WASHINGTON — House Ways & Means Committee chairman Bill Thomas (R., Calif.) introduced a trade package Thursday that would impact sourcing strategies in sub-Saharan Africa and Haiti.
Business groups had been lobbying members of Congress in the past several weeks to renew or extend several trade preference programs, some of them addressed in the Thomas bill, benefiting U.S. importers that are expiring at the end of the year. Thomas’ trade package triggered opposition from the domestic textile industry and a mixed reaction from retailers and apparel importers, who largely support it.
Rep. Charles Rangel (D., N.Y.), the ranking Democrat on Ways & Means, has introduced his own trade package that contains some different provisions, including a one-year extension of trade preferences for the four Andean countries that expire at the end of the year. Thomas’ bill does not include an extension for the Andean countries.
An aide for House Democrats, who requested anonymity, said he expects there will be a “level of support for this [Thomas’] measure” from Democrats, despite differences between the Rangel and Thomas bills. “I wouldn’t see any problems with it passing,” the Democratic aide said. “Certainly, we are not going to get to the point where we leave these countries in the lurch and make them pay the price for an imperfect bill.”
House GOP leaders have placed the Thomas bill on the “suspensions calendar” for a vote Tuesday, which is a procedural step for noncontroversial bills but requires a two-thirds majority for passage.
The Thomas bill would extend third-country fabric benefits to sub-Saharan African countries through September 2008. After that, the bill scales back the existing third-country benefits, under which companies can use fabrics and yarns from anywhere in the world and do not have to meet regional content or processing requirements. The rule of origin will change and require that at least 50 percent of the value of the materials and processing be in the region. These materials can be from eligible sub-Saharan African countries, the U.S. or countries where the U.S. has free trade agreements or trade preference programs.
In addition, the bill would enhance duty free benefits for Haiti based on a 50 percent value-added rule that increases to a 60 percent requirement in the fifth year, and extend the Generalized System of Preferences duty free benefits program for two years.
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A spokeswoman with the U.S. Trade Representative’s office said: “We are pleased that both houses of Congress and leaders of both parties are paying close attention to these important programs, and look forward to working with them as they consider reauthorization. As for chairman Thomas’ bill, we are currently reviewing the proposal.”
Importers were split over whether the trade package would have a big impact on sourcing decisions. “Certainly in the short term, an extension will allow companies to maintain current apparel production in [sub-Saharan Africa] and should actually attract new business to Haiti,” said Julia Hughes, senior vice president at the U.S. Association of Importers of Textiles & Apparel.
Erik Autor, vice president and international trade counsel at the National Retail Federation, said, “I don’t see this as having a huge impact on sourcing decisions. It may result in some marginal business in terms of retaining current business in those regions.”
Autor said the real question is what companies like Gap Inc., which sources in sub-Saharan Africa, will derive from it.
“Are there sufficient incentives in the bill to keep business in Lesotho or not?” asked Autor. “If they think this is workable, that is very encouraging.”
As for the domestic textile industry, Cass Johnson, president of the National Council of Textile Organizations, said, “This bill, if passed, will have a huge adverse impact on the domestic industry. It is unbalanced, unenforceable and destructive of major U.S. export markets.”
Johnson said the primary concern with the bill is the inclusion of preferences for Haiti. He noted the U.S. textile industry’s fabric and yarn export business to Haiti, totaling $150 million, would be lost because of the rules of origin.
A spokesman for the American Manufacturing Trade Action Coalition, who noted the association would oppose the bill in its current form, said, “This certainly will be a controversial vote in textile districts and it will be interesting to see if leadership wants to move something that has the potential to be controversial for textile people so close to the election.”