U.S. trade policy

April 1st, 2017 / By: , / Business, Management

Last year was both a momentous and a productive year for the U.S. Industrial Fabrics Institute (USIFI) and the Narrow Fabrics Institute (NFI) divisions’ efforts in Washington, D.C.

The text of the highly controversial Trans-Pacific Partnership (TPP) limited damage to the U.S. textile industry to the greatest degree politically achievable; now the election of Donald Trump as president has killed the agreement. USIFI and NFI also won five important Berry Amendment-related victories in fiscal year (FY) 2017 National Defense Authorization Act.

With a new administration in power, USIFI and NFI are cautiously optimistic that the textile industry will be able to switch its policy focus from defense to offense in the coming months.

TPP derailed

The election of Donald Trump signaled the end for U.S. participation in the Trans-Pacific Partnership (TPP). Instead, USIFI and NFI anticipate that the Trump administration will focus on renegotiating the North American Free Trade Agreement (NAFTA) and pursuing bilateral free trade agreements (FTAs) rather than pushing large trade deals. Trump has routinely criticized multilateral trade agreements for being “too complicated” and having inherent enforcement issues.

Despite this, it’s important to acknowledge the considerable work accomplished by the U.S. textile industry during the TPP process. The Bush administration’s 2008 announcement to negotiate a TPP that included Vietnam was deeply concerning to USIFI and NFI. Not only is Vietnam a non-market economy and a textile exporting powerhouse, it was clear that U.S. concessions on textiles were going to be required to conclude a deal.

No trade agreement had ever been rejected once completed. Consequently, USIFI and other textile trade associations decided to work with the Obama administration to craft a TPP that would limit damage to the U.S. industry and its Western Hemisphere trade partners to the greatest degree possible. The need to provide U.S. negotiators with detailed data justifying textile industry priorities required an unprecedented research effort from USIFI, its member companies and other trade associations.

Work by the Obama administration should also be recognized. Leadership from U.S. Trade Representative (USTR) Michael Froman helped nurture a close working relationship between USTR, the Commerce Department and the U.S. textile industry. Political appointees and career civil servants at USTR, the Commerce Department’s Office of Textiles and Apparel (OTEXA) and the U.S. International Trade Commission (ITC) worked tirelessly to achieve the best possible TPP deal for U.S. textiles, putting in thousands of hours compiling briefs for U.S. negotiators and participating in actual negotiations.

The bottom line is that the work on TPP has significant value beyond the failed agreement. The data collected and the stronger relationships built by industry with the U.S. government will pay dividends in many policy battles down the road. USIFI and NFI will work to forge a similarly close working relationship with the Trump administration.

Berry Coalition successes

The USIFI and NFI-led Berry Amendment Textile Coalition (BATC) won five key victories in the FY 2017 National Defense Authorization Act signed into law by President Obama on December 23, 2016.

There was no increase to the simplified acquisition threshold (SAT). To trigger the Berry Amendment, contracts must exceed the $150,000 SAT; a higher SAT creates the danger of contracts being broken up to fall below the threshold. Threshold increase language was removed from the bill by the House Armed Services Committee during mark-up.

  • The Berry Amendment was exempted from changes to the procurement of commercial items.
  • A voucher program for athletic footwear was ended and clear steps were taken to ensure that all athletic footwear purchased by the Department of Defense (DoD) is Berry-compliant.
  • Lowest Price Technically Acceptable (LPTA) or reverse auctions are not appropriate contracting methods for DoD procurement of personal protective equipment where the level of quality needed or the failure of the item could result in combat casualties.
  • DoD and the State Department were directed to brief key congressional defense and foreign relations committees on efforts to make U.S. manufacturers aware of procurement opportunities related to equipping foreign security forces approved to purchase or receive equipment from U.S. manufacturers.

The Berry Amendment, 10 U.S.C. 2533a, requires the Department of Defense to buy textiles and clothing made with 100 percent U.S. content and labor.

“Buy American” in 2017?

