WASHINGTON — As Congress returns for its fall session today, impending battles over the funding of the government could delay or even scuttle the completion of key industry issues, including an Asia-Pacific trade deal, cyber security, an Internet sales tax and patent reform.
The anticipated divisive battles over funding the government, which many are concerned could lead to a government shutdown, will weigh heavily on the Congressional agenda and force some measures into next year. With the 2016 presidential election swinging into high gear, getting legislation though Congress next year could also be difficult.
To further complicate matters, Pope Francis is scheduled to visit Washington near the end of September, which will consume more valuable time, followed by a state visit from Chinese President Xi Jinping that could heighten tensions between the U.S. and China over contentious topics such as the Asian nation’s currency policies and U.S. allegations of Chinese cyber theft.
The top issue on the fashion industry’s radar is the Trans-Pacific Partnership trade agreement. The Obama administration will work toward narrowing differences with 11 other countries involved in the TPP talks in an attempt to reach a deal by the end of the year, while also advancing negotiations on a separate trade pact with the European Union, known as the Transatlantic Trade and Investment Partnership.
On Capitol Hill, several industry other issues could come into play this fall: a bill addressing a disparity in sales taxes between brick-and-mortar stores and online sellers, legislation on cyber security, patent reform and Customs reauthorization and enforcement.
“There is a lot of concern with the House in particular that they will want to do something to defund Planned Parenthood [in a measure funding the government], which of course is something that will not get through the Senate and certainly something the President won’t sign,” said Jennifer Safavian, executive vice president of government affairs at the Retail Industry Leaders Association. “So as much as I hate to say it, there is the possibility of another government shutdown. I think if that were to happen, it would be short-term. Obviously, I am hoping it doesn’t happen, but I think that is a concern right now.”
Phillip Swagel, a professor of international economic policy at the University of Maryland, said fall action on Capitol Hill will be “heavily centered on fiscal policy,” but he is optimistic about the outcome of those battles.
“Ultimately, the House and Senate leadership are not going to let the government close or the debt ceiling be breached, so the biggest threats are off the table,” Swagel said. “There will be plenty of ups and downs on the budget, debt ceiling, and highway funding, but ultimately it will get resolved — though probably not until late in 2015 or even into 2016, as we can expect continuing resolutions to serve as a bridge to get past the end of September.”
Swagel said other areas will likely take a back seat, including important legislative policies such as cyber security, patent reform and Internet sales taxes, and could be pushed into next year and beyond.
In the midst of the legislative battles are the ongoing TPP negotiations involving the U.S., Japan, Mexico, Canada, Australia, Vietnam, Singapore, Chile, Peru, Brunei, New Zealand and Malaysia. Negotiators were unable to clinch a deal in Maui, Hawaii, at the end of July, despite a big push to finalize negotiations, but vowed to continue trying to narrow differences. The industry is hopeful that negotiators will reach a deal by the end of the year, but Congress would not be able to consider it until next year.
“I really do think there is an opportunity to get the negotiations concluded this year,” said Stephen Lamar, executive vice president at the American Apparel & Footwear Association. “There is definitely a willingness [on the part of the 12 countries] to conclude this year.”
Julia K. Hughes, president of the U.S. Fashion Industry Association, said: “We remain optimistic that TPP will close this year. My gut would be that they finish negotiations this year and spend early 2016 going through the legal scrub and other issues that may be uncovered by any TPP partners. The likeliest scenario is that Congress will vote on it in a lame duck session next year, after the elections.”
AAFA and USFIA are part of a coalition advocating for more flexibility to a strict yarn forward rule of origin that would require apparel be made of yarns and fabrics produced in the TPP region to qualify for duty benefits. They are also seeking shorter tariff phaseouts for products.
Augustine Tantillo, president of the National Council of Textile Organizations, said the breakdown in Maui was all “part of the normal process” in negotiations and said negotiators are working hard to narrow differences. The U.S. textile industry is seeking a strict rule of origin and longer phaseout schedules on sensitive products.
“Whether there’s one more meeting or five more meetings my position is the same. We have significant sensitivities and those sensitivities need to be reflected in how the final agreement turns out in order for the U.S. textile industry to support a finalized TPP,” Tantillo said. “We will continue to press that approach with the government.”
As for the more bread-and-butter bills, Safavian said: “Last year RILA founded the Retail Cyber Intelligence Sharing Center designed to facilitate [threat] information-sharing among retailers. This bill [in the Senate] provides for liability protection for not only retailers but everyone out there to share more information so we can counter these threats that we are constantly under.”
The House passed two cyber-related bills earlier this year and action is pending in the Senate. She noted that she is hopeful the Senate will consider the legislation in October.
The Internet sales tax legislation will likely not be approved this fall and spill over into next year, but the industry is pressing lawmakers for some resolution this year. Two different bills have been introduced in the Senate and House but have not yet advanced.