Administration MTB Objections on Footwear Duty Suspensions Don't Make Sense, Says AAFA

Numerous objections in the Miscellaneous Tariff Bills (MTB) process filed by the Obama Administration regarding the duty suspensions of footwear and apparel provisions should be withdrawn, said the American Apparel and Footwear Association (AAFA). The AAFA complained of the objections in a letter to U.S. Trade Representative Ron Kirk and Acting Commerce Secretary Rebecca Blank. A huge number of duty suspensions would expire if Congress doesn't pass a MTB by the end of the year.

(The Senate Finance and House Ways and Means Committees recently posted the International Trade Commission reports and Obama Administration analysis on the MTBs. The Senate Finance Committee spreadsheet with links to the bills, comments and ITC report is (here). A Senate Finance spreadsheet of administration positions is (here). The House Ways and Means Committee has similar lists (here). Input from the ITC and Obama Administration through the Commerce Department is required to pass a MTB, which is typically passed by every congress to suspend tariffs on certain products.)

The AAFA took issue with the administration's objections to more than 60 footwear and apparel duty suspensions based on the effect on trade negotiations or trade preferences. The administration objections in questions said either "Enactment would undermine trade negotiations" or "Enactment would undermine existing U.S. trade preferences." Those concerns are "simply false," said the AAFA.

The USTR stood behind its objections. "Congress asks the Administration to review the miscellaneous tariff bills that have been submitted," said a USTR spokesperson. " In the course of our review, we considered the effect of the proposed bills on our ongoing trade negotiations and commented accordingly. While USTR has provided its own opinion, it is also up to the Congress to decide whether they believe MTBs are in the best interest of domestic industries that may be affected and in the best interest of the country’s overall trade objectives. "

'Just Does Not Make Sense'

There's no logic behind the administration's objections, said the AAFA. "Barring the fact that neither objection is anticipated under the MTB process, as established by the House Ways & Means Committee and the Senate Finance Committee, the objections turn upside down U.S. trade policy and U.S. trade negotiating strategy for the last two decades," the association said. "By the very fact that it is making such objections, the administration is undermining its ability to negotiate trade agreements."

The AAFA was especially concerned with the objection that "enactment would undermine trade negotiations," because the "logic just does not make sense. The MTB duty suspensions, "by their very nature" are temporary, unlike Free Trade Agreements, which are permanent, said the AAFA. administrations have long said that FTAs are negotiated from most favored nation duty rates, it said.

Half of the MTBs now being opposed by the administration have been around since 2006, since which they haven't caused a problem with trade negotiations, it said. "The impact of the MTBs on the proposed Trans-Pacific Partnership (TPP) Free Trade Agreement, or any other trade negotiation for that matter, would be minimal," the AAFA said. "MTBs provide short term (3 year) duty relief and are limited to projected lost revenue to the U.S. Treasury of $500,000 per year. There are 59 footwear MTBs; if each result in $500,000 in lost revenue, the total cost would be only $29.5 million -- this is a mere 1.3% of total footwear duties collected in 2011 ($2.3 billion)."

The objection that “Enactment would undermine existing U.S. trade preferences” is also of significant concern, it said.. "The basic premise of this objection is faulty. To extend the logic outlined in this objection, the current negotiations toward a TPP agreement would “undermine existing U.S. trade preferences” as would negotiations toward a Doha Round agreement at the World Trade Organization." The administration seems to be arguing "that U.S. trade policy should be brought to a halt altogether," it said.

The House Ways and Means, Senate Finance Committees and Commerce Department didn't respond to a request for comment. The Association of Importers of Textiles and Apparel didn't comment on the AAFA letter.

(See ITT's Online Archives 12040239 for summary of the House and Senate Committees beginning the MTB process. See ITT's Online Archives 12061429 to a summary of the recent legislation that would revamp the MTB process.)