by  Kristi Ellis

Posted Thursday November 4, 2010

From WWD Issue 11/04/2010

President Obama at the White House on Wednesday.

Photo By Chip Somodevilla/Getty Images

WASHINGTON — Congress and the White House should reach common ground on free trade agreements and tax cuts for businesses and individuals, while a bill that would have made it easier for labor groups to organize appears dead in the wake of the Republican takeover of the House in Tuesday’s midterm elections.

The GOP control of the House will usher into power next year what is traditionally a more business friendly and pro-trade party, according to industry observers.

President Obama, who will now be governing a divided government, said in an hour-long postelection news conference on Wednesday that he believes there are areas where he and Democrats and Republicans in Congress can find common ground. Obama said his number-one priority is to extend tax cuts for the middle class that are set to expire at the end of the year. But he side-stepped a question about whether he would be willing to compromise on his insistence that the tax cuts passed by Congress in 2001 and 2003 for all income levels be extended only for families with household incomes of below $250,000. Republicans are pushing for the tax cuts to be extended to everyone, including the wealthy.

Obama also said he will continue to put an emphasis on opening overseas markets for companies to boost exports, starting off with his 10-day trip to four countries in Asia that begins on Friday.

“Now keep in mind over the last two years we’ve been talking to ceo’s constantly,” said Obama. “And as I plan for my trip later this week to Asia, the whole focus is on how are we going to open markets so that American businesses can prosper and we can sell more goods and create more jobs here in the United States. And a whole bunch of corporate executives are going to be joining us so that I can help them open up those markets and allow them to sell their products.”

International trade is one of the biggest areas where industry executives and academics believe there will be compromise. Other issues that have had bipartisan support and could see compromise action are a package of tax cuts that includes a provision allowing retailers to write off expenses on store renovations more quickly, a bill that would mandate sales tax collection by all sellers, including online merchants, and legislation cracking down on organized retail crime.

A bill that would have made it easier for workers to organize a union has likely been tabled for the next two years while Republicans control the House, as has comprehensive climate change legislation targeting greenhouse gas emissions.

“I think there will be a least-common-denominator approach [to policy making] of places where the President and Republicans have agreement, and trade policy is number one,” said Phillip Swagel, a visiting professor at the McDonough School of Business at Georgetown University. “It’s a place where the President is much more favorable toward boosting trade than the Democratic party.”

Pending trade agreements with South Korea, Panama and Colombia have been reinvigorated and face better prospects on the heels of the Republican congressional gains, according to most industry executives.

“I do think all three pending trade agreements will go through,” Swagel added.

Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association, said he’s also optimistic about the free trade pacts that have been languishing. Obama has singled out his support for the trade deal with South Korea and the White House has said it is pushing for a resolution on all outstanding issues with the country before the G-20 meeting in Seoul on Nov. 11 and 12.

“Hopefully, as a result of this election, there is more of a reason for the President to expand his views and…really become a free trade president,” Burke said.

Julia Hughes, president of the U.S. Association of Importers of Textiles and Apparel, said the election results might also “give some impetus” to negotiations for the regional Asia-Pacific trade pact known as the Trans-Pacific Partnership with seven other nations that was launched by the Obama administration, and a push for an overhaul of trade preference programs, stretching from Haiti to sub-Saharan Africa.

The prospects for legislation targeting China’s allegedly undervalued currency will likely dim if the Senate does not pass a bill this year. The House passed a bill, which had broad bipartisan support, last month that would give the Commerce Department greater leeway in investigating and cracking down on undervalued currency as an illegal export subsidy, which could lead to punitive tariffs on imports from China and other countries.

Erik Autor, vice president and international trade counsel for the National Retail Federation, said, “I think it is still a high priority for unions and certain segments of the manufacturing community. It all depends on what progress the administration is able to make bilaterally and multilaterally with the Chinese over currency policy, and it depends on what the Chinese do in response.”

On Wednesday, investors took stock of the shifting political landscape as well as the Federal Reserve’s reinvigorated effort to stimulate the economy. The Fed, led by chairman Ben S. Bernanke, said it would buy $600 billion in long-term Treasury bonds “to promote a stronger pace of economic recovery.”

The S&P Retail Index rose 0.4 percent, or 1.73 points, to close at 473.15, as the Dow Jones Industrial Average inched up 0.2 percent, or 26.41 points, to 11,215.13. Retail gainers included Saks Inc., up 1.5 percent to $11.34, and J. Crew Group Inc., ahead 1.3 percent to $32.11.