Fashion Intel & Analysis

           

From October 13 through November 10, the U.S. Department of Agriculture’s Agricultural Marketing Service (AMS) will hold a referendum on whether to treat Kansas, Virginia and Florida each as separate cotton-producing states, a move that will further dilute cotton importers’ influence on the Cotton Board, which oversees the Cotton Research and Promotion Program.

 

            The three states are currently grouped together for purposes of representation on the Cotton Board because each state produces a fairly small quantity of cotton per year.  Under the law that created the cotton program, each cotton producing state, or group of states where production is small, gets at least one representative plus one additional representative for each 1 million bales or major fraction (more than half) thereof of cotton produced.  However, as part of the 2008 Farm Bill, Congress authorized giving Kansas, Virginia and Florida their own individual representatives on the Cotton Board.  This was proposed even though Florida produced only 106,000 bales, Kansas produced 53,500 bales, and Virginia produced just under 100,000 bales in the most recent year.

 

            Treating the states separately would expand producer membership on the Cotton Board by three. Today, there are 23 producer members, 15 importer members and one consumer advisory.  The changes being proposed would increase the number of producer members to 26.   Importers currently account for 48 percent of the fees collected under the cotton program; the number of seats that can be held by the importers is subject to adjustment based upon a rolling five year average of the fees paid.  While the importer fee collections have increased over time and the number of seats held by importers have gradually increased, Congress has acted to ensure that producers continue to account for the majority of seats by legislating that even small producer states should have separate seats.

 

            A referendum on the change is still required for it to be implemented, so importers do have some chance of defeating it.  USDA says it will mail the ballot to all importers, but, as has been the case in the past, the ballot may or may not reach the appropriate person in each organization.  Importers also should be able to access the necessary voting forms via the internet, at http://www.ams.usda.gov/Cotton., so they don’t have to wait to see if it is received by the right person.   Importers must mail their ballots to:

 

            USDA, FSA, DAFO

            PO Box 23704

            Washington, DC 20026-3704

 

 

            The Senate Finance Committee last week started the process of drafting a so-called “miscellaneous tariff bill” (MTB), giving senators until October 30 to introduce bills to temporarily eliminate or reduce tariffs on particular products.  A MTB has generally been enacted by Congress once every two or three years to provide temporary duty suspensions for imported products that are not made in the United States and therefore considered non-controversial.  Under the rules established by the Congress, the tariffs forgone for each product must not exceed $500,000 per year. 

 

            Consideration of the MTB got off to a slow start this year in part because of the healthcare debate but also because Senator Charles Grassley (R-IA) wanted to ensure transparency in the process.  Grassley refused to move ahead with Senate consideration of a bill until it was clear that lobbyists would have to disclose their participation in the bill; this change was made in September in both the House and the Senate.  The U.S. textile industry makes significant use of the MTB process to obtain duty suspensions on imported machinery.

 

            The House already has a package of duty suspensions that it has rolled into a single draft bill, based on work done in 2007 and 2008.  But the Ways & Means Committee has been waiting for the Senate to commit to the MTB process before moving it for a vote. While the House has not publicly released the text of this bill yet, it is now expected to do so in the coming weeks.

 

            It is unclear whether a new MTB can be completed this year, as the current duty suspension law expires at the end of the year and any new duty suspension proposals in the Senate still have to be vetted at the U.S. International Trade Commission. Depending on the number of proposals made in the Senate, this could take some time. 

            A report from the International Trade Commission released with week says eliminating U.S. import tariffs on all textile and apparel items would increase annual domestic welfare by $2.25 billion, about half of the total $4.6 billion increase if tariffs on all goods were eliminated.

 

            The report said apparel tariffs average about 9.8%, and textile tariffs average 6.1%. It said eliminating these tariffs would allow domestic prices to fall, “leading to increased U.S. competitiveness in the global economy.”

 

            The report also said eliminating tariffs on all goods would increase imports by $13.1 billion and expand U.S. exports by $5.5 billion.

            The National Council of Textile Organizations (NCTO) today used a hearing at the U.S. Trade Representative’s office to reiterate claims that Chinese apparel exporters benefit from a range of subsidies, and ask that the U.S. government step up efforts to publicly track these programs.

 

            Today’s USTR hearing was meant to help officials prepare for their annual report on China’s compliance with its WTO obligations. When asked by USTR why tracking China’s subsidies would be helpful, NCTO President Cass Johnson replied that it would help textile producers file CVD cases against China, and said generally it would help anyone injured by China to “understand where the injury is coming from.”

 

            Johnson cited a value added tax rebate on exports and China’s undervalued currency as the largest subsidies enjoyed by Chinese apparel exporters, and said other subsidies exist. When asked about other policies, Johnson wasn’t specific but said he believes China has created many provincial and municipal level subsidies that help its exporters. He also insisted that imports of items that were under quota through 2008 have increased an average of 60 to 70%, while other imports from other countries have fallen.

 

            Johnson also repeated NCTO’s request that the U.S. formally cite China as a currency manipulator and set up an import monitoring program for Chinese apparel. Johnson generally tried to argue that the U.S. has turned its back on U.S. manufacturing, and that more scrutiny on imports from China would help strengthen manufacturing.

 

Last week, USA-ITA joined several U.S. textile organizations, led by the National Council of Textile Organizations (NCTO), in pressing the Obama Administration to work to resolve the political unrest in Honduras, which is threatening apparel sourcing in the region at a time when there is already a global downturn.

 

            In late June, Honduran President Manuel Zelaya was exiled in a coup led by Honduras’ Congress and Supreme Court, which rejected Zelaya’s plan to re-write the country’s constitution to allow the reelection of the president. The resulting political instability has interfered with trade both into and out of Honduras.

 

            In a September 25 letter to the Departments of State and Commerce and the U.S. Trade Representative’s office, the associations noted that Honduras usually ships 39 million garments a week to the U.S., most of which are made from U.S. cotton or fabric. The associations noted that trade with CAFTA countries has already fallen off due to the global economic downturn, and asked the Administration to take steps to ensure commercial ties between the U.S. and Honduras are not interrupted further.

 

            Among the other signatories to the letter were the American Apparel and Footwear Association, American Manufacturing Trade Action Coalition, and the National Cotton Council. A copy of the letter is available from USA-ITA.