WASHINGTON — Congress reconvenes in full today from its five-week summer recess, charged with the colossal task of providing ongoing relief aid for the Gulf Coast victims of Hurricane Katrina.
The focus on Katrina will overshadow several key legislative battles that could ultimately reshape the Supreme Court, immigration laws, the federal tax code and U.S.-China trade relations.
In the aftermath of what could turn out to be the worst natural disaster in U.S. history, Senate and House leaders returned to Washington early to approve and rush to the White House a $10.5 billion relief package for tens of thousands of people in the Gulf Coast region displaced by the deadly hurricane.
As Congress grapples with the devastation in the region, more emergency supplemental bills are expected in the coming months, which could impact the fall Congressional calendar and push some of President Bush’s agenda aside. While Republicans maintain majorities in both houses, Bush has run into some trouble securing the votes he needs to move portions of his ambitious second-term economic agenda forward, most notably Social Security and federal tax code reform.
The President has had some legislative victories this year, though, including passage of the Central American Free Trade Agreement, as well as energy and transportation legislation. But Bush’s agenda will again be tested in Congress this fall against the backdrop of soaring oil and gasoline prices, mounting casualties in Iraq and flagging public support for the war, dissension within GOP ranks and challenges from Democrats.
“It’s going to be very partisan and it’s going to be very nasty,” said Larry Sabato, executive director of the Center for Politics at the University of Virginia, referring to the anticipated Congressional fights this fall. “There’s no question about that.”
Topping the fall Congressional schedule is the upcoming Senate battle over the Supreme Court nomination of John Roberts, which could delay action on several other bills if Democrats mount an effective opposition. The House is expected to take up immigration reform legislation creating a foreign worker visa program, and the President could renew his push for Congressional action on his proposal to overhaul the Social Security system, which has failed to garner much support from either party.
As Congress grapples with these big-ticket items, the fashion industry is closely watching several other key pieces of pending legislation and issues, including bills targeting China’s trade practices and currency policy, suspension of import tariffs on a range of goods, data security standards and recommendations on a revamping of the tax code.
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The November 2006 midterm elections could make Social Security and tax reform difficult to achieve, while at the same time increasing Congressional pressure to take a more aggressive stance against China, especially if the economy stagnates and job losses mount.
“When you isolate things like the Roberts nomination, a potential nomination fight for the successor of Supreme Court Chief Justice William H. Rehnquist, appropriations issues and the differences relating to Iraq, there is a lot of political bad blood out there, which could manifest itself in a fall appropriations fight and in Congress calling for stronger action against China,” said Steve Pfister, senior vice president for government relations at the National Retail Federation.
While consumer and business spending is a key topic for retailers, importers and domestic textile and apparel producers, the direction of U.S. trade policy — set out by the White House but shaped by the role of Congress in approving and adjusting legislation — is a top priority.
The industry will closely monitor many trade issues over the next few months, including several pending China bills, ongoing negotiations on a comprehensive textile and apparel import restraint agreement with that country, and a critical December meeting of World Trade Organization trade ministers in Hong Kong, where they will attempt to overcome steep hurdles and agree on a blueprint for eliminating global tariffs.
President Bush will hold his first summit with Chinese President Hu Jintao on Wednesday, and energy issues and bilateral relations are expected to be on the agenda. It is unclear whether the two presidents will discuss currency reform, which has become a hot-button topic on Capitol Hill.
“If the Chinese don’t move further on currency, [some of these bills] will get a lot of traction,” said Cass Johnson, president of the National Council of Textile Organizations. “Congress will be looking for movement, and if it doesn’t see it, it will start to move ahead with pieces of legislation.”
Lawmakers have introduced several China bills this year, but only two appear to have a strong chance of passage, according to industry representatives.
“We’ll be in a defense posture as it relates to the fight over the legislation [introduced by Sens. Charles Schumer (D., N.Y.) and Lindsey Graham (R., S.C.)] and similar types of legislation,” said Paul Kelly, senior vice president for federal and state government affairs at the Retail Industry Leaders Association. “Honestly, these things are politically popular, and I would not be surprised in the Senate to see those bills end up as riders to other legislation.”
Pfister said a bill introduced by Rep. Phil English (R., Pa.) that would allow U.S. firms to file trade cases against subsidized goods from China has traction because it passed the House, but it “really comes down to what the Republican Party feels it needs to do.”
But Jim Schollaert, director of industry and grass-roots relations at the American Manufacturing Trade Action Coalition, said there is a lot of cynicism about the English bill, because the House Ways & Means Committee refused to allow any amendments before the full floor vote at the end of July.
“Nobody really takes it seriously in its present form,” Schollaert contended.
He noted the Schumer-Graham bill might have more momentum this fall if China fails to make further progress in revaluing its currency.
Another issue the fashion industry will be watching closely this year is a miscellaneous trade package that Ways & Means is expected to mark up and send to the House for a full floor vote. These types of trade packages often have hundreds of provisions attached to them, and importers, retailers and textile executives are pressing the committee to include a number of proposed provisions, including the repeal of duties on several imported textile, apparel and footwear items.
One highly controversial element that could make its way into the omnibus bill is a proposal to repeal the Byrd Amendment, which was ruled illegal by the WTO. The European Union slapped a 15 percent tariff on imports of 10 kinds of U.S.-made apparel in May after Congress failed to repeal the law, which allows for the collection of tariffs on foreign goods when they are sold in the U.S. for less than they are in their home country.
Stephen Lamar, senior vice president at the American Apparel & Footwear Association, said the group supports the repeal of the Byrd Amendment, though he said it will “obviously provoke a lot of emotions on both sides.”
However, the Byrd Amendment has strong Congressional support, and any move to rescind it is expected to meet considerable opposition in the Senate and possibly the House. Shortly after the WTO deemed the subsidies illegal, 70 senators sent a letter to the President opposing the ruling and asking that the issue be readdressed as part of the Doha Round of global trade talks.
Cotton subsidies are another trade-related issue at the top of at least one textile association’s watch list this fall. Missy Branson, senior vice president of the NCTO, said the group is watching how the administration’s proposal to cancel a program that has supported U.S. cotton growers and yarn spinners with millions of dollars in government subsidies, ruled illegal by the WTO, will play out. Congress must repeal the program, known as Step 2, and some Congressional aides have said language to remove the program could be attached to the Senate Agriculture Committee’s budget reconciliation, due in mid-September.
“I think, of all of the issues out there that are textile-related that could see action, that is the most likely,” Branson said.
Retailers and importers are paying close attention to the President’s Advisory Panel on Federal Tax Reform, which will release its recommendations on simplifying the tax code on Sept. 30. Bush pushed back the deadline for the bipartisan panel’s recommendations in June in order to tackle Social Security reform, which has stalled.
“We will be prepared to come out with both barrels blazing if they suggest any type of consumption tax,” said Kelly of RILA, noting a value-added tax or a national sales tax would depress sales and have a negative impact on consumer spending.
Kelly said retailers are concerned about a bill introduced by Rep. John Linder (R., Ga.) that would create a national sales tax of as much as 25 percent to replace all individual and corporate taxes. Linder’s plan has support from House Majority Leader Tom DeLay (R., Tex.).
Pfister of the NRF said: “Most people feel an absolute replacement of the existing tax structure is not in the cards,” but the real concern is a “window of opportunity for a VAT,” or value-added tax.