NEW YORK — Vietnam was fresh on the minds of importers and sourcing executives attending the 18th annual Textile & Apparel Importers Trade and Transportation Conference here last week.
On the eve of the conference, held Nov. 14 at the Chelsea Piers Event Center, the House unexpectedly voted down a bill that would have granted Vietnam permanent normal trade relations status. If passed, the bill would have allowed U.S. companies to reap the full benefits of Vietnam’s membership in the World Trade Organization. The bill also had included a provision to establish a procedure for imposing quotas on imports of subsidized apparel and textile products from the Southeast Asian country, a provision Vietnam had accepted in its bilateral WTO accession agreement with the U.S.
Whether the vote reflected the influence of textile-state lawmakers or the ire of those Republicans who blamed President Bush for their loss in the midterm elections, the trade industry saw the defeat as a step backward for free trade.
“You’ve got to know what is happening in respect to Vietnam,” said Bob Zane, chairman of the U.S. Association of Importers of Textiles & Apparel, in his opening remarks at the conference.
Zane believes if something isn’t done to address Vietnam within the next year, the entirety of textile and apparel exports from the country will cease.
“And who will benefit from this scheme?” Zane asked rhetorically. “I have no idea.”
The more immediate challenge for the sourcing executives in the room, according to Zane, will be gauging the risk of doing business in Vietnam given the current level of uncertainty. “You’re going to have to guess whether it will be safe to export products from Vietnam beyond a certain date,” said Zane.
That date may be fast approaching, with Zane contending that some in the industry believe it won’t be safe beyond the 2007 holiday season.
In a keynote address, Robert Hormats, vice chairman of Goldman Sachs International, gave an overview of the growth of the global economy. Hormats noted the domestic economy has achieved consistent growth in recent years despite several events that, in decades past, likely would have caused significant upheavals in the market. Surging energy prices, the prolonged war in Iraq and the government’s poor response to Hurricane Katrina, noted Hormats, have failed to have a sustained negative impact on economic growth.
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Hormats attributed the domestic economy’s resiliency to the fact that global trade has expanded with countries such as Russia, China and India. Their continued development has brought with it an expansion of financial markets.
“You have companies and countries that were not there 10 to 15 years ago,” he said.
As a result, there are more options around the world in terms of borrowing and investing. Better financial practices also have been adopted by countries and companies worldwide, in turn creating greater stability. The power of the Internet to provide instant information allows for faster decision making.
Despite this, Hormats believes there have been recent events that show what he characterized as ominous signs of a regression to less open market systems.
“In this country, you’re getting an economic nationalism setting in,” said Hormats, referring to Dubai Ports World’s attempted acquisition of terminal operations at six major U.S. ports, as well as the failure of Vietnam to win PNTR status.
Protectionist measures, said Hormats, tend to appear when the country is experiencing rising unemployment and an increase in the trade gap. Today, however, the country is facing only one of those conditions — a widening trade deficit — that Hormats contends is “dangerous.” Protectionist measures will drive the price of goods higher, ultimately having the greatest impact on low-income consumers, he argued.
Brenda Jacobs, a trade attorney with Sidley Austin, said the Vietnam vote may have been insulting to that nation’s government, which made a number of concessions in other industries to allow U.S. access to its market. According to Jacobs, Vietnamese manufacturers already have seen a pullback in orders.
But there are some negative implications to the increase in global trade, including the growth in counterfeits and attempts to circumvent quotas.
“We are seeing an overall increase in misdescribed merchandise,” said Janet Labuda, director of the textile enforcement and operations division at U.S. Customs & Border Protection. Since textile products represent 43 percent of all duties collected, the government stands to lose considerable sums as importers look to avoid quotas.
Last year, textiles valued at $100.3 billion were imported, a 40 percent increase over the $71.4 billion reported in 2001. During that time, duties collected on textiles rose 23 percent to $10.1 billion from $8.2 billion.
In an effort to verify origins of textile products, textile production verification teams have been established. So far this year, the teams have visited more than 430 factories in 13 countries, ranging from Hong Kong to Swaziland. Those visits found that 97 of the factories, which, on paper, were cited as the producers, were permanently closed. Another 20 factories refused to allow the teams to enter their facilities. Overall, 60 percent of the factories had engaged in illegal transshipment — where goods are shipped from one port to another one that is less likely to arouse suspicion with customs officials — and 41 percent had improperly claimed a trade preference.
“You know the term port shopping in the U.S., but now we’re seeing country shopping,” said Labuda.
For 2006, textiles enforcement has seized textiles valued at $103.7 billion. According to Labuda, the individuals and criminal organizations participating in textile importing often have been found to also be engaging in alien smuggling, prostitution and drug smuggling.