APRIL 18, 2008

Bush Seeks to Head Off Congressional Action on Climate Change
President Bush this week sought to head off congressional legislation that would impose hard and immediate caps on U.S. greenhouse gas emissions and stick legwear manufacturers and other businesses with billions of dollars in compliance costs by announcing his own strategy to “slow” carbon emissions growth by 2025. At an April 16 press conference, he also expressed concern over a possible rush to address the Earth's warming by greatly expanding regulations under the Clean Air Act, the Endangered Species Act and other existing federal laws. Pending Senate legislation would require mandatory caps on greenhouse gas emissions beginning as soon as 2010, and Senate Democratic leaders plan to begin debate in June on a broader bill that would cap greenhouse gases, but allow polluters to lessen the cost burden through carbon capture and storage and by purchasing emissions credits. This cap-and-trade approach looks to cut emissions by 70 percent by 2050. According to Capitol Hill sources, the House may consider its own cap-and-trade proposal later this year.

Legislation capping greenhouse gas emissions is unlikely to pass in the current Congress, but will almost certainly feature prominently on next year’s legislative agenda. All three presidential candidates favor imposing mandatory limits on greenhouse gases, and the United States and other countries agreed in December to identify firm targets for reducing global emissions by the end of 2009. Industry lobbyists concerned about costs and worried that commercially viable technologies necessary to implement carbon cuts are not yet available are preparing for some type of cap-and-trade proposal in the near future and developing strategies to limit the damage.

Higher Prices and Weak Sales Add to Gloomy Economic Outlook
Crude oil and gasoline prices hit new highs on Wednesday following the release of the Energy Department’s weekly report on U.S. crude inventories and refinery operating rates. Light sweet crude for May delivery touched $115.07 a barrel on the New York Mercantile Exchange (NYMEX) before settling at $114.93 – a record close. Overall, prices were up 4.3 percent this week and 81 percent from a year ago. The surge in commodity prices is linked to continued weakness in the dollar, which plunged to an all-time low of $1.5979 against the Euro in Wednesday trading. Dollar declines should mean a lower U.S. trade deficit, but rising fuel prices are driving further imbalances. On April 10, the Commerce Department also reported the February U.S. trade deficit rose at its fastest pace in three months – up 5.7 percent from January to 62.3 billion.

Higher commodity prices added to a gloomy overall picture for producers this week as fresh data showed rising producer prices and stagnant or falling retail sales. On Tuesday, the Labor Department released its March Producer Price Index, showing prices set by domestic manufacturers climbed 0.2 percent after rising 0.5 percent in February. The preliminary producer price index for hosiery and sock mills reached 113.0 in March – a 0.44 percent increase from February and the highest level since December 2002. Excluding gasoline, overall U.S. retail sales were unchanged last month, according to a Commerce Department report released Monday. The report showed Americans are spending less on clothing, furniture and other consumer goods, putting strong financial pressure on major clothing and other retailers.

FUTURES PRICES FOR SELECT HOSIERY INPUTS
(Thursday, April 10 - Wednesday, April 16, 2008)

Lawsuits Prompt House Action on Disclosure of 401(k) Plan Fees
In a move that may lay the groundwork for broader 401(k) plan reforms in the face of recent class action lawsuits against employers for failing to disclose fees associated with certain account options, the Education and Labor Committee passed legislation sponsored by Committee Chairman George Miller (D-CA) on Wednesday that would require company 401(k) plan administrators to disclose all annual costs and fees associated with account services. The legislation would require the Department of Labor (DOL) to help small employers find and understand affordable investment options for such plans. It also calls on DOL to establish an advisory council, including industry participants, to improve employer-employee retirement practices. Employer groups have given cautious support to the measure, but continue to advocate for greater liability protections for any plan sponsor and service provider that acts in a reasonable manner in good faith reliance on information provided by a third party.

The House Ways and Means Committee must also consider the bill before it can move to the House floor for a vote, and lawmakers there are expected to take up the measure soon. According to Capitol Hill sources, the House is likely to pass the fee disclosure legislation this year, but the Senate probably will not. If not, Chairman Miller and others are expected to pursue this issue in the next Congress.

China Takes Helm of International Textile Standards Committee as Labor Demands Put Fresh Pressure on Producers
China and Japan have jointly assumed the chairmanship of the International Organization for Standardization’s Technical Committee 38, replacing the United Kingdom. That committee has authority to develop international standards for textiles – including fibers, yarns, threads and fabric. It remains to be seen how this change will affect the Committee’s agenda and work program, but the move comes as Chinese textile and apparel producers have come under increasing price and labor pressures and are increasingly looking to shift production to other countries. According to press reports, China’s new labor contract law that took effect in January is adding significantly to business costs. A major victory for Chinese workers and overseas competitors who have complained about weak worker rights in China for decades, the law prohibits forced labor, withholding of pay, unwarranted dismissals and other abuses. It also requires firms to provide contracts that include pension and insurance contributions, pay overtime hours at higher rates, and also pay workers who are fired a month's wages for every year worked.

ITC China Report May Set Stage for Future Legislation
A report on China’s economic policy issued April 10 by the U.S. International Trade Commission (ITC) could lay the groundwork for new congressional trade legislation. Requested by the House Ways and Means Committee, the report describes and quantifies the impact of numerous practices and policies that Chinese government agencies use to support and attempt to influence decision making in the country's manufacturing, agriculture, and services sectors – including subsidies, price coordination and restraints on imports and exports. The report also analyzes the likely impact of a December 2006 policy directive from China's State-Owned Assets Supervision and Administration Commission, which identifies industries the Chinese government considers to be strategically important. Ways and Means staff is currently reviewing the report, which is likely to inform ongoing work on China trade legislation the Committee may introduce in the near future.