For U.S. Textile Lobbyists: A Coup Against Vietnam

Posted on May 11, 2007
By Greg Rushford

The U.S. textile lobby has been complicating American foreign policy for decades. In 1956, for instance, a group of "cotton senators" feared that U.S. financial support for Egypt's Aswan High Dam would increase acreage for Egyptian cotton and thus "intensify a trade competition already tougher than their liking," as Townsend Hoopes reported in his acclaimed 1973 book about Dwight Eisenhower's secretary of state, The Devil and John Foster Dulles. Infuriated when Dulles -- who didn't cotton much to Egyptian President Gamal Abdel Nasser anyway -- withdrew the offer of American financial backing, Nasser turned to the Soviet Union, thus helping establish a Soviet foothold in the Middle East.

Fast forward to 2007, and the current textile lobby coup that promotes a parochial interest over a legitimate U.S. foreign policy priority. Republican senators Elizabeth Dole (NC) and Lindsey Graham (SC) have successfully pressured President George W. Bush's commerce secretary, Carlos Gutierrez, to disrupt increased U.S. clothing imports from Vietnam. Gutierrez' "import monitoring program" basically is aimed at aimed at building a record to hit Vietnam with antidumping cases that would roll back the imports. While Gutierrez claims that he wants to save American jobs, a few minor problems have arisen: No domestic clothing manufacturer has stepped forward to support the program. Entrepreneur Wilbur Ross, the outspoken chairman of the International Textile Group, says that if Gutierrez cripples his company's joint venture in Danang, he might have to shed American textile jobs in his mills in North and South Carolina. Senior members of Washington's international trade bar who represent importers and retailers, including Valerie Slater, Gary Horlick, and Brenda Jacobs, have charged that Commerce lacks specific statutory authority to administer the program (no comment from Gutierrez.). Meanwhile, important American firms with import and retail operations in Vietnam and the U.S. -- big names like the venerable Levi Strauss & Co., Liz Claiborne, and J.C. Penney -- have vehemently complained that their ongoing contractual operations have been disrupted, thus throwing critical sourcing plans into disarray.

While nobody claims that the episode will result in a calamity for broader U.S. foreign policy interests like the Aswan High Dam fiasco, Hanoi is understandably furious, as Vietnamese workers are losing their jobs -- and America's reputation as a reliable international trading partner has taken another hit.

The Vietnam Import Monitoring program for exports of clothes was welcomed last September by the National Council of Textile Organizations, the Washington, D.C.-based lobby for domestic fabric makers that had pushed the idea upon the Bush administration. NCTO's president, Cass Johnson, issued a press release thanking Senators Dole and Graham for having put holds on then-pending legislation to grant so-called Permanent Normal Trade Relations to clear the path for Vietnam's accession to the World Trade Organization. "By placing holds, which were able to temporarily block PNTR legislation in the face of near unanimous support in the Congress for Vietnam's entry, the senators were able to work with the government to create a new program on dumped apparel products from Vietnam," Johnson explained.

Johnson did not explain why, if the legislation was going to pass anyway, the Bush administration would need to give Dole and Graham anything. But the NCTO president did make it clear why the deal was important to his industry: "First, the U.S. government has agreed to self-initiate dumping cases on apparel imports, an action that the US textile industry could not take because of 'standing' issues. As a result, the industry now has a potent line of defense against unfairly traded imports of apparel from Vietnam." (For non-lawyers, the standing issue simply acknowledges that U.S. fabric makers don't make clothes, they have no legal basis to initiate trade litigation on their own.)

