Byline: Jim Ostroff

WASHINGTON — U.S. trade officials, accompanied by domestic industry advisers, have completed a fact-finding trip in Italy that could resolve a simmering dispute with European makers.
Rita Hayes, the U.S. chief textile negotiator, spent several days last week in the Lake Como region touring textile finishing plants that utilize discharge printing. This technology permits gray goods first to be dyed and then printed with decorative patterns.
Should the U.S. recognize discharge printing as a process that adds significant value to finished goods — such as silk, cotton and man-made fiber scarves, ties and accessories — this could result in a decision that they are products of European nations and not China, which often is the source of the gray goods.
This hardly is an esoteric issue.
The European Union has complained that a change in the U.S. rule of origin for textile and apparel products that took effect last July 1 could devastate industries that for centuries have made high-quality fashion accessories. Although the U.S. has not yet been enforcing the rule change, sources said, it stipulates that these products’ origins, for U.S. quota purposes, are determined by the source of fabrics; not where they are assembled or processed. This is opposite to the rule change as it applies to apparel, for which origin is determined by where garments are assembled, and most of the value is added, rather than where the fabric is made and cut.
Several large U.S.-based textile and apparel firms and their trade associations pushed this change through Congress in 1995, claiming they were being harmed economically by a practice whereby fabric was cut in Hong Kong, assembled in China and charged against Hong Kong’s quotas.
The European Union, led by makers in Italy and France, have begun proceedings that could bring the issue before the World Trade Organization, which has ruled against the U.S. in most textile cases it has adjudicated so far. The Italian and French makers argue they add most of the value to scarves, ties and fashion accessories and therefore, these goods should be considered as products of their nations.
Critically, they point out that now, when they use Chinese fabrics, their high-fashion products have to bear a “Made in China” label and be charged to China’s quotas. Moreover, the European makers add, they are forced to obtain Chinese export visas before these products are allowed entry here.
The makers also contend they are suffering grievous economic harm since their products lose a vital cachet if they are labeled “Made in China.” They further argue that where they have faced no U.S. quotas in the past, they now must buy quota from China, whose overall quotas have been reduced twice in the past four years.
Hayes did not return telephone calls seeking comment on her trip to Italy. Moreover, in an unusual break with practice, her office did not provide details either before her departure for Italy or during her meetings there.
Industry sources said Hayes was accompanied to the Como region by her deputy, Caroyle Miller, and officials with Springs Industries, the American Textile Manufacturers Institute and the Commerce Department’s Office of Textiles and Apparel. Sources said Hayes met with officials from several Italian discharge printing facilities, as well as at least one high-ranking member of the European Commission, which handles trade matters for the EU.
The trip came two months before the EU will decide whether to bring an unfair trade practice action at the WTO against the U.S.
Textile trade analysts here said the U.S. could be looking to resolve the dispute before then — by mid-April — although by what mechanism is unclear.