TRADE BILL ACCORD NOT DONE DEAL

Byline: Joanna Ramey

WASHINGTON — The deal struck last month over how apparel imports should be treated under the Africa-Caribbean Basin trade bill is taking a beating, casting a cloud over the measure’s future.
Many controversial issues still dog the bill, some of them supposedly settled at an April 14 meeting led by Republican leadership. The overall deal reached between the House and Senate mandates that apparel receiving duty-free breaks from either region must be made with U.S. textiles — with some exceptions, particularly pertaining to Africa.
House leadership has set aside time on Thursday to vote on a compromise, but the scheduling may prove too optimistic.
“This deal is far from done,” said one source close to the negotiations.
One of the biggest issues now causing disagreement between the chambers is how U.S. apparel and textile makers should be protected from import surges from sub-Saharan Africa.
There are also differences over whether merino wool apparel shipments from the region can be imported duty-free without quota limits. U.S. retailers and importers are angling for this provision, arguing that the U.S. doesn’t produce merino wool garments. It’s a claim disputed by U.S. textile makers.
“The yarn that would go into merino wool sweaters is produced in large quantities in the U.S.,” argued Doug Bulcao, director of government relations at the American Textile Manufacturers Institute.
Under the Caribbean Basin portion, there is debate over whether to give garments made in the region that contain Israeli yarn duty-free treatment. Israel, which has a free-trade agreement with the U.S., maintains that its yarns should be treated like U.S. yarns under the bill. Opponents say such special treatment could lead to NAFTA partners Mexico and Canada demanding parity.
Another Caribbean Basin trade issue still on the table is whether Basin-manufactured brassieres made of foreign fabric would also enter the U.S. tariff free, according to sources.
Then there’s the debate over spandex. DuPont, a huge producer of the fiber, wants lawmakers to require all Caribbean Basin-made apparel containing the stretch filament to use only U.S.-made spandex. This would create a spandex exception from a “de minimus” standard allowing small portions of foreign-made yarn to be used in apparel receiving duty-free breaks.
“Since this is a unilateral trade bill, we feel it should not only help these developing countries, but also U.S. companies,” said a DuPont spokeswoman.
Requests such as these may seem like minutiae that can be easily negotiated. But in the realm of international trade policy, where there’s tension in Congress between dropping all trade barriers and protecting U.S. industries like textiles from foreign competition, such issues can easily evolve from simple staff-level dust-ups to political firestorms.
“It’s like a roller coaster everyday,” said Julia Hughes, vice president for international trade at the U.S. Association of Importers of Textiles, whose members generally side with House free-trade lawmakers in pushing for the most liberal import provisions a compromise can bear.
Senate leadership has been reluctant to stray too far from its stance favoring duty breaks only for apparel made from U.S. textiles, and time is running out to settle differences between the House and Senate.
Passage of the Caribbean Basin portion of the bill is a priority of large U.S. apparel makers, as well as retailers. U.S. textile makers are pressing for expanded trade with the region, with a strong U.S.-textile-origin rule, claiming it’s a matter of their long-term survival.
Apparel production in the Caribbean Basin’s 24 countries is already flourishing under a special trade provision giving duty breaks for garments made of U.S. fabric. If the pending trade bill passes, an estimated $1.42 billion in tariffs over five years would be eliminated on these garments and that would encourage even more shipments, according to Congressional estimates based on 1998 import levels.
The Africa portion of the trade bill is of less near-term interest to U.S. apparel producers, and textile makers don’t see the subcontinent as a growth area. However, retailers, including Kmart, The Gap and The Limited, are eager to increase imports from the region as an alternative to Asia. Apparel shipments from sub-Saharan Africa now amount to less than 1 percent of all U.S. imports.
Importers are concerned that a narrowly drawn trade bill may hamstring development of an African apparel or textile industry in the region’s 48 countries, most of which are extremely poor.
Under the accord struck last month, Senate negotiators relented to the House, agreeing to allow some duty-free apparel shipments to be made of African fabric, amounting to 1.5 percent of all U.S. apparel imports and increasing to 3.5 percent over eight years.
For the poorest countries, there would be no restrictions on the source of textiles; however, shipments would fit under the same cap. Apparel made of U.S. textiles could be imported duty free without restrictions.
How to safeguard against import surges from Africa is one of the most contentious issues still outstanding. Sources said the Senate was angling for a tougher standard than the House, one that would make it easier for U.S. companies to claim imports have caused market disruption, thus triggering limits on shipments.
The U.S. textile industry is pressing Senate negotiators to agree to set quotas per country, as well as product category. Such a regime, importers and House negotiators argue, would hinder business and thus defeat economic development, the underlying purpose of the bill.