The monthly monitoring program run by Gutierrez' aides in Commerce's import administration will run "until the end of the current Administration" in Jan. 2009, the department has announced. It covers five big-ticket items in Americans' wardrobes: trousers, shirts, sweaters, underwear and swimwear. For example, Commerce has published figures showing that U.S. imports of Vietnamese trousers shot up from some $10 million in January 2007 to more than $22 million in February. It's pretty much the same story of surging imports in the other categories as well. The idea is that since domestic fabric makers can't file antidumping actions on products they don't make, and there are no U.S. apparel manufacturers still around to do the same, the Commerce Department will "self-initiate" its own antidumping cases against Vietnam. While the surges are real, the monthly numbers are still somewhat skewed, as they start measuring the sales as of Jan.11, 2007, when Vietnam joined the WTO.

The driving idea behind the data on surges is to build cases for antidumping actions taken against Vietnam. For U.S. importers and Vietnamese exporters, the reality is that the manner in which such cases are processed in the bowels of the Commerce Department assures that very few foreigners are ever judged to be "fair" traders. The process recalls Lewis Carroll's famous Red Queen, who told Alice, "Sentence first, then the verdict."

In testimony presented at an April 24 Commerce public hearing, the National Council of Textile Organizations -- the only supporter of the monitoring program to show up -- complained that Vietnam "subsidizes its textile and apparel sector in a number of ways, including export subsidies, wage controls, preferential interest and tax rates, rent holidays and most significantly, direct investment from the Vietnamese government. The most startling example of this investment largesse is the $891 million invested in Vinatex over a five-year period." According to the NCTO, the Vietnamese government "plans to invest an additional $1 billion in the company from 2006-2010," and "Vinatex is the 10th largest apparel producer in the world and a wholly-owned company of the Vietnamese government."

The NCTO points are well taken, even though the Vietnamese government has pledged to bring all of its subsidy programs into compliance with its legal obligations as a WTO member. Still, veteran trade observers would find it somewhat ironic that in the same testimony, the American fabric-makers sung the praises of something called the Berry Amendment -- under which Congress makes the Pentagon discriminate against foreign clothing makers by giving preference in awarding government contracts for military uniforms to domestic clothing manufacturers. It seems that where one stands on "good" subsidies as opposed to "bad" ones depends upon where one sits.
For leading American multinational firms like Levi Strauss & Co. the monthly monitoring of clothing imports is a nightmare. Helga Ying, the San Francisco-based director of worldwide government affairs and public policy at Levi's, put it succinctly in a December 26, 206 letter to David Spooner, the Gutierrez aide in charge of Commerce's monitoring program. Her company, "has worked hard to establish lasting partnerships with apparel producers in Vietnam," Ying wrote. But "these partnerships could be in jeopardy," she added. Indeed, one real result of the Commerce program has been that American clothing importers and retailers are currently letting Vietnamese workers go as they scramble to find other Asian locales to replace the Vietnamese operations.
Despite the NCTO's influence with some southern lawmakers, the Commerce action against Vietnam has drawn some political opposition. Six members of the Ways and Means Committee led by Oregon Republican Earl Blumenauer and Jim Ramstad, a Democrat from Minnesota, wrote a strong letter to Gutierrez on May 2 to register their objections to the Vietnam import monitoring. The congressmen stated that they suspected that "this program is inconsistent with U.S. trade remedy law." And even if it were legally supportable, the lawmakers declared that the program, in general, is simply "unnecessary."

But, necessary and legal or not, even if Gutierrez ultimately decides not to launch government-sponsored antidumping litigation against Vietnam clothing exports, the U.S. textile lobby has already won a major lobbying victory by disrupting markets and forcing their arch-enemies in the American rag trade to scramble.

As Wilbur Ross has asked by way of questioning the business sense of all this, "why would you conclude that if Vietnam did not make the sale, it would revert to the U.S. rather than some other lower cost country?" Indeed, for anyone who is not familiar with the strange world of international trade politics, why Carlos Gutierrez -- especially as he is a former chief executive of Kellogg's and presumably knows better -- would deliberately take any action that would aim at helping one segment of an American industry and hurting another is doing is difficult to understand.
But in Washington, D.C., whether the lobbying really makes sense is often lost in the fun of the game. If he were still with us today, John Foster Dulles would understand.