AAFA President and CEO Kevin Burke wades through the climate of uncertainty to offer some guidance on what the apparel and footwear industries could expect from McCain or Obama presidencies, respectively, with respect to issues such as international trade agreements, the Berry Amendment, labor and the overall economy.
by Kevin M. Burke, President & CEO, American Apparel & Footwear Association (AAFA)
Uncertainty. It is an adjective, it is an emotion and it is the state of our nation. Whether we are discussing the presidential election, the economy or the apparel and footwear industries Ã.‚¬" the answer is uncertainty. While the future of stock market has yet to be seen, we will soon know the outcome of the election, which will influence Wall Street, Main Street and your street. Whether it is Senator Barack Obama or Senator John McCain declaring victory among falling balloons and roaring supporters on the night of Nov. 4 expectations for the next administration and its impact on our industries will become clearer on election night and in the days following.
Among the pressing issues awaiting the incoming president will be the many pending international trade agreements, which are vital to the growth of the apparel and footwear industries. With the majority of clothes and shoes sold in America being imported, and with the majority of consumers living outside U.S. borders, it is imperative that our industry be allowed to compete globally with free and open trade. Both Obama and McCain claim to be supporters of free trade, but their enthusiasm and form of support vary greatly.
Democratic nominee Barack Obama supports conditional free trade, declaring that it must be fair and that labor and environmental issues must be addressed. Throughout the campaign he has expressed concern about the failure of past trade agreements to meet the needs of the American worker, often pointing to the North American Free Trade Agreement as a failed example. He, and many fellow Democrats, are calling for a review and likely also a renegotiation of this more- than-a-decade-old agreement between the United States, Canada and Mexico. Even though experts and economists disagree over how many jobs have been lost primarily to free trade with these countries, as opposed to other causes including technology advancements, Obama continues to scapegoat the agreement on the campaign trail when speaking to blue collar crowds.
With rhetoric like this, it is clear the apparel and footwear industries can expect a slowdown, or even halt, of negotiations for new international trade agreements under an Obama administration. Obama's campaign has indicated that in his administration, more resources at the United States Trade Representative's office will be dedicated to reviewing and enforcing existing trade agreements, rather than negotiating new ones. This will create an investigative climate in Washington and foster uncertainty regarding the future of international trade, which could be disastrous for globally competing industries like ours at a time when the global economy is already faltering.
On the other side of the aisle, Republican nominee John McCain has long been a vocal proponent of international trade agreements. His campaign has made clear that a priority will be to develop a bi-partisan compromise that will reinstate the president's Trade Promotion Authority (TPA). Also known as Fast Track, the TPA allows a president to negotiate trade agreements with other countries, and then present the final agreement to the Congress for a simple up or down vote, with no potential for amendments. This authority is imperative for providing the executive branch credibility at the negotiation table. There has been some discussion that Democrats may renew TPA with an understanding that stricter environmental and labor standards be included in all future trade agreements negotiated by the president.
A McCain administration would push for the passage of the pending free trade agreements with Colombia, Korea and others, while exploring potential free trade agreements with other countries and proactively seeking a conclusion of the repeatedly stalled Doha Round of the World Trade Organization.
No matter if McCain or Obama is elected to the White House, the footwear and apparel industries will have the same responsibility to educate their employees, consumers and elected officials about the benefits of international trade. Anecdotal and quantitative evidence finds that Americans just don't understand how they benefit from international trade. So whether we are trying to influence Obama's opinion in the White House, or helping McCain gain support for his trade agenda in what will likely be a Democratic Congress, the apparel and footwear industries must spread the message of the good international trade has brought to American consumers - higher quality, wider variety of products at ever lower prices. It is what Americans want and what international trade delivers.
Of course, international trade isn't the only presidential litmus test for the apparel and footwear industries. Beyond international trade concerns, the industries are worried about the next administration's stance on a diverse range of issues including the Berry amendment, labor, the economy and more.
As much as McCain's international trade views align with the apparel and footwear industries, his opposition to the Berry amendment is a threat to domestic manufacturers producing military uniforms. The Berry amendment requires the Department of Defense to source textiles and apparel for military uniforms from American manufacturers using American-made inputs. McCain's vocal opposition to the amendment could become a realized threat if elected, while Obama is more likely to uphold this regulation, which is so vital to our remaining domestic apparel and footwear producers.
Labor issues facing the next administration are as diverse as McCain's and Obama's differing plans. While the candidates both agree that Trade Adjustment Assistance (TAA), a program to help American workers who lose their jobs to international trade, is faltering, their plans to fix it vary. McCain wants to expand the program into a larger, general job transition program to help the unemployed, whether or not their job was lost to international trade. Obama would expand the program to include all jobs lost to international trade, whether or not the United States has a trade agreement with the country where the jobs were shifted. He would also include service employees for the first time. Other labor issues that will come into the forefront soon will be the union-favored controversial Card Check legislation, which allows a union to be formed without a secret ballot vote. Also, the Democrats are pushing for more tools that would allow the United States to enforce foreign labor standards.
And finally, the issue at the forefront of everyone's minds, including politicians, industry executives and hardworking families: the economy. This column started by mentioning all the things that are uncertain right now, which at times seems just about everything. Well, one thing that is certain is that this holiday shopping season will be a rough one. Fortunately, it may not be as bad as it could have been. Since our last markedly slow holiday shopping season in 2001, our industry has gotten better at controlling inventory, in part due to technology advancements. Still, it will not be an easy next couple of months, or perhaps even next couple of years.
Now, as retailers are facing a gloomy holiday shopping season, like all Americans, they are looking for economic relief, not only from the next administration but also by pressuring those in office right now to pass an additional economic stimulus package. An economic stimulus package will put more cash in the hands of consumers now, to help us through this slow time and perhaps even start our nation back on the road to recovery. The U.S. gross domestic product (GDP) is dependant on consumer spending, so as Americans hunker down and spend less, it makes the road out of the recession that much harder. An economic stimulus package needs to occur now, in a lame duck session or as soon as possible after the start of the next Congressional session, to bring liquidity back to the market place. The sooner the better.
The next stimulus package needs to be more creative than the last, to find more ways to lessen the burden on American taxpayers in a tangible way. A dynamic and effective package would fold in outstanding legislation from the session that would benefit consumers, such as the footwear industries' Affordable Footwear Act (AFA), which could save consumers billions of dollars. The AFA will eliminate the outdated regressive import tariffs on footwear, commonly called the shoe tax, for all children's footwear and on other lower to moderately priced shoes. This is commonsense tax relief that hardworking families can use today, not five years from now. As Congress and the president-elect consider what actions need to be taken today, to stave off a deeper recession, the Affordable Footwear Act should be on the table.
In this dynamic and uncertain time in our nation's history, it is reassuring to know that soon we will have a certain future Ã.‚¬" a recovering economy and a newly elected president and Congress, and renewed energy to face the challenges and opportunities that lie ahead.