses if TPP is never implemented vary widely.
The U.S. International Trade Commission has said there will be a small positive gain for the U.S. economy from the trade deal. An ITC study found that U.S. annual real income would increase 0.23 percent, or $57.3 billion, by 2032 compared to baseline projections that did not include TPP. Real GDP would be $42.7 billion, or 0.15 percent, higher than baseline projects and employment would be 0.07 percent, or about, 128,000 full-time equivalents, higher than the baseline.
U.S. exports would increase 1 percent, or $27.2 billion, while imports would gain 1.1 percent, or $48.9 billion relative to baseline projections, according to the ITC.
Economists at the Peterson Institute for International Economics estimated in one study that each year’s delay in implementing TPP represents a $77 billion to $123 billion permanent income loss for the United States, depending on the discount rate applied.
Rick Helfenbein, president and chief executive officer of the American Apparel & Footwear Association, said if TPP doesn’t pass, he believes “there would be little long-term damage to the apparel industry (in terms of imports) as China and Vietnam together already control 48 percent of all imports to the USA and that’s with duty.”
“The USA would suffer some short-term loss of credibility but, in the long term, everyone still wants to trade with us, so new opportunities will arise,” Helfenbein said.
Among the key sticking points outlined by lawmakers are inadequate patent protections for biologics, high-priced medicines derived from living organisms, and dispute settlement provisions for tobacco products.
“Given the time and resources that I personally put into and invested in this agreement, which are not nearly as significant as a lot of the negotiators and staff who worked on it for many years, I have to be an optimist about the chances for passage of this agreement,” Teitelbaum said. “I just believe it is too important to not consider the strategic value for the U.S., both economically and as a global power in the Asia-Pacific region. The president and administration will be all in in trying to push it during a lame duck.”
Kantor said there is a “strong possibility” Congress can pass TPP in a lame-duck session. “I think there are a number of members in both the House and Senate who, in a lame-duck session, will feel more politically free to support it. If that is the case, I think it can pass.”
Julia Hughes, president of the U.S. Fashion Industry Association, said if Congress fails to act on TPP, “When you go in as president, you have a honeymoon and lot of goodwill. But to quickly pivot to support something that was such a hotly debated issue during the campaign, I can’t see her [Clinton] doing that.”
If it is not ratified by the U.S., Helfenbein said he expects the U.S. and the TPP partners to try to pursue separate and smaller trade deals, which could be easier to get through Congress.
As for what would happen if Trump pulls out a last-minute victory in the election, the business community is concerned that he would kill the TPP deal outright and they have a new study that underscores the downside of failing to implement the agreement.
The White House Council of Economic Advisers said in a report Friday there are risks to U.S. workers and companies if Congress fails to vote on TPP. The council predicted there will be “substantial” lost opportunities to increase economic growth and productivity in the U.S., which would “prevent the United States from helping to shape trade in Asia to adhere to high standards and U.S. values.”
If TPP fails to pass, the CEA said other countries have made it clear they will negotiate their own trade deals. A big deal waiting in the wings is known as the Regional Comprehensive Economic Partnership agreement, which does not include the U.S., but does include China, Japan and many other Asian countries and TPP partners such as Vietnam.
But it isn’t only TPP that is raising industry concern. Trump has promised to renegotiate NAFTA and withdraw from it if Canada and Mexico refuse to do so, calling it “the worst trade deal ever.” Experts believe that even Clinton could try to update that deal, even though it was negotiated by her husband when he was president.
Asked if Clinton might also reopen NAFTA if elected, Kantor said, “Frankly, I have always advocated it. It has been 23 years since NAFTA passed Congress and it needs to be updated. All three countries should want to do it. If president-elect Clinton asked me, I would say absolutely. In 1993, when we finished NAFTA and it passed Congress, there was no such thing as the Internet. Can you imagine the things that are not included in NAFTA?”
