Byline: Kristi Ellis

WASHINGTON — Pakistan’s huge textile industry is becoming a negotiating chip in the war against terrorism.
As the U.S. continues its military buildup in the Mideast and Central Asia, the State Department is taking a keen interest in the impact a war in the region might have on the U.S. textile and apparel industry.
Importers and retailers called on the Bush administration Wednesday to offer short-term trade concessions to companies sourcing in those regions, particularly in Pakistan, as executives addressed their concerns to the State Department in a teleconference.
Many retailers and importers are threatening to cancel orders for textiles and apparel in Pakistan, which has aligned itself with the U.S.’s threatened retaliation against neighboring Afghanistan following the terrorist attacks of Sept.11. Companies are concerned about destabilization in Pakistan that could lead to shipping and production problems.
Pakistan is the number one supplier of cotton yarn imports, cotton fabric and cotton home furnishings, according to the Commerce Department’s figures. The total annual value of Pakistan’s textile and apparel exports to the U.S. is $1.9 billion, which makes it the fourth-largest supplier.
The Pakistani government issued a letter of assurance last week to business lobbyists and trade groups claiming it will help companies get their goods out of the country in a timely manner, even if chartered flights have to be arranged. But U.S. companies want further concessions from the Bush administration.
Executives from Wal-Mart, Kmart, Federated Department Stores, The Warnaco Group, Springs Industries and Burlington Industries joined representatives of the National Retail Federation, U.S. Association of Importers of Textiles & Apparel, American Apparel & Footwear Association and International Mass Retail Association in a conference with Alan P. Larson, undersecretary of state for economic, business and agricultural affairs, to discuss possible concessions for companies that source in and import from Pakistan.
A delegation of apparel and textile industry executives also are scheduled to meet with Pakistani Minister of Commerce Abdul Razaq Dawood today at the Pakistani Embassy here.
“As the State Department’s top economic and business affairs official, I have, in the past several days, heard from the Pakistani government of their concerns about the effect of lost textile orders on their economy,” Larson said in a letter obtained by WWD that was sent to the companies. “Pakistan is a key ally in the fight against terrorism and the United States government is in the process of taking a number of steps to support the Pakistani economy at this critical time.”
Larson further encouraged executives to discuss these steps and any concerns they have in doing business in Pakistan.
“Your input will be extremely helpful as I and my interagency counterparts consider next steps with respect to the Pakistani economy, and its textile sector in particular,” he said in the letter.
Despite the inquiries made by the State Department, some executives who listened in on the call were not completely satisfied with Larson’s stance.
“He threw a little cold water on the proposals to eliminate quotas [on Pakistani imports] or reduce duties,” said Brenda Jacobs, general counsel of the USA-ITA. “He was not ready to go that step and that’s unfortunate.”
She said she did not get assurances from Larson that importers would be able to get into the country safely to place orders for next spring.
Larson concentrated instead on transportation and insurance issues during the conference call. “He talked about guaranteeing air flights and underwriting insurance,” Jacobs said.
Jonathan Gold, director of trade policy for IMRA, said it was clear that the State Department wasn’t going to show its hand quite yet.
“But because we are in such an unusual circumstance, [the government] needs to do something about it,” Gold said. “Folks are getting nervous about Pakistan and the surrounding region, and if U.S. companies pull out, it could do more harm than good.”
He said that his main concern is guaranteeing that companies can get their current orders filled and shipped out of Pakistan, adding that future orders are not even on the table yet.
“This is a major geopolitical strategic decision not driven by the traditional position of anyone in the textile and apparel sector,” said Julia Hughes, vice president of international trade at the USA-ITA. “We are looking at how to maintain a commercial relationship with a country supporting us strongly in a war against terrorism and [unfortunately] people took some predictable positions during the call.”
Hughes noted that the domestic textile industry represented by Springs, WestPoint Stevens and Burlington, all told the undersecretary that they are opposed to any concessions that might hurt their ailing industry.
“In the end, what the administration has to do is much broader,” Hughes said.
Hughes said she told Larson that many airlines are canceling flights into and out of Pakistan, while shippers are planning to charge “war-risk” premiums.
Erik Autor, vice president and international counsel for the NRF, said he addressed concerns about war-risk premiums that will be passed onto retailers and importers, transportation issues and delays of up to two weeks on Pakistan imports by U.S. Customs Service officials who are conducting “contraband examinations.”
“It sounds like the State Department is focused on immediate concerns about getting goods currently in the pipeline through the supply chain with a minimum disruption and continue to insure current levels of trade are maintained,” Autor said.
He said the longer-term issue is whether retailers and importers will continue to place orders in Pakistan and called for the administration to offer more incentives such as reducing tariffs and eliminating quotas.
Meanwhile, the USA-ITA and IMRA, in a joint statement on Wednesday, urged the administration to take action in Pakistan, including efforts to make it easier for U.S. businesses to get insurance, simplifying Customs procedures for textiles and apparel and granting short-term duty and quota breaks for textiles and apparel products from the region.
USA-ITA executive director Laura Jones warned: “The threat of canceled orders is very real. U.S. companies are finding it hard to get insurance, they have had to pull their personnel back because of safety concerns and travel advisories, and air and ocean transport is uncertain.”