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May 30, 2008
Legislative Outlook for the Remainder of 2008
Members of Congress are away from Washington this week for the Memorial Day recess, but are expected to debate and possibly vote on a series of legislation that may affect the legwear industry when they return on June 2. Typically, the summer legislative agenda is focused on appropriations bills, which provide funding to federal agencies for the next fiscal year, which begins October 1. But according to Capitol Hill sources, few, if any, of those bills are likely to pass in this election year. With a shorter legislative session and an ongoing power struggle between the Republican Administration and Democratic Congress sure to limit progress on spending legislation, congressional leaders reportedly plan to focus instead on measures that will directly affect voters – including the farm bill, product safety legislation, and trade adjustment assistance. Although they are less likely to pass, House and Senate lawmakers will also debate bills that address healthcare reform, trade preferences and trade enforcement practices – providing a preview of battles likely to play out next year. Following is a brief snapshot of key legislation that may affect legwear manufacturers and suppliers that may see action in the coming months.
Farm Bill. While focused on rural spending, trade provisions included in this year’s Farm Bill could have a direct impact on the hosiery industry by preventing U.S. Customs and Border Protection from eliminating the first sale rule and making it easier for manufacturers in Africa and the Caribbean to export legwear and other apparel to the United States duty free. The House has already passed the final bill, and the Senate is expected to do so the same next week. Although the President has threatened to veto the measure, past congressional votes suggest there is sufficient support in both chambers to override any veto and bring the bill into law early next month.
Product Safety. Official conference negotiations to reconcile different consumer product safety bills passed by the House (H.R.4040) and Senate (S.2663) have not yet started, but congressional aides are working on a package for lawmakers to review in June. The Democratic Leadership has made passage of product safety legislation a priority, despite little support from the Administration. U.S. manufacturers have expressed particular concern about provisions of the Senate bill that would increase maximum civil penalties for product safety violations to $20 million (twice the level included in the House-passed measure), authorize state attorneys general to enforce laws administered by the CPSC (possibly resulting in various interpretations of product safety laws across multiple jurisdictions), and extend whistleblower protection to employees of manufacturers, private labelers, distributors, and retailers.
Trade Adjustment Assistance. Senate Finance Committee Chairman Max Baucus (D-MT) continues to insist on passage of Trade Adjustment Assistance (TAA) legislation before considering measures implementing pending free trade agreements with Colombia, Korea and Panama. TAA makes financial and other assistance available to workers and firms, including hosiery manufacturers, affected by import competition. According to Capitol Hill sources, there has been some bipartisan progress on legislation to extend and expand the program, and the Finance Committee may take up a draft bill as early as next month. The House passed its version of a TAA overhaul in October, known as the Trade and Globalization Assistance Act (H.R. 3920).
Miscellaneous Tariff Bill. As reported in previous editions of Footnotes, the House Ways and Means Committee has requested public comments, due June 2, on measures that would reduce or eliminate tariffs on imported manufacturing inputs no longer produced in the United States. Many of those measures are likely to be included in an omnibus miscellaneous tariff bill (MTB) the House will consider later this year. Due to Senate delays, however, a final bill is not likely to move quickly this year, if at all. The Senate Finance Committee has yet to announce a schedule for accepting measures for its own version of the MTB. That process has been frustrated by calls from Finance Committee Ranking Member Charles Grassley (R-IA) for members to disclose the names of those companies or organizations lobbying in favor of the measures.
Trade Preference Programs. The farm bill includes provisions that would extend expiring trade preferences to the Caribbean. However, lawmakers may take up separate legislation later this year that would carry forward a similar program for four Andean countries (Bolivia, Columbia, Ecuador and Peru), which expire on December 31. Those preferences provide duty-free treatment to legwear and other textile and apparel products imported from those countries that meet certain requirements. According to Capitol Hill sources, the House Ways and Means and Senate Finance Committees are likely to take up the matter later this summer. The International Trade Commission has also announced a July 22 public hearing on Andean preferences as part of an annual report on the program to Congress.
