Two of President Bush’s top priorities, a plan to stimulate the economy by speeding up last year’s tax cuts and quickly securing Trade Promotion Authority to complete free-trade pacts — goals shared by many in the retail, apparel and textile trades — are mired in election-year strategies. The agenda is challenging even for seasoned industry lobbyists.
“It is going to be a very interesting session,” said Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel. “My head hurts just thinking about it.”
As the second half of the 107th Congress gets under way, lurking in the distance are the November elections, in which the entire 435-member House and one-third of the 50-member Senate will go before voters. Democrats are anxious to maintain control of the Senate and enhance their single-seat majority, while wrestling control of the House from the GOP. Republicans desperately want to have the majority in both chambers, as they did at the start of the Bush administration.
For the time being, the action will be in the Senate, which has yet to follow the House lead in passing TPA, an economic stimulus bill and legislation granting duty breaks to apparel made in the Andean countries of Colombia, Peru, Ecuador and Bolivia.
Senate Majority Leader Tom Daschle (D., S.D.), a supporter of TPA, has said he wants to bring the bill to a vote “early” in the year. However, complications for TPA could come if Daschle, as some observers expect, attaches the Andean Trade Preference Act to the legislation. TPA would mean Congress won’t be able to amend negotiated trade deals, only vote them up or down.
Although the Senate bill would require Andean apparel receiving duty breaks to be made mostly of U.S. textiles, influential textile-state Sens. Ernest Hollings (D., S.C.) and Jesse Helms (R., N.C.) oppose the measure. They side with the American Textile Manufacturers Institute in arguing that before adding more trade benefits, domestic mills need to first realize gains from Caribbean Basin trade legislation approved two years ago. Chamber rules offer Helms and Hollings a means to attempt to block or stall the measure and, along with it, TPA.
Daschle’s packaging of the Andean bill with TPA — and voting on both quickly — would be part of an election-year strategy, according to industry observers. As the conventional wisdom goes, voting for trade-expanding measures, particularly during a recession, doesn’t resound with voters who tie globalization to factory closings.
“The longer they wait to do it, the less opportunity they have to do it,” is how Kevin Burke, president of the American Apparel & Footwear Association, measured the touchy, election-year nature of trade legislation.
How quickly any legislation moves in “the first month or month and a half will set the tone for the rest of the session,” Burke said. “It could very well turn into a political bloodbath where Democrats and Republicans are both posturing. That could backfire for both parties, but usually it backfires most on the people who are in charge.”
Further coloring the trade debate is the deal made in the House last year with Republican textile-state lawmakers that allowed TPA to pass by one vote. In exchange for their TPA support, these lawmakers, concerned about massive job losses in the textile industry, wanted a promise from GOP leadership: legislation to be considered this year that would require duty-free treatment be extended only to Caribbean Basin-made apparel if the U.S. textiles contained in the garments are dyed, finished and printed in the U.S.
The deal angered free traders, including apparel and textile importers, who said the finishing requirement would detract from any savings gained from sourcing duty-free in the Caribbean. Not only do retailers and importers want this deal scrapped, but they are concerned a U.S.-only finishing rule will also be put in the Andean trade bill.
“We truly expect the dyeing and finishing issue to be in play,” said Erik Autor, vice president of international trade at the National Retail Federation.
House Ways and Means Chairman Bill Thomas (R., Calif.), an opponent of the TPA deal who was once a fierce free trader, will have a hand in the final shaping of any trade legislation.
“The question is if Mr. Thomas has to take dyeing and finishing, what will he get in return” in terms of trade-expanding measures, Autor said.
Moreover, the fate of TPA could be tied to the dyeing and finishing issue, said Chris Chafe, political director of the apparel union UNITE. The House will likely have to vote again on TPA if the Andean legislation is attached to it in the Senate. So if dyeing and finishing is permitted in the Andean region in that bill, “the Southern textile-state lawmakers could change their vote [to no] if they feel they haven’t gotten their deal,” Chafe said.
While not on the Congressional agenda, if Bush gets TPA he said he wants to also pursue a free-trade pact for Central America.
Meanwhile, the debate over what Congress should do to stimulate the economy will be a magnet for partisan bickering, as it was last year and continued to be during the month-long recess. Democrats have resisted Republican calls for an acceleration of last year’s tax cuts passed by Congress. Republicans scoff at Democrat calls for a stimulus package focused largely on helping unemployed workers, like subsidizing their health insurance.
Somewhere in the mix is a proposal for a 10-day National Sales Tax Holiday, which has a list of backers from both parties, but has yet to be included in any stimulus proposals.
“It will very much be on the table this year. It’s definitely something that warrants consideration,” said Katherine Lugar, vice president of government relations at the NRF. As for the fate of a stimulus package emerging amid partisan sniping, Lugar said, “We’re hopeful, but we’re not holding our breath. It will be an intensely political fight, there is no question about it.”
Issues also affecting business that are almost guaranteed to be shelved because of party bickering are health care and bankruptcy reform. The two respective bills have passed both chambers. It’s now up to conference committees to reconcile differences in House and Senate versions, some of which are deep and have kept lawmakers even from scheduling regular meetings.
The bankruptcy reform bill, supported by retailers, would make it more difficult for people to entirely wipe out their debts, a move also not considered to be popular in an election year. One of the major health-care reform divides involves whether businesses should keep their exemption from being swept up in lawsuits over health care.