Retailers reverse field on GATT - General Agreement on Tariffs and Trade

Discount Store News, Oct 17, 1994 by James Mammarella

WASHINGTON -- The irony couldn't be more clear: the General Agreement on Tariffs and Trade (GATT) is a complex global treaty aimed at cutting barriers to international trade. A decade in the making, it involves 123 nations--most of them looking to the United States for free trade leadership. But in a last-minute political maneuver that proved more fiasco than finesse, the Clinton Administration alienated key supporters in the U.S. retail community by welding new restrictions onto the GATT structure.

Over 10 years, GATT will, among other things, phase out quota systems on some apparel and textiles. The White House, seeking to appease some domestic producers and a key U.S. senator, has erected new barriers through rule changes--and a painfully short implementation deadline--on GATT's "country of origin" language.

The offended apparel makers and marketers assert they were blindsided by the White House's adoption of the amendment. It was proposed by a group of fiber companies that included Fruit of the Loom, Milliken & Co., the American Apparel Manufacturers Association and the American Textile Manufacturers Institute.

Among the vendors opposed to the rule change are Levi Strauss & Co., Liz Claiborne and Warnaco. They predicted losses for their businesses, product scarcity and higher prices for American consumers. Major retailer/vendor trade groups dropped their long-standing support for GATT when the rule change was adopted in late September, in spite of their protests to U.S. Trade Representative Mickey Kantor.

Most observers agree that GATT will open up at least $500 billion of new trade over 10 years, and create new U.S. jobs. However, the country of origin rule change may cost several billion dollars short term in lost apparel business and precipitate retaliation in other industries by foreign governments.

Champions of the rule change argue they are shielding hundreds of thousands of American textile mill and apparel making jobs. Sen. Ernest Hollings (D-S.C.) has inferred he will protect mill workers and business interests in his state. Even with the rule change he remains opposed to GATT as a whole, and has said he intends to delay or defeat its implementation.

As DSN went to press, both the House and Senate announced they would return in special sessions after the November elections, specifically to hold hearings on GATT--even though parliamentary rules allow no further amendments. Sen. Hollings will use the Senate Commerce Committee, which he chairs, as a forum for trade protection boosters.

At least three organizations that had backed GATT announced their withdrawal of support: the International Mass Retail Association (IMRA), the U.S. Association of Importers of Textiles and Apparel (USAITA) and the National Retail Federation (NRF).

"We are the bedrock of the free trade community," said IMRA vp Robin Lanier, "but now we are making a principled point: this is an aggressively neutral position. Many of our members are bitter and angry. Some think we should oppose GATT."

Lanier said that although IMRA had proposed a five-year period for the rule change implementation, members would likely have supported a compromise granting three years to comply, which would have given suppliers ample time to move some aspects of apparel factory production out of mainland China and into nations that are GATT members.

In his Sept. 28 letter to Alliance for GATT Now chairman Jerry Junkins (chairman and ceo of Texas Instruments), IMRA president Robert Verdisco stated that the Clinton Administration timetable was "simply unworkable for many of IMRA's member companies."

The letter began, "I am writing with deep regret to ask that you formally remove [IMRA] from the membership rolls of the Alliance for GATT Now. I am taking this action, not because the American mass retail industry opposes the treaty negotiated as part of the Uruguay Round, but because our organization cannot support the implementing bill introduced by the Clinton Administration yesterday."

Verdisco continued: "As you many know, the implementing legislation contains an extremely protectionist provision that would alter the rules used to determine the country of origin for wearing apparel. Despite the retail industry's sincere effort to develop a workable time frame for this significant rules change, the Clinton Administration has insisted on an effective date of July 1, 1996 ... The 18-month lead time provided in the implementing bill will simply devastate many importers and retailers of these products. Ultimately the consumer will pay."

IMRA estimates more than 75% of all U.S. apparel imports would be affected.

USAITA executive director Laura Jones said, "The way the Administration has translated the Uruguay Round commitments into implementing legislation is a scandal."

She called the White House position "a hidden tax on apparel."

NRF president Tracy Mullin said the new barriers have "added a new layer of costs to the American consumer." NRF vp Robert Hall said the rule change would cause "a 4% to 10% cost increase on some apparel items," and suggested the impact would be mainly on "simple garments: women's blouses and skirts, fashion shirts, panel sweaters."