APRIL 11, 2008

Decision on Honduras Sock Tariff Expected Soon as CITA Hosts Bilateral Consultations
Members of the U.S. Committee for the Implementation of Textile Agreements (CITA) met with their Honduran government counterparts on Thursday, April 10 in a bid to conclude bilateral consultations on a U.S.-proposed safeguard tariff on cotton socks. The official consultation period ended on March 28, but both countries agreed to extend talks into the 30-day window CITA has to decide on the tariff, which expires April 28. According to Administration sources, CITA members hope to reach agreement on the tariff rate by the end of the week. One press report issued following the meeting suggested that tariff rate is likely to be below the maximum possible level of 13.5 percent, and one source interviewed for the article said the United States is considering a five percent tariff. However, Footnotes was not able to confirm that figure before press time, and an official announcement is unlikely before the end of this month. We will continue to monitor this issue closely and report on developments as they become available.

CITA announced its intent to apply a textile safeguard measure to cotton socks imported from Honduras on January 18. Under the CAFTA-DR Free Trade Agreement, CITA can impose a tariff up to 13.5 percent on cotton socks from Honduras and would do so through December 31, 2008. U.S. cotton hosiery imports from Honduras increased by more than 100 percent in 2007 compared to the previous year, according to Commerce Department data. Overall U.S. cotton hosiery imports grew by just over 8 percent during the same period.

Pelosi Blocks Bush Move to Pass Colombia FTA
As previewed in past editions of Footnotes, President Bush took the unprecedented step of sending the U.S.-Colombia Free Trade Agreement (FTA) to Capitol Hill on Monday without the customary approval of House and Senate leaders. And, as expected, congressional opponents of the measure acted quickly to shift attention to other economic issues and block any near-term progress. Prior to a meeting between Congressional leaders and the President on Wednesday, House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (D-NV) insisted the President support a second economic stimulus package before they would agree to any new trade deals. When the President declined, Pelosi introduced a procedural rule change on Thursday that could postpone a vote indefinitely by eliminating the 90 legislative day time limit by which Congress typically must act on trade agreements. According to Capitol Hill sources, Pelosi is hoping to push off any decision on Colombia until after the November elections. If a vote were held in the next three months, they say, strong labor union opposition would almost certainly doom the deal.

Small Business Optimism Plunges as Oil, Dollar Hit New Records
Rising input prices have driven the National Federation of Independent Businesses Index of Small Business Optimism to its lowest level since the group launched the monthly survey in 1986. The percentage of March survey respondents who cited inflation as their biggest problem was the highest ever recorded.

This week’s fresh oil price spikes and dollar lows against other major currencies only confirmed that sentiment. Following Wednesday’s release of Energy Department figures showing an unexpected drop in U.S. petroleum stockpiles, oil futures prices hit a new record high of $112.21 a barrel on the New York Mercantile Exchange (NYMEX). It was the highest price ever seen on the exchange since futures trading began in 1983, and surpassed the pervious record of $111.80 a barrel reached on March 17. The dollar also broke a March 17 record this week, as the U.S. currency fell to a new low of $1.5913 against the Euro in Thursday trading. The drop followed release of dire U.S. and global economic predictions by International Monetary Fund (IMF). In its semiannual World Economic Report, released Wednesday, IMF economists warned the United States economy could see growth of just 0.5 percent this year and that a “mild” recession appeared inevitable. The Fund predicted a slow recovery in the latter half of this year, which will continue into 2009.

FUTURES PRICES FOR SELECT HOSIERY INPUTS
(Thursday, April 3 - Wednesday, April 9, 2008)

Textiles are Top Priority for Customs in 2008
The U.S. Bureau of Customs and Border Protection (CBP) has designated textiles a “priority trade issue” for 2008, along with import safety, antidumping and countervailing duty enforcement, penalties and revenue. Legwear and other textile imports account for approximately 42 percent of all duties collected by the Bureau each year. In announcing the move on April 4, CBP acknowledged the numerous requirements placed on textile products entering the United States under various free trade agreements, legislative preference programs and China quotas, and said it is determined to continue identifying the many different schemes used to evade duties or quotas through stepped up monitoring of trade pattern analysis, on-site verification, review of production records, audits and laboratory analysis. Customs officials have seized more than $100 million in textile goods since the beginning of 2006 and close to $50 million in 2007 alone for China quota violations.

To better protect the public from unsafe imports, CBP also announced updates to the Automated Commercial Environment (ACE) Secure Data Portal. ACE account holders are now able to download large volumes of account data, import it into a local reporting system and generate reports tailored to their companies’ reporting software with the authorized data extract, formerly known as bulk data download. All cargo entry, cargo exam, entry summary, entry summary compliance and account revenue reports are now available for an importer or broker to request via the authorized data extract feature.

Maine Legislature to Consider Far-Reaching Toxic Chemical Safety Regulations
In a move that could have broad implications for producers of legwear and other products, the Maine Legislature is considering a bill (L.D. 2048) that would require manufactures of children’s and other products, including clothing, that contain priority chemicals to disclose information on their chemical use to the state’s Department of Environmental Protection (DEP) and pay a registration fee. The bill language authorizes the DEP to establish this "priority chemical" list, referencing the Environmental Protection Agency’s High Production Volume list as a possible resource. The EPA list includes ammonium sulfates used in hosiery product dyes as well as other chemicals. The burden of proving the use, quantity and application of the chemical is safe by Maine standards would rest with the manufacturer or the company whose label is on the finished product.