Customs Reauthorization. The Senate Finance Committee is expected to introduce a bill later this year that would reauthorize programs and funding for the U.S. Bureau of Customs and Border Protection. According to Committee aides, that measure could include language that would affect the legwear industry – including provisions designed to improve supply chain security, strengthen intellectual property enforcement, improve tariff collections, and streamline data submission requirements. The House is also likely to move on the legislation this year.
Trade Enforcement. The Senate Finance Committee held a May 22 hearing to examine legislation (S. 1919) introduced by Chairman Baucus that would strengthen trade enforcement, particularly with respect to China. At the hearing, an official from the Office of the U.S. Trade Representative testified that some of the proposed enforcement measures might not work to the benefit of American manufacturing competitiveness and instead prompt other countries to raise trade barriers. The House, the Ways and Means committee is developing its own trade enforcement bill. However, industry lobbyists believe this shortened legislative calendar makes is increasingly unlikely that Congress will send a unified trade enforcement bill to the White House this year.
Healthcare. The Senate Finance Committee has announced a June 3 hearing on the healthcare reform. Witnesses include union representatives from the AFL-CIO. While a healthcare reform bill is highly unlikely to become law in 2008, this hearing and others will provide useful insight into what labor organizations and other groups plan to propose next year, when lawmakers are expected to take up healthcare reform in earnest.
Oil and Synthetic Fiber Prices Rise as Consumer Confidence Hits 16-Year Low
After falling sharply on Tuesday following last week’s series of record highs, oil prices rose again Wednesday afternoon following release of a Morgan Stanley forecast stating petroleum costs could easily reach $150 a barrel this year. Light sweet crude for July delivery increased $2.18 to settle at $131.03 a barrel in Wednesday trading on the New York Mercantile Exchange (NYMEX). Mounting oil prices continue to put upward pressure on petroleum-based raw materials, transportation and energy costs, and several companies that manufacture inputs for hosiery and other apparel are increasing their rates in response. Wellman, Inc. announced earlier this month that it will raise the price of all Fortrel polyester stable fiber products by 4 cents per pound, effective June 2. Polymer Group, Inc. has announced that it will increase fees 5 to 7 percent for polypropylene-based materials sold in North America, effective June 1. While most synthetic fiber prices are increasing, some other raw materials, such as rayon, are softening due to the slowdown in world textile production, especially China.
Rising costs also continue to dampen consumer spending. A monthly report released Tuesday by the New York-based Conference Board, a private research group, found May consumer confidence fell to its lowest level since October 1992, when the economy was coming out of a recession. The Conference Board said Americans are reacting with deepening gloom to the collapse of the housing sector, rising inflation and a surge in gasoline prices. The consumer confidence monthly index fell from a low 62.8 in April to an even weaker 57.2 in May – a level many economists associate with recession.
FUTURES PRICES FOR SELECT HOSIERY INPUTS
(Thursday, May 22 -- Wednesday, May 28, 2008)
OTEXA Announces Upcoming Trade Events
The Commerce Department’s Office of Textiles and Apparel (OTEXA) recently announced it is recruiting U.S. businesses for two upcoming European trade events that may be of interest to legwear manufacturers. EUROSATORY 2008, scheduled for Paris in mid-June, is focused on the security and defense markets, and the European Outdoor Show, scheduled for Germany in mid-July, is one of the leading trade shows for that important retail sector. Europe is a growing market for U.S. hosiery exports. Driven in part by a falling dollar, U.S. sales to the 27-member European Union increased by 14 percent in March 2008, when compared to March 2007 data, and now account for more than eight percent of all U.S. legwear sales abroad. The United Kingdom is the largest single market for American hosiery in Europe. U.S. legwear exports to that country increased by 53 percent in March, compared to the same month last year.
American manufacturers that take part in Commerce Department-sponsored exhibitions can receive certain assistance in preparing for the event, including help to create a promotional campaign designed to attract importers, distributors, agents, licensees, joint-venture partners, franchisees, buyers and end-users – including key government officials. The Department can also provide exhibition space and other services. Additional information is available on the OTEXA web site.
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