Fashion Intel & Analysis

Senators Bob Casey (D-PA) and Catherine Cortez Masto (D-NV) introduced legislation to guarantee that countries who receive benefits under the Generalized System of Preferences (GSP) to uphold worker rights and the rights of women. The bill comes as Congress faces a deadline to renew GSP before it expires on December 31, 2020. The Senators say this legislation is needed to support women around the world who face many barriers to employment including restrictions on property ownership, access to education, violence, harassment, and wage discrimination. "We have to tear down these barriers and do everything we can to create safe workplaces for women in the United States and across the globe. I’m proud to introduce a bill that would take us one step further in protecting and strengthening worker’s and women's rights" said Cortez Mastro.

The legislation would require the following: 
I. Add criteria to GSP on:
Women’s rights and equal protection under the law;
Bars gross violations of human rights;
Non-discrimination; and
Violence and harassment in the workplace.
II: Strengthen standards under GSP to ensure countries adhere to the commitments in the program and provide more tools to bring complaints and encourage changes on the ground in country.
III: Establish a supplemental review mechanism to ensure a Nation’s laws align with their commitments under GSP.
IV: Encourage the adoption of data collection measures to aid country evaluations and outcomes.

Earlier this week the Uzbek Forum for Human Rights released a report titled “Tashkent’s Reforms Have Not Yet Reached Us” - Unfinished Work in The Fight Against Forced Labor in Uzbekistan’s 2019 Cotton Harvest.” Key findings of the report include evidence that while most pickers in cotton fields are voluntary workers, there remains some forced mobilization in Uzbekistan's public sector especially for people working in mid-level civil servant positions and medical workers in Karakalpakstan. UF says the government in Uzbekistan remained closely involved in cotton production and used coercion to reach quotas and production targets. However, the report also noted improvements over previous years as schools and hospitals in most regions did not participate in the 2019 cotton harvest. You can also read a blog post from one of the Cotton Campaign activists that talks about the report findings here
 
In a letter, USFIA joined the American Apparel & Footwear Association (AAFA), the Retail Industry Leaders Association (RILA), and the National Retail Federation (NRF) to support increased funding for the U.S. Department of Labor's Bureau of International Labor Affairs (ILAB). ILAB provides resources that support the fashion industry to ensure there are no goods made with forced labor in the supply chain. Companies benefit from ILAB's "unprecedented experience, credibility, and influence regarding international labor rights" and their key role in funding vital initiatives at the U.N. International Labor Organization (ILO). The association letter supports six members of Congress who wrote to the House Subcommittee on Labor, HHS, Education, and Related Agencies asking that the budget include additional resources for ILAB to address forced labor concerns in the Chinese Xinjiang Uygur Autonomous Region (XUAR).  The members of Congress supporting ILAB funding are: Ted S. Yoho (R - FL), Jim Costa (D - CA), Chrissy Houlahan (D - PA), Ami Bera (D - CA), John Curtis (R - UT), Adriano Espaillat (D - NY).
 
USFIA joined 17 other associations in a letter to Jerome Powell, Chairman, Board of Governors at the Federal Reserve System; Steven Mnuchin, Secretary of the Treasury; and Wilbur Ross, Secretary of Commerce to call for support of the trade credit insurance market. As a result of the disruption from the COVID-19 pandemic, many retailers and vendors are overextended and in need of commercial trade credit insurance. As retailers are gearing up for the critical Holiday season, the industry groups call on the Administration to implement an emergency, temporary federal reinsurance backstop to help restore the missing capacity in the commercial credit insurance market so that new orders can be placed and new business can be conducted.

On June 17th, U.S. Trade Representative Robert Lighthizer appeared at two Congressional hearings on The 2020 Trade Policy Agenda. Lighthizer met with the House Ways & Means Committee in the morning, and the Senate Finance Committee in the afternoon.  After hours of testimony, and some contentious moments, we want to share with you some of the major trade issues discussed yesterday. 

