WASHINGTON — As global trade talks were headed toward collapse earlier this month in Cancún, Mexico, Grant Aldonas, the U.S. Undersecretary for International Trade, was making a pass at bringing peace between the U.S. textile industry and its decades-long nemesis, importers of apparel such as Wal-Mart, J.C. Penney and The Limited.
Aldonas saw a chance to smooth relations between the warring sides that was casting a shadow over the U.S. negotiating a Central America Free Trade Agreement by year’s end. Moreover, Aldonas said he decided to “seize the opportunity and get started right now” on the administration’s new initiative to make the flagging U.S. manufacturing sector more globally competitive.
Called the Global Supply Chain Initiative, the long-brewing plan is slated for unveiling by month’s end. In it, the depressed U.S. textile industry will receive special attention, along with the tool and dye sector supplying auto makers, which, like mills, have been buffeted by import competition.
“I worry that government policies have pitted the two industries together,” Aldonas said about the apparel importer-U.S. textile producer divide, in a phone interview recapping the meeting. “We need to focus on the textile industry…serving a customer base all the way from Wal-Mart to the elegant design houses and customers on Fifth Avenue.”
Aldonas was not specific about the array of government policies under review, which could range from taxes to business reporting requirements. However, he said the Bush administration is eager to eliminate the ways mills are kept at a global competitive disadvantage, despite spending billions on high tech plants. Part of this effort includes stepped-up badgering of foreign countries, including China, to lower barriers other than tariffs to U.S. exports.
To help the administration spur a U.S. textile revival, Aldonas is asking mill officials to huddle with retailer and importer concerns and brainstorm about each other’s competitive needs and what the federal government can do to further a successful marriage of the sides.
“Grant basically floated the idea of U.S. retailer-importers working with the U.S. textile industry,” said Peter McGrath, president of J.C. Penney Purchasing Corp., who is also chairman of the U.S. Association of Importers of Textiles & Apparel and chairman of the National Retail Federation’s International Trade Committee.
Also among the roughly 30 people in the Cancún meeting were officials in the importer camp from The Limited, Wal-Mart, Liz Claiborne, Gap Inc., Sara Lee Corp., Levi Strauss and Jockey International. Representing domestic mills were officials from Milliken & Co., Dupont, the American Textile Manufacturers Institute and the American Manufacturing Trade Action Coalition.
The Cancún retailer-textile summit occurred as the gulf between the parties has widened in the last two years, with the textile sector shedding more jobs than it had since the Great Depression. At the same time, the amount of apparel imported has grown and about 84 percent of garments sold in the U.S. are now foreign made, according to government sources.
As a consequence, new Washington textile lobbying efforts have sprouted to increase the industry’s chorus and pressure the White House and Congress to curb what they claim are unfair trade practices and manipulated currencies by low-cost import competition. Among those agitating are billionaires Wilbur Ross, who is in the midst of purchasing and merging textile stalwarts Burlington Industries and Cone Mills, and textile scion Roger Milliken of Milliken & Co.
The flagging manufacturing base, including textiles and apparel, has become a political liability for the Bush administration. GOP lawmakers from the South are accusing the White House of foot dragging to help mills compete better with inexpensive imports, particularly from China. Lawmaker concerns about their textile constituencies is also widely viewed as a potential threat to congressional passage of the Central American Free Trade Agreement or future trade-liberalizing pacts.
At the same time, Republican loyalists in the Southern textile industry have said their support for President Bush’s reelection in 2004 is waning because they consider the administration to be pursuing an aggressive free-trade agenda at the expense of textile jobs, which, in the last year alone, have declined by 67,000 to 436,000.
Although détente wasn’t reached at Aldonas’ meeting, participants said rancor between the sides was kept mostly in check and, crucially for Aldonas, neither side rejected a key idea the administration is pursuing: creation of a North American Platform covering the U.S., Canada, Mexico, Central America and the Caribbean.
The platform premise has been pursued before, including by GOP members of the House Textile Caucus and by Congress as a whole in passing legislation like the apparel-duty-dropping Caribbean Trade Partnership Act in 2000, which retailers charge has come up short in servicing their need of more flexibility to import apparel duty-free, even though it might be made of non-U.S. textiles.
