WASHINGTON — As Congress returns for a new year of business, key industry measures including a 12-nation Asia-Pacific trade deal, Internet sales tax, cybersecurity and patent reform could advance, but the looming presidential elections will weigh heavily on the agenda.
The top issue for the fashion industry is the Trans-Pacific Partnership trade agreement between the U.S., Japan, Mexico, Canada, Vietnam, Malaysia, Peru, Singapore, Chile, Brunei, Australia and New Zealand. The path to Congressional passage of TPP in 2016 is littered with obstacles that leave at least the timing of its passage uncertain.
Trade ministers reached a deal in October and the leaders must all formally sign it — which is expected to happen early next month — before their legislatures can consider it. President Obama is then expected to send implementing legislation to Congress this year for consideration. Lawmakers will then likely be consumed with hearings that will take place in a shortened calendar year, with the parties’ conventions in the summer and presidential and Congressional elections in November.
All three Democratic presidential candidates have said they oppose TPP, some of the Republican presidential candidates have also said they are against it and a large swath of lawmakers on Capitol Hill have opposed it or pointed to its shortcomings. A majority of lawmakers passed presidential Trade Promotion Authority this summer, which gave U.S. negotiators the leverage they needed to reach a deal on TPP — but only after Obama got backing from Republican members of Congress rather than his own party.
But Obama, for whom TPP could be a legacy-defining moment, picked up three key business group endorsements this week, adding to other business groups that have pushed for it, which could boost his chances of garnering enough support from Republicans to help get the deal approved in Congress. The House returned this week for the new session, while the Senate returns on Monday. On Wednesday, the U.S. Chamber of Commerce marked the third group in three days to come out in support of the agreement.
“I think there’s definitely a good chance for that to move,” said Jennifer Safavian, executive vice president of government affairs at the Retail Industry Leaders Association. “We expect the president to sign it in early February and once that happens it is in Congress’ hands to move it forward.”
Safavian said the best prospect for TPP gaining approval in an election year is in a lame-duck session after the November elections.
“You still have many members of Congress who have concerns about the agreement and you’ve got many stakeholders who are still concerned about portions of the agreement,” she said. “So I think Congress will need time to evaluate it, talk with their constituents and those stakeholders, and make a determination on where things stand. That’s why I think it will take some time….It would be very beneficial to the retail sector so that’s something we will be out there educating members on and helping its progress.”
David French, senior vice president for government relations at the National Retail Federation, said any expectation of getting TPP through Congress early this year is “probably unrealistic.”
“You’ve got a couple of senators who are very concerned about some of the provisions that were negotiated,” French said.
He pointed to concerns raised by Senate Majority Leader Mitch McConnell (R., Ky.) over the deal’s tobacco provisions and those raised by Sen. Orrin Hatch (R., Utah) over pharmaceutical aspects.
“Trade in general will be a bit of a punching bag politically until after the election,” French said. “I think they can take care of TPP in a lame-duck session. That’s my expectation.”
Phillip Swagel, a professor of international economic policy at the University of Maryland, said, “Congressional Democrats will be loath to sign on to a deal opposed by their presidential candidate — and most of the party — and President Obama will be limited in how hard he can push the deal given this. I was previously optimistic about TPP going forward, in part because I thought it would be difficult for Hillary Clinton to walk away from her strong support for the agreement [when she was Secretary of State]. The prospects for TPP will be better in 2017.”
On Capitol Hill, several other industry issues could come into play this year — 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.
New Internet sales tax bills were introduced in the Senate and House last year, but did not advance. Industry groups said there is a chance a measure that would allow states to collect taxes on online or other remote sales could move this year.
“That has been a difficult issue for us and one that we have worked on for a number of years and that will continue,” RILA’s Safavian said. “Some would say it is not possible in a presidential election year, but I don’t know that that is true. We will certainly continue to work with the House Judiciary Committee, which has jurisdiction over it, this year. If we can move some of this in the first half, we have a better chance.”
French said one of the best chances for the Internet sales tax legislation is pairing it with another measure that would impose a permanent moratorium on Internet access taxes.
“That’s been the preferred approach to solving this problem for awhile,” French said. “It will remain one of the more attractive legislative vehicles.”
Another bill that many expect to advance early this year is a conference report on Customs reauthorization and trade enforcement that stalled in late December in the Senate. That legislation contains some vital components for the industry, including a provision that would raise the floor for duty assessment on small value shipments to $800 from $200 and provide new trade preferences for Nepal, including duty-free benefits for scarves, hats, some footwear and travel goods.
The conference bill fixes a technical error on a new classification for recreational performance outerwear that industry groups hope will eventually lead to lower tariffs on those imported products. The wide-ranging bill would also beef up enforcement of U.S. trade agreements and aims to help prevent counterfeit goods from entering the country.
Stephen Lamar, executive vice president of the American Apparel & Footwear Association, said the group is supportive of the conference report advancing as soon as possible because it “has a number of provisions that cut costs for our members.”
“Our expectation is that that we will see it taken care of early on in the year and maybe as early as January,” Lamar said.
On TPP, Lamar said: “I think the prospects are excellent that there will be a very strong debate and discussion about TPP and opportunity for members of Congress to learn about it. Depending upon how that debate and discussion go, that will instruct us whether or not there is going to be an opportunity for actual Congressional consideration.”
Julia Hughes, president at the U.S. Fashion Industry Association, said passage of TPP and the Customs conference report are her group’s priorities.
“I think there’s definitely a good chance for TPP to pass this year,” Hughes said. “I still suspect that the best opportunity though will be after the election in the lame-duck session….We support TPP and we anticipate that Congress will approve TPP, but it is a question of what the best timing will be in what will be an incredibly politically charged year.”