WASHINGTON — Regional and bilateral trade agreements are proliferating worldwide without American involvement, raising industry concerns the U.S. could fall behind in the race for global trade benefits.
This story first appeared in the June 25, 2010 issue of WWD. Subscribe Today.
U.S. sentiment toward trade agreements has soured in many parts of the country, making it politically challenging to move forward with new pacts.
At risk for apparel companies is access to export markets and the availability of production capacity with key suppliers. Even retail sales in stores overseas could be impacted if U.S. companies were forced to compete with firms from countries with better trade benefits in a specific market, experts said.
While nations around the world are rapidly signing as many agreements as they can negotiate, the U.S. has initiated one new negotiation to join the Trans-Pacific Partnership, a process that sources expect could take several years to complete. Little progress has been made to ratify three pending trade agreements with South Korea, Colombia and Panama. The Obama administration said Saturday it was committed to resolving outstanding issues in the South Korea pact by November.
“Other countries have very different perspectives toward free trade agreements,” said Paul Bingham, managing director of global commerce and transportation for IHS Global Insight.
In the absence of the successful conclusion of the multilateral Doha Round of world trade talks, some countries are aggressively pursuing other paths, Bingham said.
“We’ve heard from companies talking about their concern that the plethora of new agreements going into effect with Europe and Asia represent missed opportunities for U.S. companies,” said Julia Hughes, president of the U.S. Association of Importers of Textiles & Apparel. “Our members who are global in their reach have expressed some concern that, when the U.S. is not involved [in these new trade deals], there may be regulations or new business opportunities that they’ll be shut out from.”
In a June 14 letter addressed to U.S. Trade Representative Ron Kirk, a host of industry organizations and companies, including AnnTaylor Corp., Gap Inc., Hanesbrands Inc., J.C. Penney Co. Inc., Johnson & Johnson Corp., Levi Strauss & Co., Nike Inc., Perry Ellis International, Phillips-Van Heusen Corp., Target Corp. and Wal-Mart Stores Inc., urged the passage of the TPP as quickly as possible.
“We cannot afford to wait on the sidelines while our trade competitors negotiate trade and investment deals to their benefit that exclude or ignore U.S. interests. Time is of the essence,” the letter read. “As the global economy works toward recovery and our economic competitors, including the EU, Canada, India and China, are negotiating new trade agreements quickly among themselves, the United States is falling behind because it is not moving forward. We are losing economic opportunities and being placed at a competitive disadvantage in major markets.”
The European Union is working on trade pacts with many of the same countries the U.S. has engaged in recent years, including South Korea, Colombia, Panama and Central America, which would leave the U.S. on the “sidelines of the level playing field they’re trying to construct,” said Stephen Lamar, executive vice president of the American Apparel & Footwear Association.
“Will America be left behind? I’m afraid to say ‘yes,’” said Kim Jong-hoon, South Korea’s minister for trade, at a recent event in Washington.
The agreement South Korea signed with the U.S. is still important, he said, but while waiting for the U.S. to move forward, South Korea completed a trade pact with the EU, moved ahead with free trade talks with Australia and took the first steps toward negotiations with China and Japan. The agreement with the EU in particular is as ambitious as the one negotiated with the U.S. and could put them in direct competition in some sectors, he said.
President Obama announced at the G-20 summit in Toronto this past weekend that he had directed Kirk to work with his Korean counterpart to resolve disagreements impeding final ratification of the pact by the next G-20 meeting in South Korea in November. Outstanding issues in the auto and beef sectors have held the agreement up. Obama said he intended to submit the agreement to Congress in the “few months” following the November meeting.
Peter Van Loan, Canada’s minister of international trade, speaking at the same event, said Canada has pursued an “ambitious free trade agenda” that includes South America, India and the EU.
The EU said in May it was relaunching negotiations with the Mercosur countries — Argentina, Brazil, Paraguay and Uruguay — and endorsed measures to establish trade ties with Peru, Colombia and Central America.
Individually, many of the agreements being negotiated by other countries would not impact U.S. trade because they are limited in scope, experts noted.
“The U.S. doesn’t get left out just because a couple of small countries make a bilateral agreement,” said Mickey Kantor, former USTR in the Clinton administration and now an attorney with Mayer Brown.
However, there is a risk that small agreements can impede larger ones, Kantor said.
Pascal Lamy, director general of the World Trade Organization, expressed concerns to that effect in recent interviews cautioning that regional and bilateral agreements must not get in the way of the stalled Doha talks.