WASHINGTON — A new era of trade is about to dawn.

As the GATT Uruguay Round won its final Congressional approval Thursday night, retailers and manufacturers braced for what could become a whole new way of life.

The pact — passed by the Senate by a surprisingly comfortable 76-24 margin after having scored overwhelming passage in the House on Tuesday — reverses decades of hard-core protection for textiles, slashes worldwide

tariffs on a variety of products by an average of 40 percent, opens new markets for retailers and ushers in liberalized trading rules between the U.S. and 123 countries.

While changes won’t happen overnight, many see increasing opportunities for both merchandise procurement and exporting and a global potential for expanding their own companies. Some key players in the apparel game say they have already geared their operations to a global outlook, which GATT will only enhance.

Some, though, fear the prospect of intensified international competition will at the same time only accelerate the erosion of a manufacturing industry that has already been hard hit by ever-rising imports. Organized labor in the apparel industry said it will cost millions of workers their jobs.

“The most important point for businesses to understand,” said Lawrence Pugh, chairman and chief executive officer of VF Corp., “is that GATT is not simply about duties, tariffs or the voluminous pages full of rules and regulations. It’s about adopting a global mindset. And that may be the most difficult transition for many companies to make.”

The Senate actually voted on GATT twice. First, it approved waiving technical budget requirements for funding the bill by a vote of 68 to 32. Then it passed the implementing legislation.

The bill now goes to President Clinton, who could sign it as early as next week, likely with a major White House ceremony. Trade analysts say while some of the nations covered by the agreement may not be able to ratify it by yearend, its provisions — including creation of the World Trade Organization, the body that now will oversee world trade — will take effect on Jan. 1. U.S. approval of the pact was seen as the key element.

The agreement affects multiple industries, but for textiles and apparel the most salient features include the 10-year-phaseout of the Multi-Fiber Arrangement, which for 21 years has governed this international commerce with a system of quotas and tariffs.

Quotas will be phased out in four stages. On Jan. 1, 1995, 16 percent of the quota on all textile and apparel products imported into the U.S., based on 1990 figures, will be eliminated. On Jan. 1, 1998, another 17 percent of this trade will become quota-free, and at the start of 2002, another 18 percent.

Finally, on Jan. 1, 2005, the remaining 49 percent will become simultaneously integrated into GATT’s quota-free regime.

But despite these features, textiles and apparel will remain one of the most heavily protected sectors internationally even after the 10-year phaseout, because the agreement does relatively little to reduce textile tariffs in developing countries and high tariffs on clothing in developed countries.

During the 10-year period, the U.S. will cut tariffs on apparel and textiles by an average of 11.6 percent, although the cuts vary widely by product. On apparel, the average cut will be 9.2 percent.

Moreover, importers and retailers have complained vigorously about a provision included in the implementing legislation that will change the rule of origin for apparel imports.

Effective July 1, 1996, apparel’s origin for quota purposes will be determined by where it’s sewn and not where its cut, as is the case now. This will, in effect, end the process known as outward processing, which has been a mainstay of Far East sourcing.

In this system, fabric is cut in Hong Kong, sewn into apparel by the cheaper labor of China and then imported under the more abundant quota of Hong Kong. While importers wait for a quota-free world, they say this rule change, pushed by the U.S. textile and apparel manufacturers, will seriously disrupt established sourcing patterns and raise prices as well.

Importers also were unhappy with the first list of products put together by the administration to make up the required 16 percent share of quota-fee products, effective next year. The 280 items on the list were quota-free, to begin with, they point out, and were for the most part, non-strategic goods, such as silk parachutes and cotton tents.

The rule-of-origin change so angered retailers, they withdrew from active lobbying for GATT until just this week, when the National Retail Federation sent a letter with signatures of many key retailers to each Senate office in support of the pact.

Now, as executives in retailing, apparel and textiles contemplated the free trade victory won by the Clinton administration, many praised it, even while saying they won’t rush to implement new strategies.

Following is a cross-section of industry reaction.


Retailers, while hailing GATT’s passage, do not see it having a major immediate impact. They said they are not about to move into new overseas expansion efforts, they will take months to examine new markets and sourcing opportunities for their U.S. stores, and noted that the phaseout of tariffs on certain categories occurs over several years.

They would prefer an accelerated timetable, yet they see the legislation as a great opportunity for giving better values to consumers in the future. As Allen I. Questrom, chairman and ceo of Federated Department Stores, said, “I don’t think GATT changes our outlook on retail.”

