Byline: Jim Ostroff

WASHINGTON — The nation’s leading retailers and importers have intensified their push over the past week to defeat what they contend is a protectionist move to restrict apparel imports.
At issue is an amendment proposed for the legislation to implement the Uruguay Round of GATT. The amendment would change the U.S.’s rule of origin for apparel so that this will be determined by where a garment is assembled, not where the fabric first is cut.
As reported, the House Ways and Means Committee this month approved an amendment containing this rule change for its version of the GATT implementing legislation.
Today, Sen. John Breaux (D., La.) is expected to offer an identical measure when the Senate Finance Committee meets to consider amendments to its GATT bill, making the committee the battleground for friends and foes of the plan.
Once Finance completes its work, its members will meet with Ways and Means members, along with White House trade officials, to reconcile their prospective GATT bills. The proposed origin rule change would take effect Jan. 1, 1996.
Under fast-track rules for considering trade treaties, the White House then would submit the completed package to Congress for a final vote — probably in late August before the lawmakers recess.
With the fate of Breaux’s measure likely to determine whether the apparel origin rule becomes law, retailers and importers have been furiously lobbying senators, the White House and trade officials to kill the measure.
Under the National Retail Federation banner, executives from 10 leading retailers wrote to Daniel P. Moynihan (D., N.Y.), the Senate Finance Committee chairman, and Sam Gibbons (D., Fla.), acting chairman of the House Ways and Means Committee, urging them “to resist protectionist measures.”
The letter, dated July 20, warned that Breaux’s “radical proposal would cause a major market disruption and that it would have a dramatic negative impact on domestic retailers, forcing us to make widespread and costly changes to our current international sourcing practices.”
The retailers added: “Existing practices for cutting, forming and assembly would need to be changed and new contracts and processes would have to be instituted to comply with the new requirements.” This, they said, would create hardships for “those who source any apparel in Israel, Hong Kong, Taiwan, or Korea.”
The letter was signed by top executives with Baums Inc., Federated Department Stores, J.C. Penney Co., Kmart Corp., Montgomery Ward & Co., Sears Merchandise Group, Spiegel Inc., The Gap,, The Limited, The May Department Stores Co. and the NRF.
In a July 20 letter to Breaux, Linda J. Wachner, chairman, president and chief executive officer of The Warnaco Group, averred the senator’s amendment would not discourage transshipping, would circumvent many of the U.S.’s 40 textile bilateral pacts and would be at odds with the GATT agreement, which “provides for a three-year work program to harmonize conflicting rule of origin regulations among member nations.”
Meanwhile, a bevy of lobbyists — including those from the NRF, Independent Mass Retailers Association, Associated Merchandising Corp., U.S. Association of Importers of Textiles and Apparel, Liz Claiborne, Penney’s and others — have fanned out within the last few days to lobby White House, trade and Senate officials to defeat the Breaux plan. Their message, according to Robert Hall, an NRF vice president, is that not only is the apparel assembly rule unfair and costly, but duplicitous on the part of the U.S.
“You cannot harmonize origin rules unilaterally, and what many of these Far Eastern nations do in parallel processing of apparel is exactly what the U.S. does with its 807 programs,” Hall said. He noted that at least some of the goods assembled in Caribbean nations out of U.S.-cut fabric under 807 programs are later exported as a U.S. product.
The retailers and importers picked up support for their positions this week when the governments of Australia, the Philippines and the Association of Southeast Asian Nations sent formal protests to the U.S. about the proposed change, contesting its legality and charging it would cause their nations economic harm.
While there is a dispute about how much apparel imported into the U.S. would be affected by the origin rule change, several estimates by trade analysts say up to half of the $2.17 billion in apparel sourced last year just from Hong Kong would be covered. For firms like Mast Industries Inc., The Limited’s sourcing arm, the change could be devastating, according to Martin Trust, president of the Andover, Mass., firm.
With more than $1 billion in sales last year, Trust said Mast sourced about 75 percent of its apparel from Pacific Rim nations. Of that total, Hong Kong accounted for 34 percent of all sourcing and China, 18 percent. Should the GATT bill be enacted with the assembly origin requirement, he said, almost all outbound processing would be halted, explaining that nations such as China have relatively small quotas compared with Hong Kong.
One example he noted is category 347/348, cotton men’s and women’s trousers: China’s U.S. quota is 2.4 million dozen, and Hong Kong’s is 6.1 million dozen. For women’s cotton shirts, category 341, China’s quota is 640,000 dozen compared with 2.5 million for Hong Kong.
“If we had to assemble apparel in Hong Kong with their higher wages, producers would charge us more for the product, and we would raise the price for consumers,” Trust said. “This is exactly what the domestic producers want. If we have to raise our prices, they can raise theirs’.”
Domestic producers, who also have been lobbying intensely for the origin rule change in the Senate this week, concede that manufacturing in Hong Kong is more expensive.
“If apparel had to be manufactured in Hong Kong, obviously, the price would go up, and I presume U.S.-made apparel would be more competitive,” said Larry Martin, the American Apparel Manufacturers Association’s government relations director.
However, Martin — like Charles Bremer, the American Textile Manufacturers Institute’s international trade director — said this is only fair.
“The importers and retailers have to admit that cutting is an insignificant portion of the cost of making apparel, and this shouldn’t confer origin,” Bremer said. He added that if Hong Kong protests the decision it can negotiate with the U.S. for additional quota.
— Fairchild News Service

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