Aldonas’ efforts have yet to quell textile industry cries about administration inaction. “Grant is in a very difficult position,” said Kevin Burke, president of the American Apparel & Footwear Association, whose vice president, Steve Lamar, attended the Cancún importer-textile mill confab. “He represents an administration that is a strong advocate of free trade and now he’s got the challenge of working with the domestic concerns of free trade and how you engineer a [Central American Free Trade] agreement that benefits both sides.”
At the Cancún meeting, Aldonas said it was encouraging that textile and retail-importer officials identified predictability in business conditions as key.
“What the retailers are saying is they don’t want to be in a position where there would be a regular resort to trade actions” by the U.S. imposing emergency tariffs or quotas on imports, Aldonas said.
Such a scenario is now unfolding with domestic textile producers, much to the anger of importers, pressing the Bush administration to impose import restrictions on three Chinese apparel import categories that mill officials claim are unfairly flooding the American market at below-market costs.
U.S. fabric, fiber and yarn producers, Aldonas acknowledged, “would prefer to not be in that position” of asking for import restrictions. “But at the same time, with each passage of trade legislation,” Aldonas said, mills “have to adjust their plans all over again.”
However, Aldonas said he can understand retailer laments that trade pacts under negotiation like CAFTA or the Free Trade Area of the Americas should make allowances for apparel to receive duty-free treatment even if it’s made from non-U.S. or regional textiles. Nonetheless, he stressed such bilateral trade agreements should still structure “rules of origin to protect” industries in signatory countries.
To get past their differences, Aldonas in Cancún told importers and mill officials, “rather than simply argue their philosophies [about trade] with me,” they should work together to create a joint business model “if the numbers bare out.”
Tentatively supportive, Augustine Tantillo, the Washington lobbyist of the domestic manufacturing lobby, AMTAC, said, “If Grant can work this out, then I think he should be sent to solve the Israeli-Palestinian issue. The situation here is just that volatile. If the retailers want to work on this, fine, then we’ll work on it. If retailers want everything like now, then there will be no middle ground.”
Jock Nash, Milliken & Co.’s Washington lobbyist said in an e-mail, “If they do not want to deviate from their free-trade absolutism, then this exercise is in vain. However, the jury is still out.”
McGrath is eager to assuage textile industry fears and pointed out that retailers already are big customers of U.S. textiles used in Central American, Caribbean and Mexican apparel production, which account for 32 percent of the foreign apparel imported into the U.S. Moreover, the three regions are the U.S. textile industry’s largest export markets, amounting to roughly $10 billion in sales or 62 percent of all domestic textile exports, including cut pieces.
However, McGrath cautioned that importers would still need the flexibility in CAFTA to buy non-North American fabric, but he doesn’t see those sales coming out of the hide of U.S. mills. Rather, McGrath envisions U.S. textile exports growing under help from the federal government, which he said could have the same effect as the $19 billion in federal subsidies given U.S. farmers annually to help compete globally, and which has turned U.S. crops into an export powerhouse.
“We need to do a big mind shift,” said McGrath, who describes himself as a free trader who is still concerned about the overall decline in U.S. manufacturing jobs. “The manufacturing workers who are losing their jobs, for J.C. Penney, they are our customers.”
In the meantime, with Aldonas hoping to bring importers and mills together at a second meeting next month, lobbyists for either side are pursuing their strategies to press their trade agendas on Capitol Hill and with the administration.
Corporate turnaround expert Wilbur Ross is poised to launch a broad-based industry coalition in Washington on Thursday to lobby on the issue of lowering the U.S. trade deficit — now standing at $40.3 billion. Two lobbyists have been hired to press his cause, along with other trade issues related to steel producers in his manufacturing portfolio.
“He views the trade deficit as an unsustainable situation, an outflow of the well-being of America,” said Ross lobbyist Maurice Carino.
Last week, the coalition was being tentatively called the Free Trade for America Coalition, which includes industries “that are getting beat up on the trade front” and range from small farmers to textile mills, Carino said. A coalition goal is to educate voters to cast ballots according to politicians’ positions on trade.
“We envision the mission to be an education for the American people to understand what’s happening here and obviously when people vote, they vote according to concerns they have,” Carino said.