Federated does believe that Bloomingdale’s has an international reputation that can be transported overseas, but no plans are in motion to open Bloomingdale’s abroad at this point.

Regarding sourcing, he said, “If we as retailers don’t shop the world, we won’t get the best values for our customers.”

“I think as a retailer representing customers, GATT is a big plus, but we don’t know enough yet about the impact on our stores,” Questrom said. “There will still be some trade barriers on the textile side. That’s unfortunate, but GATT needed to be approved.”

Donald G. Fisher, chairman of The Gap, saw no immediate changes at his company because of GATT.

“The major impact will come, as it will to all retailers, in 10 years when the Multi-Fiber Arrangement is phased out,” said Fisher. “Until that time, there is such a minuscule number of classifications of apparel that will be released from the MFA, it will be of little value for us.

“Over the 10-year period it will have an advantage for the customer, and I think it is the right thing for the country,” he continued. If GATT hadn’t happened, he said, there would have been “international chaos in trade.”

Fisher said GATT’s passage won’t cause The Gap to reevaluate its sourcing procedures. He also objected to the change in country-of-origin rules, describing it as “totally unnecessary.”

A. Robert Stevenson, Kmart’s vice president of public affairs, said GATT’s approval would not have any immediate impact on Kmart’s retail operations worldwide. He did acknowledge, however, that a reduction of tariffs would make it easier for Kmart to supply its international stores with U.S.-made products if and when it decides to do so.

Kmart operates discount stores in Canada, Mexico, the Czech Republic, Slovakia and Singapore. Consumers also stand to benefit from GATT, which should lead to lower prices and increase the range of products available, Stevenson said.

The International Mass Retail Association, which never lobbied on behalf of the agreement in its anger over the rule-of-origin change, nevertheless welcomed GATT’s passage, said Robin Lanier, the organization’s vice president for international trade.

“Considering we spent years working on the agreement, it’s been difficult to sit this one out,” she said. “On balance it’s good, but we are not happy with the implementing bill.”

Tracy Mullin, president of the NRF, also expressed strong opposition to the rule-of-origin change, but saw final passage of the bill “an important step on the road to a more open global trading system.”


For some of the biggest players in apparel manufacturing, GATT will not necessarily inspire any shifts in strategy.

“Our global strategies have been in place for a number of years, and I don’t believe GATT will drastically change any of that direction,” said VF’s Lawrence Pugh. “Perhaps there will be some fine-tuning of our sourcing. It will certainly make it easier to market our products in some countries. But I don’t see any drastic changes. Eighty-five to 90 percent of our products are manufactured domestically. We see that going to about 75 percent. And we have no plans for any massive restructuring or layoffs.

“[Overall], GATT is going to be very positive, and the vital companies in our industry are going to be ever more vital as they expand their vision under this next step toward a worldwide marketplace.”

“We think overall GATT is very important in terms of continuing progress toward world free trade and that the sooner that happens, the better off we are going to be,” said Jerome A. Chazen, chairman of Liz Claiborne, who doesn’t see any short-term implications for his firm.

“We do have some concerns regarding the rule of origin,” said Chazen. “However, as a high-value importer, it would affect us less than others.”

James Jacobsen, vice chairman of Kellwood Corp., said the “anticipation of the Uruguay Round issue, much like the North American Free Trade Agreement, started us working well in advance.”

Kellwood opened a sales office in Mexico, he pointed out, which is seeing real growth, but not big growth.

“As for the Uruguay Round, the quotas and the phaseout of MFA, we’re looking at eight to 10 years before major categories are impacted.”

“An important 35 to 40 percent of what we sell to the U.S. market is made in a variety of countries,” he added. What Jacobsen said he’d like to see is NAFTA parity for the Caribbean countries. “We make goods in the Caribbean and would like to have the Caribbean included in the trading block.”

The American Apparel Manufacturers Association, in fact, sat out the GATT battle because a provision that would broaden trade benefits for Caribbean Basin countries was stripped from the bill by the White House.

“We opposed it because it didn’t contain what it should have,” said AAMA incoming president Larry Martin.

The domestic industry, meanwhile, has turned its attention to 1995 and has announced its push for Caribbean parity and already is lining up votes for the new Congress.

Linda J. Wachner, chairman and president of The Warnaco Group, saw GATT as “a boon to the innerwear industry, but it will be a slow phase-in over several years.”

Howard Cooley, chief executive officer at Danskin Inc., said, “GATT’s a bonanza for the Danskins, Levi’s and Jockeys of the world. I think it’s the best thing that could happen to branded business, because great American brands are wanted all over the world, but they’re also kept out all over the world.”