According to a report from the Wharton School of Business, overall trade between the three NAFTA partners has increased sharply over the pact’s history, to more than $1.1 trillion in 2016 from about $290 billion in 1993. It cited Wilson Center estimates that 25 cents out of every dollar of goods that are imported from Canada to the U.S. is actually “Made in USA” content, as are 40 cents out of every dollar for goods imported into the U.S. from Mexico.
Some critics argue that NAFTA is to blame for job losses and wage stagnation in the U.S. because competition from Mexican firms has forced many U.S. companies to relocate to Mexico, the Wharton study noted.
Kantor said NAFTA has been “helpful to the U.S. economy, no doubt. That cannot be argued.”
“Of course there have been job shifts, mostly because of technology and globalization, but some because of NAFTA,” he said. “We are not losing jobs. We are shifting jobs, but we have not done a good job of that. No administration has. I am criticizing myself and everyone on that.”
It is this division that worries fashion and retail executives — as well as executives in almost every industry. Whether it is TPP, or modifying NAFTA or completing negotiations on trade deals under way between the U.S. and European Union, industry and trade officials said the U.S. can’t ignore globalization.
“We have never in my knowledge in our history turned down a trade agreement — ever,” Kantor said.
In Trump’s view, all that matters is Made in America and he has vowed to bring back to the U.S. industries like steel-making or coal mining that left the country long ago because they were either uncompetitive or for environmental reasons.
Under the campaign slogan of “Make America Great Again,” Trump has outlined several tax reforms, including lowering the corporate tax rate and trade reforms, both of which he said will create new jobs in the U.S.
A large portion of his economic plan centers around cracking down on unfair trade and keeping the U.S. out of “bad” trade deals that could lead to more job losses.
Trump has also come under fire for reportedly having his suit and tie collection made in Mexico and China, while he simultaneously rails against off-shoring. And he has angered the business community with disparaging remarks he made about Mexican immigrants. Macy’s Inc. dropped his signature suit business in its stores last year over those incendiary comments on the campaign trail.
Clinton has outlined a plan to strengthen U.S. manufacturing through a $10 billion investment in “Make It in America” partnerships that bring a broad coalition of workers, labor, business, universities and community colleges together to focus on boosting U.S. production. Companies that take part will have to pledge that they do not shift jobs or profits from the partnerships abroad and will support “buy American” standards.
She has also proposed creating tax incentives to encourage investment in the hardest-hit manufacturing communities, crack down on companies that ship jobs and earnings overseas and expand apprenticeships and training focused on manufacturing.
On minimum wage, which has stood at $7.25 an hour for seven years, both candidates have shown varying degrees of support for raising the federal rate.
Clinton supported a $12 minimum hourly wage at the start of the campaign season, but has since she would support taking it to $15 an hour, looking to garner support from the progressive wing of her party.
Trump supports increasing the minimum wage, but has also said it should be left to the states, which is a reversal of a position he took opposing a hike in last year’s debates.
Their approaches to immigration are vastly different.
Clinton has pledged to introduce comprehensive immigration reform and provide a “pathway to full and equal citizenship within her first 100 days in office” and also supports providing legal status to children who arrive in the country illegally and allowing immigrant parents of children born in the U.S. to receive work permits and avoid being deported.
Trump’s plan does not call for a “pathway to citizenship,” but does call for deporting millions of undocumented immigrants, significantly expanding the U.S. border control infrastructure and building a massive wall between the U.S. and Mexico.
But there could be even a bigger moment at stake in American political history, according to Chuck Todd, host of “Meet the Press” and political director of NBC News, who recently spoke at the WWD CEO Summit. In his view, the upheaval from this election could fundamentally change the Democratic and Republican parties. In his view, one party is likely to be internationalists and the other isolationists.
“I think the two political parties are going to reorganize themselves on economic issues, not on social issues,” Todd said. “The cultural wars have essentially ended in the last month….We are going to have a debate over capitalism in this country.”