While there is no shortage of drama heading into the U.S. presidential election, industry insiders are keeping their focus on the issues that will impact the apparel sector—and their livelihoods.
Aside from the need for an economic recovery and a boost to consumer confidence, the issue of international trade relations is at the forefront of their concerns.
A trade battle with China has raged for more than two years, with tensions heightening as the coronavirus crept across the globe earlier this year. Amid the confusion of supply chains shuttering and then sputtering to life again months later, many companies have accelerated their efforts to move away from the sourcing superpower.
And as legislators jockey for position this fall, brands and retailers are left wondering whether U.S. trade relationships could look different under a new administration. Both sides have encouraged American companies to pursue sourcing relationships with allies, along with looking to near-shoring and re-shoring opportunities that bring jobs closer to home.
Vietnam, China’s smaller neighbor to the south, has been a prominent beneficiary of the apparel and footwear industry’s movements away from the world’s sourcing center. But the industry is now contending with worries about the possibility of new duties on goods from the rising apparel production hub.
On Oct. 2, the United States Trade Representative (USTR) said that it was initiating an investigation under the direction of President Trump into whether Vietnam engaged in acts, policies and practices that undervalued its currency, damaging U.S. commerce, along with looking into whether the country has been importing timber that was illegally harvested or traded.
The USTR subsequently said it would conduct the investigation under Section 301 of the 1974 Trade Act—the same action that has resulted in the current punitive duties on Chinese goods. At the time, American Apparel and Footwear Association (AAFA) president and CEO Steve Lamar said the imposition of tariffs on imports from Vietnam would cause “extreme disruption” to an already embattled industry seeking strong trade partners and a productive course forward.
In a call with reporters, Rep. Kevin Brady, lead Republican on the House Ways and Means Committee that oversees issues like taxes, health care and international trade, told Sourcing Journal that it was “crucial” that American supply chains be “run through reliable trading partners.”
A provision in the Trade Facilitation and Trade Enforcement Act of 2015 should be a reference point in the current investigation into Vietnam’s alleged currency manipulation, he said. “I’m hopeful, and I will encourage the USTR to use that definition as they pursue these issues with our trading partners,” he added.
Title 7 of the Customs law, signed by President Obama with bipartisan support in 2016, states that the president is required to commission analysis on suspected currency manipulators through a stringent tripartite test of currency policies aimed to reveal, among other criteria, whether they’ve benefited from undervaluing their currency and receiving subsidies through manipulation. The president must report those findings to Congress and the American people under the law.
“I think that the definition of currency manipulation is a fair and real one in that law,” he said. “And I think using that as the basis ensures that these actions and complaints are valid and recognized as real trading barriers.”
Developing dependable relationships with trusted trade partners is a matter of utmost importance, Rep. Brady said, adding, “China has proven that they’re not.”
The Ways and Means Committee, he said, is “encouraging businesses to look at ways to create a more reliable and resilient supply chain,” especially for medical goods and technology, by introducing legislation that would incentivize “anchoring the production line back here in the United States.”
In Wednesday night’s vice presidential debate, Sen. Kamala Harris sparred with current Vice President Mike Pence about the administration’s efforts to punish China and contain its influence. Harris accused Pence and the president of losing the trade war—and 300,000 American manufacturing jobs in the process.
“Farmers have experienced bankruptcy because of it,” she said. “We are in a manufacturing recession because of it.” Pence retorted that Democratic nominee Joe Biden has been a “cheerleader for Communist China over the last several decades,” insinuating that Obama’s former vice president has contributed to an environment that has allowed China to dominate when it comes to trade and technology, and to do so largely unchecked.
While both sides of the aisle have a vested interest in punishing China for its misdeeds—rampant IP theft, human rights abuses against Uyghur Muslims, aggression toward Hong Kong, allegations of economic malfeasance and more—differing strategies on how best to assert control over the ever-souring relationship while fostering new avenues for sourcing stand to emerge in the coming weeks.