In a speech made in Iowa on December 8, 2016, and later in his inaugural address, President Trump laid out his “Buy American, and hire American” decree. Holding the president to his word, the United States has the authority to enact Berry Amendment-like laws for federally funded highway and mass transit projects as well as for the Federal Aviation Administration (FAA) and the U.S. Agency for International Development (USAID), consistent with its obligations under the World Trade Organization (WTO) Agreement on Government Procurement (GPA) and existing free trade agreements.

USIFI and NFI staff are also exploring all avenues to strengthen “Buy American” laws, by authorizing legislation and executive action for the departments of State, Homeland Security and other agencies.

Modernizing trade agreements

Since the election, it appears that Trump has moderated his campaign position of repealing NAFTA to one of renegotiating it to work more in favor of the United States. Noting that U.S. textile exports to NAFTA countries totaled $11.18 billion in 2016, USIFI and NFI do not support a wholesale cancellation of NAFTA. Instead, possible improvements could include:

  • committing greater resources and focus to customs enforcement;
  • conducting a review of whether Tariff Preference Levels (TPLs) should be eliminated and if there are items on the single transformation list that should be designated as yarn forward; and
  • fixing the Kissell loophole with respect to allowing the Transportation Security Administration (TSA) to buy from Mexico and Canada.

As for the Dominican Republic–Central America FTA (CAFTA-DR) and other Western Hemisphere FTAs, Trump has not targeted them for overhaul. If they were to be reviewed, however, USIFI and NFI again would favor improvements over cancellation. With respect to the U.S.-Korea FTA (KORUS), however, the impetus would be to remove textiles from that deal because of the lack of U.S. export opportunities.

TTIP talks on hold

Although the U.S.-European Union (EU) Transatlantic Trade and Investment Partnership (TTIP) largely escaped criticism on the campaign trail, talks are in a holding pattern until the Trump administration’s intentions are clarified.

Between Brexit and Trump statements that he is more supportive of bilateral agreements than large, multi-country agreements, it is unclear what direction future TTIP talks may take—if they are restarted at all. It should be noted, however, that Trump has raised the possibility of a bilateral agreement with the United Kingdom once it formally withdraws from the European Union.

China as a market economy

The Manufacturers for Trade Enforcement (MTE) has praised the U.S. government for its Dec. 11, 2016, decision to continue to apply established criteria for determining whether a country is a non-market economy for purposes of the anti-dumping law. USIFI and NFI are members of MTE, a coalition of U.S. industry groups opposed to recognizing China as a market economy.

By making this decision, the Obama administration rejected China’s claim that it henceforth must be treated as a market economy from that date as per the terms of China’s accession to the World Trade Organization.

Recognizing China as a market economy would hamper U.S. trade remedy tools because it is impossible to calculate anti-dumping and countervailing duty margins for non-market economies using rules for market economies. U.S. law employs a different test to calculate these margins on cases involving products from non-market economies.

Duty relief: MTB filing

Congress passed new procedures for processing and approving Miscellaneous Tariff Bill (MTB) petitions in 2016. Limited to annual aggregate savings of $500,000 per product, MTBs provide duty relief on imported manufacturing inputs not available domestically.

The updated process is structured so that domestic manufacturers submit MTB petitions directly to the U.S. International Trade Commission (ITC). After review and public comment, the ITC will recommend a list of products to Congress for vetting and final approval. Congress cannot insert new products to the USITC’s list of eligible products, but may remove ones that it disapproves.

The deadline for filing MTB petitions with ITC closed on December 12, 2016. Of the more than 3,100 petitions filed, roughly 350 were textile related. More information and a listing of submitted petitions are available at the USITC’s website: https://mtbps.usitc.gov.

In mid-January, the ITC commenced a 45-day public comment period that closed on February 24.  Many IFAI member companies filed comments to express opposition or support to petitions affecting their businesses.

The ITC and the Commerce Department will be submitting reports to Congress throughout the spring, with recommendations on a final MTB package due no later than mid-August of 2017. This timeline will provide an opportunity for a congressional vote on an MTB by late 2017.

Sara Beatty and Lloyd Wood are the Washington, D.C., representatives for the USIFI and NFI divisions of IFAI. Each has 14 years’ experience advocating on behalf of domestic textile manufacturers.

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