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WWD Year In Fashion issue 12/15/2008

Barack Obama, a junior senator from Illinois, beat the odds in this year’s historic presidential election, securing a landslide victory as the country battled a two-front war and a recession that will test his leadership in the early days of his presidency.

From the campaign trail to the Democratic convention in Denver to the final election stretch, Obama made it clear that helping the American worker and the middle class would be at the core of his policies. Relying on his lyrical oratorical prowess and a simple but effective mantra of change, Obama won over millions of voters, especially in hard-hit industrial states, from unemployed autoworkers in Ohio and steelworkers in Michigan to retirees in Florida and former textile workers in North Carolina.

This story first appeared in the December 15, 2008 issue of WWD. Subscribe Today.

The strategy paid off. Obama swept to victory on hopes of restoring confidence in the country with 53 percent of the popular vote and 365 electoral votes, a lopsided win over his Republican rival, Arizona Sen. John McCain, who tallied 46 percent of the popular vote and 173 electoral votes.

Obama’s presidency is expected to bring significant changes to business and labor regulations, taxes, international trade, cargo container and port security, union bargaining, jobs programs, health care and energy. The new administration’s policies will have a multifaceted impact on the fashion industry, which helped propel him to victory and his place in the Oval Office.

With $94.2 billion in global imports, retailers, apparel and textile importers and makers have significant exposure to a president’s policies on international trade and maritime security.

Obama’s first order of business will be an economic stimulus and recovery package. He has said recently his goal is to secure 2.5 million jobs over the next two years.

“We need a recovery plan for both Wall Street and Main Street — a plan that stabilizes our financial system and gets credit flowing again, while at the same time addressing our growing foreclosure crisis, helping our struggling auto industry and creating and saving 2.5 million jobs — jobs rebuilding our crumbling roads and bridges, modernizing our schools and creating the clean energy infrastructure of the 21st century,” Obama said at a news conference unveiling his economic team. “Because at this moment, we must both restore confidence in our markets and restore the confidence in the middle-class families who find themselves working harder, earning less and falling further and further behind.”

Obama appointed half of his cabinet by the first week in December, including his economic and national security teams. He tapped New York Federal Reserve President Timothy Geithner to be his Treasury Secretary, former rival and first lady Sen. Hillary Clinton as Secretary of State and New Mexico Gov. Bill Richardson as Commerce Secretary.

“The concern of business has to be that the economic stimulus package, the Employee Free Choice Act [a bill that would make it easier for workers to organize] and the assistance to auto makers implies a big-government philosophy,” said Marick Masters, a business professor at the University of Pittsburgh. “The concern is going to be that along with a big-government philosophy comes increased taxes and increased regulation.”

While there might be a downside for businesses, workers will likely have something to cheer.

“We will see a much more pro-labor and -worker environment, both in Congress, with the Democrats enhancing their control, in the White House and in the Labor Department,” said David Redlawsk, a political science professor at the University of Iowa. “Labor has argued for a long time that the current system is rigged against them, and to some degree it is. We will probably see some shift there [in favor of the unions], although I don’t think it will be as dramatic as people think.”

He also expects to see an increase in worker protection regulations within the Labor Department.

While Obama will place a priority on domestic and foreign policy in light of the economy and wars in Iraq and Afghanistan, his full trade agenda may take a backseat in the early days, but it is expected to come to the fore in the first few months.

As for his direction on trade, many question whether it will be more protectionist, free trade-oriented or something in between.

“There will be some desire to move toward a protectionist position among a lot of constituents and a lot of people in Congress,” said Redlawsk. “At the same time, there is a lot of push back, even from some Democrats who are free trade-oriented. There is not a unified position in the party and that will constrain what a president can do.”

On the campaign trail, Obama vowed to put a hold on new trade deals until existing trade deals can be reviewed. He also pledged to ramp up enforcement of global trade rules and laws, which means more scrutiny of countries dumping imported products below cost in the U.S. market or subsidizing their imports. The new administration also aims to strengthen labor and environmental provisions in trade deals — and enforce them.

Obama will have to confront several outstanding issues with China, the largest apparel supplier to the U.S. The expiration of quotas at the end of the year on 34 categories of apparel and textile imports from China could top the list of Obama’s challenges.

Textiles played a key role in Obama’s win in the swing state of North Carolina, where he pledged to support five key textile-industry policy positions, including a monitoring program for Chinese apparel and textile imports.

“I am especially aware of the trade challenges faced by those working in our textile industries,” Obama wrote in a letter responding to a questionnaire submitted by the National Council of Textile Organizations shortly before the election.

Acknowledging the surge in imports from China that took place when global quotas were lifted at the end of 2004, Obama noted: “As president, I would use monitoring to help ensure that imports from China do not violate applicable laws and treaties.”

Obama will also likely be more aggressive in prodding China to let the value of its currency appreciate. Critics argue it’s undervalued by as much as 40 percent, which lowers prices on Chinese imports and puts U.S.-made products at a competitive disadvantage. Obama cosponsored a Senate bill that would make currency manipulation actionable under U.S. trade remedy laws, and he accused China of manipulating its currency in the letter to NCTO.

Importers and retailers fear an Obama administration might seek to impose punitive tariffs on Chinese imports, but domestic manufacturers hope his administration will follow through on pledges to take a harder stance against China.

“China must change its policies…so that it relies less on exports and more on domestic demand for growth,” said Obama. “That is why I have said that I will use all diplomatic means at my disposal to induce China to make these changes.”

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