MARCH 14, 2008

Administration Weighs Sending Colombia FTA to Congress
The Bush Administration appears poised to take the unprecedented step of sending the U.S.-Colombia Free Trade Agreement (FTA) to Capitol Hill without agreement from Congressional leaders on a vote. In March 12 remarks to the Hispanic Chamber of Commerce, President Bush said “time is running out” for lawmakers to consider his top priority trade deal before Congress is scheduled to adjourn for the year on September 29. Echoing remarks by U.S. Trade Representative Schwab and others over the last week, Bush added that “we must not allow delay to turn into inaction … there must be a vote … this year.” Administration officials have privately speculated about such a move for weeks, and are now weighing plans to present the measure to the Hill as early as the first week in April, according to press reports. Under Trade Promotion Authority rules that govern legislative action on trade agreements, Congress would have a maximum of 90 days to vote on the deal. If passed and implemented by both countries, the FTA would eliminate U.S. and Colombian tariffs on legwear and a wide array of other products that meet certain requirements.

Sending an FTA to the Hill without the consent of Congressional leaders would be very risky, and could even harm chances for passage. As previously reported in Footnotes, House Democrats have made clear they want to see further sustained progress on labor and human rights in Colombia before considering an FTA, and Senate Finance Committee Chairman Baucus said last week his committee would not look at any new trade agreements until Trade Adjustment Assistance legislation is passed. Administration officials also admit the 90-day time limit for Congress to approve the deal is procedural, not statutory, and could be amended easily by lawmakers to delay a vote indefinitely.

Proposed Small Business Procurement Changes Could Have Significant Impact on Some Suppliers
In a March 10 Federal Register notice, the Defense Department, the General Services Administration and NASA requested public comments on a proposed change to the Federal Acquisition Regulation (FAR) the agencies say “may have a significant economic impact on a significant number of small entities.” The proposed change is designed to ensure the FAR reflects the Small Business Administration’s interpretation of its regulations regarding the order of precedence that applies when deciding whether to award a contract to one of four types of companies that receive special advantages under U.S. government procurement rules – small businesses, HUBZone small business concerns, service-disabled veteran-owned small business concerns and small business participating in the 8(a) Business Development Program. Currently, there is no procedure to determine which of these types of companies has priority over another for acquisition purposes.

The proposed changes would not increase or decrease the number of contracts awarded to small businesses. Depending on their final provisions, however, some types of small businesses could be placed at a competitive disadvantage relative to others when bidding on federal procurement contracts. Public comments on the proposed change are due by May 9.

Congress Passes FY 2009 Budget Resolutions, Pledging Commitment to Manufacturing Program
The House and Senate passed Thursday similar $3 trillion budget resolutions (H. Con. Res. 312 and S. Con. Res. 70) for 2009, determining the overall blueprint for subsequent spending bills affecting taxes and benefit programs such as Medicare, as well as the twelve annual appropriations bills funding the budgets of Cabinet agencies, such as Commerce, State and Homeland Security. Unless these follow-up appropriation bills are passed, the budget debate has little real effect. When Congress returns from its spring recess at the beginning of April, lawmakers will be considering these appropriations packages.

A priority listed in both the House and Senate budget resolutions is funding for the National Institute of Standards and Technology (NIST) under the America COMPETES Act (H.R. 2272). NIST supports an industry favored program, the Manufacturing Extension Partnerships (MEP), the only federal program specifically designed to target small and medium sized manufacturers and help them modernize their operations, improve their competitiveness, and reduce job loss. Congress has repeatedly stated its support for MEPs mission and authorized $122 million in the COMPETES Act, while the Administration’s FY09 budget requests only $4 million to cover the cost of eliminating federal support for this program. At a March 11 hearing on the program, Congressional Democrats and Republicans have stated their dedication to ensuring the program is adequately funded.

Oil Reaches Another Record High as Key Supplier Announces Polyester Price Hike
Oil prices on the New York Mercantile Exchange (NYMEX) hit a new record $110.20 a barrel in March 12 trading, despite an Energy Department announcement earlier the same day that declining domestic consumption had pushed crude oil stocks up by 6.2 million barrels the previous week. Rising oil stocks usually signal price drops, but a weakening dollar continues to make New York prices attractive to foreign speculators holding stronger currencies. Oil first broke $100 a barrel on February 26 and has set record intraday highs in 11 of the last 12 trading sessions, including March 12. Oil has not traded below $100 a barrel since March 5.

The recent surge in crude oil is driving up the price of petroleum-based synthetic fibers. On March 10, Wellman Inc., one of the world’s largest producers of polyester stable fibers, announced it will increase the price of its Fortrel® polyester staple fiber products by 4 cents a pound, effective for shipments beginning April 15. Fortrel® is used in apparel and a wide array of other products. The Fort Mill, South Carolina manufacturer said the price hike was necessary because of continued upward pricing pressure on chemical-based raw materials and energy.

FUTURES PRICES FOR SELECT HOSIERY INPUTS
(Thursday, March 6 - Wednesday, March 12, 2008)

China’s U.S. Trade Surplus Falls as Overall U.S. Exports Hit Record
In a possible sign that a falling dollar is beginning to have an impact on the trade deficit, China announced March 10 that its trade surplus with the United States dropped to $8.56 billion in February, down significantly from $22.5 billion during the same period last year. China’s exports to the world grew by just 6.5 percent last month compared to 26 percent in January, the smallest increase in almost six years. Analysts cited severe winter storms that disrupted shipping, caused food and raw materials shortages and forced some factories in key Chinese industrial regions to suspend production as the primary reasons for the declines. However, increasing costs, a falling dollar relative to the yuan and the U.S. economic slowdown also dampened demand for Chinese goods.

The falling dollar may also be helping to drive up America’s overall sales abroad. According to data released by the U.S. Census Bureau on March 11, U.S. exports grew to a record $148 billion in January – an increase of 1.6 percent from December and more than 16 percent from the same period last year. The data show rising exports accounted for over 40 percent of U.S. economic growth last year.

CITA Publishes New 12-Month Cap on Certain Andean Apparel Imports
Now that Congress extended U.S. trade preferences for the four Andean countries (Bolivia, Colombia, Ecuador and Peru) until the end of this year, the U.S. Committee for the Implementation of Textile Agreements (CITA) has published a revised 12-month cap on the amount of legwear and other apparel made from fabric or components produced in those countries that can enter the United States duty-free. For the period beginning October 1, 2007, and extending through September 30, the aggregate quantity of imports made from regional fabric or components eligible for duty-free treatment is 1,247,713,244 square meters equivalent. Although imports above that limit will be subject to normal tariffs, the cap is unlikely to be reached. Since October 1, 2007, only one percent of the cap has been filled.

Congress Adjourns for Spring Recess
Congress adjourned this week for its two-week spring recess. Most members will return to their home states and districts. When Congress returns next month, there will likely be further progress on fiscal year 2009 appropriations, product safety legislation and the miscellaneous tariff bills.