CLINTON TELLS PANETTA TO SETTLE ORIGIN RULE TIFF

Byline: Jim Ostroff

WASHINGTON — President Clinton Friday directed White House chief of staff Leon Panetta to settle the apparel country-of-origin dispute that threatens to derail congressional enactment of the GATT agreement, according to people familiar with the situation.
The directive, made at a meeting of his National Economic Council, came after Clinton was advised of the impasse that exists over the proposed GATT provision to change the country-of-origin rule so that the import quotas would be charged against the country where apparel is assembled — not in the country where it’s cut, as is the case now, sources said.
Clinton’s decision to turn the apparel issue over to Panetta — and in effect take it out of the hands of U.S. Trade Representative Mickey Kantor — followed an meeting Friday morning between Kantor and several retail and importer executives, which, sources said, only continued to standoff over the matter.
Meanwhile, a new study claiming the rule change could cost the United States $1.2 billion annually in lost revenues may have won key Senate support for the retailer-importer stance against changing the rule.
House and Senate conferees working on bills to implement the GATT’s Uruguay Round were unable to resolve their differences on the rule and threw the matter back to the White House.
The House version requires that the origin rule change become effective Jan. 1, 1996.
The Senate refused to include this provision, following intense lobbying by retailers and importers, who said the change would harm their business and raise apparel costs. Under fast-track law for considering trade treaties, Congress devises a recommended bill and submits it to the White House, which sends formal legislation to Congress.
The House-Senate conferees also could not agree on providing Caribbean Basin nations free trade benefits for apparel, like those accorded to Mexico. (See story, page 28).
Sources said the White House wants to wrap up all GATT provisions by today and submit a bill to Congress this week with the aim of a final vote by Oct. 7.
Attending the Friday morning meeting with Kantor and Jennifer Hillman, the chief U.S. textile negotiator, were Harvey Falk, Liz Claiborne’s vice chairman and president; Martin Trust, Mast Industries’ president; Linda Wachner, The Warnaco Group’s chairman, president and ceo, and Tracy Mullin, the National Retail Federation president.
Joining them by telephone were Donald Fisher, The Gap’s chairman; Bob Rocky, Levi Strauss & Co.’s North American president, and Jack Shea, Spiegel’s vice chairman and ceo.
During the one-hour meeting, sources said, Kantor and Hillman maintained an apparel assembly origin rule was needed and should take effect Jan. 1, 1996. They reportedly declined to consider a January 1998 starting date some of the executives had suggested as a compromise.
According to sources, Kantor said he would consider increasing import quotas for some foreign nations if the origin rule change were enacted, but refused to say whether that meant China.
U.S. textile and apparel manufacturers insist the rule change is needed to thwart a practice where fabric is cut in Hong Kong and assembled in China, but charged against Hong Kong’s quotas. Retailers and importers argue if the origin rule is changed, less expensive Chinese-assembled apparel will be in short supply and become more costly. They say China’s quotas should be increased if the rule change occurs at any time.
Domestic apparel interests agree that prices for Chinese apparel will rise, but this, they say will allow their goods to be more competitive with imports.
Both sides concur that the final White House decision on the origin rule, as well as CBI parity, will be based on hard-nosed vote counting on whether inclusion of one or both provisions will derail chances of winning GATT approval. The retailers and importers may have picked up a key Senate vote on Friday by releasing a study, commissioned by them, that concluded an origin-change rule without additional quotas for China and other foreign producers would result in a $1.2 billion annual loss in customs revenues to the United States.
Sen. Bob Packwood (R, Ore.), the Senate Finance Committee’s ranking Republican, reportedly asked the Congressional Budget Office late Friday to verify by today the revenue loss projections. Packwood opposes the origin-rule change and reportedly said he could deliver a crucial number of Senate votes against the GATT bill if this provision is included. Packwood could not be reached this weekend for comment. However, if the CBO concludes the origin-rule change will cause revenue losses over five years, congressional rules require that federal spending be cut to offset the loss. Several political analysts commented over the course of the weekend that this requirement alone probably was going to be sufficient to persuade the White House that it should drop the proposed change in the rule of origin.
— Fairchild News Service

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