Jules Wachter, president of PSI/Bicci, a suit firm already heading overseas next year in a joint venture to distribute his lines in Europe, said it was a strategy he implemented in anticipation of GATT. He said he feels the treaty will be a boon to his expansion and production programs. The company now manufactures in Hungary, Hong Kong, Korea and Thailand.

William Maroni, director of government relations for Levi Strauss & Co., said, “Even though more liberal trade in textiles and apparel will have some adverse impact on parts of our industry, we nonetheless feel it will benefit the industry.”

Maroni said lower tariffs will help Levi’s become a more competitive brand in its current markets, as well as some untapped areas.

“The second part is that by phasing out import quotas, it will provide greater flexibility on some sourcing that we do, with woven shirts in particular,” he said.

Maurice Marciano, chairman and chief executive officer of Guess, agreed that GATT will have a positive effect on his business.

“So far, with NAFTA we have not had a single problem, and personally, I think [GATT] is going to be great in terms of Guess. It’s going to open a lot of markets. We’re going to be able to expand tremendously.”

As for the textile industry, the American Textile Manufacturers Institute remained officially neutral on the agreement, but in the final days before the vote, president William J. Armfield 4th, vice chairman of Unifi Inc., Greensboro, and past ATMI president Donald R. Hughes, vice chairman of Burlington Industries Inc., trolled the corridors of Capitol Hill looking for GATT backers.

Textile magnate Roger Milliken, chairman of Milliken & Co., remained one of GATT’s staunchest foes. “Having closely followed the negotiations from their inception, I am convinced that the new GATT agreement will harm our national economy and ultimately that of the world as well,” he said.

When informed of the margin of victory in the Senate while riding an elevator up to the Cotton Incorporated gala in New York Thursday night, Milliken greeted the news with a stone-cold expression and fell silent.

Other textile executives had more mixed reactions. Said Arthur Wiener, chairman and chief executive officer, Galey & Lord, “GATT is a reality of life. It will open up the U.S. market, and we intend to explore every opportunity to reciprocate. We’ve been thinking about GATT for some time.

“We make a lot of high value-added products, and we will attempt to sell them to markets as they open up for us. When a situation such as GATT comes up, you analyze it, and, instead of crying about it, you react.”

Jim Casey, president, fibers division, Wellman Inc., said, “We’ve been operating for such a long period of time with our hands tied behind our backs, hopefully GATT will give us an opportunity to export to countries that had not allowed us in.

“To be frank, I’m more concerned about us doing a good job with NAFTA and the ability to grow our Caribbean-based business. On Quick Response, NAFTA and the Caribbean are more meaningful to us.”

Peter Frank, division manager, Malden Mills Industries, and executive vice president, Knitted Textile Association, said, “The question and our mission is how can we survive and continue to prosper under GATT. The positive is that GATT opens up world markets with the gradual elimination of tariffs and quotas. With that, along with the cheap dollar, we should all be more competitive worldwide.

James P. Marion 3rd, president, Bloomburg Mills and president, Textile Distributors Association, observed, “With the amount of business that’s gone offshore, there would have been an erosion of the domestic market with or without GATT. We will still continue to improve efficiencies, quality and productivity, things we would normally do, to fight for what is left in this market.”

As for organized labor, the mood was grim. Jay Mazur, president of the 150,000-member ILGWU, said passage of GATT jeopardizes the future of the U.S. apparel manufacturing industry, which employs more than a million people. In addition, Mazur said another 700,000 textile jobs and “hundreds of thousands of jobs in related industries will also be placed in peril.”


With GATT’s Senate victory, there was growing talk of more free trade movements in the near future.

Sen. Bill Bradley (D., N.J.), saw the GATT Uruguay Round as the opportunity to pursue further trade liberalization.

“The world economy did not stand still while our negotiators hammered out the Uruguay Round. We need a new round — sooner, rather than later,” Bradley said during Senate debate.

Eugene Milosh, president of the American Association of Exporters and Importers, said GATT “opens a door for the U.S. that we have to keep walking through to get all the benefits we can.” Specifically, Milosh said, the U.S. should pursue free-trade possibilities with the Asian-Pacific nations, as well as propose broader trade expansion opportunities in the Western Hemisphere.

Trade analysts are also speculating that President Clinton will make trade a focal point next year, including what some say will be a proposal to begin talks on joining other nations to NAFTA, and Chile may be the first. Some of this may begin to take shape at a Western Hemisphere meeting that starts Dec. 9 in Miami.


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