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Congress increases duty-free access for Haitian textiles

Ignoring complaints the United States has already lost 100,000 textile jobs to similar trade legislation, the House and Senate voted to approve a tax and trade bill that grants almost unlimited access to the U.S. market for apparel products assembled in Haiti from yarn and fabric made elsewhere.

The Haiti measure was one of a handful of tax and trade bills adopted literally at the 11th hour by House and Senate leaders anxious to have something to show for the 109th Congress. The others extended or modified tax breaks that had already or were scheduled to expire at the end of 2006 and authorized oil and gas exploration in the Gulf of Mexico.

Farm groups such as the National Cotton Council and National Corn Growers Association supported many of those, although the NCC joined with the National Council of Textile Organizations in opposing the bill's provisions giving preferential treatment to textile products assembled in Haiti.

The NCC and the NCTO argued the Haitian provision would result in the displacement of U.S. cotton and yarn exports to Haiti by Chinese products since it contained no preferential treatment for U.S.-manufactured yarn and fabrics.

“We continue to urge the congressional leadership to reject any backroom deal that will send U.S. jobs to foreign countries like China,” said NCTO President Cass Johnson. “When China wins and U.S. workers lose because of a backroom deal made at 2 a.m. in the halls of Congress, then that is a sad day.

“The ultimate irony deal is that in its eagerness to sacrifice U.S. jobs to help Haiti, all the U.S. Congress has accomplished is to make Haiti a transshipment point for apparel from China at the expense of the entire Western Hemisphere.”

The approval of the Haiti measure came despite a letter written by eight Republican senators from North Carolina, South Carolina, Georgia, Alabama and Kentucky urging the Senate leadership to drop it and new tariff preference levels for products made by African countries.

In the letter, the senators said 100,000 textile jobs in their region had already been lost due to trade agreements, and they would oppose “as forcefully as possible” the Haiti measure.

“No hearings have been held on these measures,” said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, which also lobbied against the provisions. “No vetting has been done. No formal debate has occurred. All that is going on is a blatant attempt to ramrod ill-advised legislation through Congress to favor foreign special interests in countries like China at the expense of the U.S. textile industry and its workers.”

Johnson said the Haiti legislation contained in H.R. 6406 could eliminate most or all U.S. exports textile and apparel exports to Haiti and harm U.S. exports to Mexico and the CAFTA countries. U.S. textile and apparel exports to Haiti totaled $220 million in 2005.

Haiti is the lowest-wage apparel producer in the Western Hemisphere, he said. “As a result, its apparel exports to the United States have grown by 29 percent during the last year to 240 million square meters equivalent. By value, Haiti's exports are up 11 percent and now total $432 million. This is in sharp contrast to the CAFTA countries which have seen their apparel exports to the United States fall by 10 percent.”

The African Growth and Opportunity Act provisions also passed by the House and Senate include a tariff preference level for African countries equal to 775 million SME beginning in year one, with future increases tied to the growth of U.S. apparel imports. “The TPL will enable African producers to use inputs from third-party countries like China and still export apparel to the United States duty-free,” Johnson noted.

According to Cotton Council officials, the legislation also establishes a value-added rule of origin that, according to Customs, is unenforceable. The industry offered alternative measures, which would assist Haiti, but they were not considered.

The tax bill passed by both houses would extend through 2007 or 2008 and, in some cases, modify tax cuts that expired at the end of last year or are scheduled to expire at the end of this year.

The package also includes about $1.5 billion in energy tax breaks and extensions of provisions due to expire at the end of 2007. The package's major tax provisions extend the research and development tax credit; deduction for state and local sales taxes in lieu of state and local income taxes; deduction for tuition and related expenses; and, shorter depreciation periods for leasehold improvements.

The energy tax provisions in the legislation will extend renewable-electricity production credit, clean renewable-energy bonds, the deduction for energy-efficient commercial buildings, the credit for energy-efficient homes and the credit for business installation of alternative energy equipment and the excise tax break for methanol and ethanol produced from coal; new special depreciation allowance for cellulosic biomass ethanol plants; modification of the tax credit for coke and coke gas production.

Besides the duty-free trade benefits for Haiti and the expanded TPL for African countries, the legislation establishes permanent normal trade relations for Vietnam and extends for one year the duty-free treatment of some products from Andean countries, including Bolivia, Colombia, Ecuador and Peru; and amends the U.S. Harmonized Tariff Schedule to suspend or reduce the tariff rate on more than 500 products unavailable in the United States.

The last-minute legislation also protected doctors from a 5 percent cut in Medicare payments that would have taken effect Jan. 1.

The flurry of activity as the House and Senate prepared to leave Washington belied what has become known as one of the least effective sessions of Congress in recent memory.

The 109th Congress adjourned after passing only two of 11 appropriations bills, instead passing a continuing resolution that allows the government to continue operating with the fiscal 2006 budget until Feb. 15.

Republican leaders, in effect, left the unfinished budget work to the Democrats who will assume a leadership role when the 110th Congress gets down to business in January.

“They are leaving us with a tremendous mess,” said Senate Minority Leader Harry Reid, who will take over the reins of the Senate next month. “We do have alternatives, none of which are very good.”

The House and Senate did approve legislative language that provides for Outer Continental Shelf oil and natural gas exploration and development that includes new fields in the Gulf of Mexico.

The Corn Growers Association hailed the vote as a victory that will ensure domestic development of natural gas and lead to increased supplies of feedstocks for nitrogen fertilizers.

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