The hearings definitely provide insights into the thinking of the Administration.  For example, in response to questions about PPE and tariffs on medical equipment, Lighthizer said he thought the Administration “has done an amazing job starting with basically an empty closet and then filling it up and getting an enormous supply in a totally unprecedented circumstance.”  He also made clear that the Administration is going to try to use trade policy – and particularly to use tariffs - to promote more manufacturing investment in the United States.  “In the long run, I think part of the solution ought to be rewarding people manufacturing the product in the United States. Two ways to do that, maybe you do both. One is subsidies … the other is to have tariffs. Personally, I think you probably need both.”

CHINA

China remains a key issue for the Administration and the Congress.  After press reports quoted Ambassador Lighthizer saying that the U.S. would not "decouple" from trade with China, President Trump weighed in to say that all trade policy options are still on the table.  See the tweet from the President at the end of this FIA. Aside from that discussion, many of the lawmakers focused on the Administration’s Phase One Agreement with China. When questions were raised on China's ability to meet their purchase commitments under the agreement, Lighthizer said the Administration is in constant communication with China and they fully expect China to meet their commitments within the calendar year. 

Several Democratic lawmakers criticized the section 301 tariffs on China and the heavy financial burden the high tariffs place on American consumers, as well as problems many companies have had with the 301 Product Exclusion process.  Lighthizer was not sympathetic and suggested that tariffs are bringing manufacturing back to the U.S., and that companies that may be struggling with tariffs and the exclusion process should look for alternate options for destinations. He also clarified that the Administration is not planning to extend any of the Product Exclusions beyond December 31st.  

OTHER TRADE DISPUTES

Ambassador Lighthizer said the Administration will not be shy to initiate more trade disputes.  Several disputes were discussed.  The Administration will move forward with the 301 case targeting ten countries that have in place, or plan to put in place, Digital Services Taxes.  [The targeted countries are: Austria, Brazil, The Czech Republic, The European Commission, India, Indonesia, Italy, Spain, Turkey, The United Kingdom. There already is a 301 case with France over DST.]

During discussion about the trade negotiations with the European Union, both lawmakers and Lighthizer criticized Europe's food standards as protectionist.  Lighthizer noted his interest in launching a 301 investigation into these restrictions.

GSP RENEWAL 

Several lawmakers spoke in favor of renewing the Generalized System of Preferences (GSP) duty-free program, which is set to expire on December 31, 2020.  However Lighthizer suggested that the Administration would like to see substantial changes to GSP. He particularly criticized the fact that some GSP-eligible countries still maintain high duties on U.S. exports, and also that it is unfair that some countries have improved access because they have negotiated free trade agreements with countries other than the U.S.

TRADE AGREEMENTS 

USMCA

Democratic and Republican lawmakers both expressed concern over enforcement issues as we approach USMCA's July 1 entry into force date.  Lighthizer said the Administration will be aggressive to enforce the USMCA commitments, especially the labor commitments.  The Administration recognized the challenges for companies to deal with USMCA implementation while they are still dealing with the fallout from COVID-19 but expressed hope that USMCA will help reduce the negative effects of COVID-19.

UK 

Lighthizer says the U.S. - U.K Free Trade Agreement is unlikely to be finalized this year but the Administration is confident that a comprehensive deal will be reached.  

Kenya 

Negotiations for a U.S. - Kenya Free Trade Agreement (FTA) will launch the first week of July. The Administration confirmed that an FTA with Kenya will serve as a model for FTAs with other African countries. 

Japan

Lawmakers expressed support for the U.S. - Japan agreement last year. However, lawmakers also expressed their dissatisfaction with the lack of consultation with Congress. 

DE MINIMUS LEVELS 

Lighthizer proposed lowering de minimus levels for U.S. imports. As you know, the de minimus level for U.S. imports is $800, and Lighthizer complained about the EU threshold of $150 and the Chinese threshold of $7. "This results in massive numbers of shipments to the U.S. receiving duty-free treatment and virtually no screening. The disproportionately high volume of these shipments indicates China and others are likely exploiting the high U.S. de minimis threshold to avoid paying duties." 


WTO REFORMS 

Several Republican lawmakers reiterated calls for structural reforms to the World Trade Organization (WTO) especially in regards to the Appellate Body.  Lighthizer said the Administration holds the same concerns and called for radical reform to better protect the interests of the United States.