WASHINGTON — A range of contentious issues between the U.S. and China that impact the fashion industry are heating up ahead of Chinese President Xi Jinping’s visit to Washington on Friday, and factions from lawmakers on Capitol Hill and President Obama to GOP presidential contenders and the private sector are weighing in.
Xi will visit Washington with his wife, Peng Liyuan, for a state visit that will include a highly anticipated Rose Garden press conference and a formal state dinner at the White House. China is important to the fashion industry’s sourcing strategies and exports. It is the top supplier of apparel and textiles to the U.S., controlling a 38.7 percent share of the U.S. import market and importing $42.8 billion for the year ending July 31, according to U.S. government data.
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Several thorny, outstanding issues directly impacting the industry are pending, as Xi comes to Washington. They include:
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— A World Trade Organization case filed by the U.S. against China in February targeting a broad Chinese export subsidy program in seven sectors, including apparel, textiles and footwear, that could have broad ramifications for sourcing.
— A spat over China’s cotton supply. The U.S. asserted at a WTO meeting in June that China’s stockpiling of cotton has distorted world cotton prices and adversely impacted global cotton textile trade.
— China remains the number-one source of imported counterfeit products to the U.S., and cyber attacks and theft of trade secrets against retailers and other businesses are on the rise. The administration has said it is preparing a list of possible sanctions against China.
“With respect to China, [cyber security] will probably be one of the biggest topics that I discuss with President Xi,” President Obama said last week at a Business Roundtable meeting. Obama said any action by China “engaging directly in industrial espionage and stealing trade secrets, stealing proprietary information from companies” is an ‘act of aggression that has to stop.”
“We are preparing a number of measures that will indicate to the Chinese that this is not just a matter of us being mildly upset, but is something that will put significant strains on the bilateral relationship if not resolved, and that we are prepared to [take] some countervailing actions in order to get their attention,” Obama said. “My hope is that it gets resolved short of that and ultimately the goal should be to have some basic international framework.”
The Chinese sent a delegation to Washington earlier this month to discuss cyber security and other issues with senior U.S. officials ahead of Xi’s visit. According to China’s Xinhua news agency, Meng Jianzhu, secretary of the Central Political and Legal Affairs Commission of the Chinese Communist Party, said the two sides had reached an “important consensus” during the meetings.
In a speech posted on Xinhua, Chinese Foreign Minister Wang Yi said: “The two sides will step up dialogue on cyber issues, work together to combat all forms of cyber crimes according to law, uphold cyber security and carry out cooperation in cyberspace.”
The threat of sanctions by the U.S. cuts both ways for the business community, which has been the target of trade secret theft and cyber attacks but is concerned about retaliation by the Chinese.
Nick Ahrens, vice president of privacy and cyber security at the Retail Industry Leaders Association, said, “Through a host of ways, our membership is really deeply engaged in the cyber problem and trying to harden their network and to get to a place of much more security, and they are facing literally thousands of attacks a day and oftentimes those attacks originate from China.
“It is a double-edged sword,” he said of the threatened sanctions. “If you do something there could be economic blowback. If you don’t do something, then cyber attackers are emboldened and continue to attack and continue to steal IP and perpetrate other crimes against the U.S. economy. From the retailers’ perspective, we are encouraged that the administration is taking what looks like a very deliberate tact working through these issues, but frankly they’ve been working with the Chinese from the beginning of the administration and it has been frustrating for everybody involved where they are today.”
The Obama administration is also under mounting pressure to confront China on issues such as currency manipulation and counterfeiting.
“The development of the online marketplace and the proliferation of counterfeiting in several of those marketplaces — Taobao is [one] where we have had a lot of focus — is really problematic,” said Stephen Lamar, executive vice president at the American Apparel & Footwear Association. “China is the nexus of this problem [of counterfeiting]. Unless it is addressed in China, then we are going to see it aggressively pop up.”
Lamar said he expects counterfeiting to be part of the discussion between Obama and Xi.
“You can’t really have a meaningful economic and commercial conversation with China, unless you talk about the vast counterfeiting and intellectual property problem,” Lamar said.
Lawmakers are calling for stronger currency language in an Asia-Pact under negotiations, in the wake of a move by China to devalue the yuan that caused turmoil in international financial markets.
“We fear these recent currency interventions [by China] could lead to a pattern of competitive devaluation within the Asia-Pacific that could hurt U.S. workers and exports for years to come,” a bipartisan group of senators said in a recent letter to top trade and treasury officials, calling for stronger currency language in an Asia-Pacific trade pact under negotiation.
The U.S. relationship with China also came up at Wednesday’s GOP debate. Former Florida Gov. Jeb Bush, responding to Wisconsin Gov. Scott Walker’s call to cancel the state, said, “We should use offensive tactics as it relates to cyber security, send a deterrent signal to China. There should be super sanctions in what President Obama has proposed. There’s many other tools that we have without canceling a dinner. That’s not going to change anything, but we can be much stronger as it relates to that.”