According to industry sources, the bill’s sponsor, Maine House Majority Leader Hannah Pingree, is determined to push for a vote on the bill prior to the April 16 end of the Maine legislative session. Local and national manufacturing groups are working to kill the legislation, fearing a state-specific hazard based chemical policy could create a costly and unnecessary precedent for others to follow. Instead of federal guidelines, manufacturers would be faced with various state regulations.

House Democrats Push Industrial Dust Controls
Citing an explosion at a Georgia sugar refinery in February, members of the House Education and Labor Committee passed legislation on Wednesday aimed at preventing further such “industrial dust” accidents. The bill, sponsored by Education and Labor Committee Chairman George Miller (D-CA), would require the Occupational Safety and Health Administration (OSHA) to issue new regulations within three months of enactment of the bill requiring industries to better train employees about dust risks and more thoroughly inspect, clean and ventilate their plants. It further states that new implementing regulations should, at a minimum, provide protections recommended by the National Fire Protection Association, a fire-prevention group that has previously released voluntary guidelines on combustible dust associated with "flocking” processes used in hosiery manufacturing. Republicans on the Committee said they would oppose the measure if it comes to the House floor for final passage, citing OSHA's position that more study is needed to determine what, if any, "regulatory mandates" would help.

Mexico Threatens $2 Billion Trade Retaliation Over NAFTA Trucks
Last month, Mexican Secretary of Communications and Transportation Luis Tellez said his country would raise tariffs on $2 billion in U.S. exports if the Administration bows to congressional pressure and cancels a newly instituted pilot program that permits a limited number of Mexican trucks to provide cross-border cargo service in the United States. Under the North American Free Trade Agreement (NAFTA), the United States and Mexico were to have allowed full cross-border trucking services by 2001. However, pressure from unions and highway safety groups succeeded in delaying implementation.
According to recent press reports, Mexico is now poised to revive dispute settlement proceedings that previously found the United States had violated its NAFTA obligations. If Mexico prevails, Administration sources expect retaliation against U.S. agricultural products. However, the list of goods that could see higher tariffs entering Mexico may be much broader, and any action by that country could prompt a similar response by the United States. Mexico is the fifth largest exporter of hosiery products to the United States, and fifth largest foreign market for U.S. legwear.

FTC Considers New Generic Fiber Definition For PTT
The Federal Trade Commission (FTC) is accepting public comments until May 5 on whether to amend the definition of “polyester” in its Textile Rules to establish a new generic subclass name for fibers made from poly(trimethylene terephthalate), or PTT. If the FTC creates a new subclass for PTT, hosiery manufacturers could (but would not be required to) list the fiber, instead of polyester, on products’ fiber content labels. The FTC will make its final determination based on whether PTT has distinctive properties of importance to the general public and if these distinctive features make the fiber suitable for uses for which other fibers under the established generic name would not be suited. According to the companies that requested the new subclass, the PTT fiber has distinctive features related to durability, resilience, softness, and ability to stretch with recovery, and these features will make it more suitable than conventional polyester for carpet and apparel products. If PPT is not classified separately in the final ruling, the FTC is also requesting comment on whether the polyester definition should be broadened to more accurately describe the molecular structure and physical characteristics of PTT and any similar fibers.

Senators Introduce China Currency Legislation as Chinese Textile Exporters Dump Dollar to Cut Costs
On April 3, Senators Jim Bunning (R-KY), Debbie Stabenow (D-MI), and Evan Bayh (D-IN) introduced the latest congressional measure designed to punish China for alleged currency manipulation. Similar to a measure passed in the Senate Banking Committee in July 2007, the China Currency Manipulation Act of 2008 (S. 2813) would require the Treasury Secretary to make a finding that China is manipulating its currency to gain an unfair trade advantage. It would further require the Secretary to establish a plan of action to remedy the problem within 30 days of enactment of the legislation, to submit a report to Congress describing the plan, and to seek consultations at the International Monetary Fund.

However, congressional China currency legislation is quickly falling behind the curve of inflationary pressures rocking much of Asia. While producers of textiles, apparel and other manufactured goods in China and across the wider region have not been able to pass all of their rising costs on to American buyers, the price of U.S. imports from the developing world is up sharply over last year. According to the most recent data released by the Bureau of Labor Statistics, average import prices for manufactured goods from China and other developing countries fell gradually through early 2004, but are now rising briskly – including a 5.6 percent jump in February, compared to the same month last year. Meanwhile, according to recent surveys and press reports, the steady appreciation of the China’s currency, the Yuan, against the dollar is prompting Chinese textile exporters to cut costs by using non-dollar currencies for pricing and settlement.

Possible May WTO Ministerial Could Revive Global Tariff Negotiations
Progress in ongoing Doha negotiations in the World Trade Organization (WTO) could pave the way for a long-awaited Ministerial meeting as early as next month. According to press reports, WTO Director General Pascal Lamy announced April 8 that there is a possibility of a Ministerial meeting in May if there is a good chance agreement can be reached by the end of this month on major outstanding issues, including agricultural subsidies and tariffs on textiles, apparel and other industrial goods. Deputy U.S. Trade Representative John Veroneau told the President's Export Council the same day that negotiators had made "a lot of progress" over the past three months and are close to a possible breakthrough.

The United States and the more than 150 other WTO member economies launched the Doha Round of global trade negotiations more than six years ago, with the goal of finishing by January 2005. However, the talks have been plagued by deep differences over how much to cut rich-country farm subsidies, as well as tariffs on agricultural and manufactured goods in both developed and advanced developing countries. Negotiators are trying to conclude a Doha Round agreement by the end of this year, ahead of leadership changes in the United States and the European Commission that could put the talks on hold.