1. © Copyright AAFA. All rights reserved. 2006 Trade Agenda in 2006 and Beyond: A View from Washington ISC/SCLC Spring 2006 Meeting Stephen Lamar Sr. Vice President American Apparel & Footwear Association April 2006

2. © Copyright AAFA. All rights reserved. 2006 Where are we in 2006? What’s Hot in Washington Trade Agenda

3. © Copyright AAFA. All rights reserved. 2006 Where are we in 2006? What’s Hot in Washington Trade Agenda

4. © Copyright AAFA. All rights reserved. 2006 Washington Political Scene 194 Days Until the Next Election Democrats Smell Blood.. Perception That Republicans “Smell” –Scandals –White House Missteps –Budget Deficit –Iraq –Gas Prices –“Do Nothing” Congress? Reverse of 1994? –Problem: Democrats Have No Ideas

5. © Copyright AAFA. All rights reserved. 2006 Washington Agenda Budget National Defense/Homeland Security Tax Health Care Energy Immigration? Port Security Lobby Reform?

6. © Copyright AAFA. All rights reserved. 2006 Where are we in 2006? What’s Hot in Washington Trade Agenda

7. © Copyright AAFA. All rights reserved. 2006 Trade Agenda 429 Days Until Expiration of TPA Doha Round Free Trade Agenda China/Enforcement –Schumer/Graham –IPR Trade Aspects of Port and Immigration Debate Dogs and Cats –CAFTA Fix –Misc. Trade Bill –Burma –Vietnam –Trade Preference Programs New Leadership

8. © Copyright AAFA. All rights reserved. 2006 FTA Agenda In place: –8 FTAs with 11 countries (14 countries) Pending/Under Negotiation –11 FTAs with 15 countries Opportunity: –Reduce Duties/Duty Free –Permanent Access/More Comprehensive Danger: –Tight Rules of Origin/Enforcement –Sloppy/Delayed Implementation Status: Steady but slow progress.

9. © Copyright AAFA. All rights reserved. 2006 Israel NAFTA Jordan Chile Singapore Australia Morocco Current and Future U.S. Free Trade Agreements CAFTA- DR* Bahrain Oman Peru Colombia Panama Ecuador Thailand UAE SACU FTAA ASEAN Middle East In force Under negotiation Pending Proposed Potential South Korea Malaysia Egypt Indonesia * El Salvador, Honduras, Nicaragua only. Note: Peru, Colombia and Ecuador may be merged.

10. © Copyright AAFA. All rights reserved. 2006 Other Major U.S. Trade Preference Programs 1.9802 Programs 2.CBTPA 3.Jordan QIZ 4.Egypt QIZ 5.AGOA 6.ATPDEA 7.Insular Territories Goal: Reduce U.S. Duties

11. © Copyright AAFA. All rights reserved. 2006 Tariff Peaks Source: USITC Travel Goods Textiles, Apparel, and Shoes

12. © Copyright AAFA. All rights reserved. 2006 Who Pays U.S. Duties? (part I) Source: USITC

13. © Copyright AAFA. All rights reserved. 2006 Who Pays U.S. Duties? (part II) Top 10 Apparel and Footwear Exporters to the U.S. (2005) Apparel Footwear Duty Free Not Duty Free China Brazil Vietnam Indonesia Italy China Mexico Honduras Bangladesh El Salvador Indonesia Vietnam India Dom. Rep. Cambodia Thailand Mexico Dom. Rep. Hong Kong India Source: USITC

14. © Copyright AAFA. All rights reserved. 2006 Who Pays U.S Duties? (part III) Bangladesh Effective Duty Rate: 14.7 percent Belgium Effective Duty Rate: 1.0 percent Source: USITC

15. © Copyright AAFA. All rights reserved. 2006 Doha Round Multilateral Negotiations (2001) Opportunity: –Reduce Duties Further –Eliminate Non Tariff Barriers –Harmonize and Facilitate Trade Danger: –Proposals to Limit Impact on Textiles –Reintroduce Quotas/Extend Safeguards Status: Going nowhere fast

16. © Copyright AAFA. All rights reserved. 2006 Did Safeguards Work? Ended Self Imposed Uncertainty for Many Textile and Apparel Production: Down Textile and Apparel Imports: Up –Imports from Asia: Up –Imports from Mexico/CAFTA: Down Textile And Apparel Import Penetration: Up Textile and Apparel Employment: Down Apparel Prices Down

17. © Copyright AAFA. All rights reserved. 2006 China’s Incredible Growth Source: US Commerce Department

18. © Copyright AAFA. All rights reserved. 2006 China’s Incredible Growth? Source: US Commerce Department

19. © Copyright AAFA. All rights reserved. 2006 U.S. Apparel Imports 1994 & 2005 Source: US Commerce Department

20. © Copyright AAFA. All rights reserved. 2006 More on Safeguards… Source: U.S. Department of Commerce 1.7% 4.2% Percent of U.S. import market during 1 st 2 months of 2006

21. © Copyright AAFA. All rights reserved. 2006 What to Do About China? China WTO Obligations –IPR Issues –Currency –Distribution Rights w/in China China Safeguards –Bilateral Agreement –Textile Safeguards –Product Specific Safeguards Trade Remedies –Anti Dumping/CVD –Congressional Action

22. © Copyright AAFA. All rights reserved. 2006 A word on CAFTA-DR 3 countries implemented –Still waiting for CR, DR, and Guatemala Footwear working well. Textile and apparel issues (Go to Asia): –Co Production Nightmare –Pockets/Linings and TPL Change –Socks Change –Cumulation –Other Technical Fixes

23. © Copyright AAFA. All rights reserved. 2006 How Are Other Countries Doing? Source: US Commerce Department

24. © Copyright AAFA. All rights reserved. 2006 For Rest of 2006… Homeland security will remain critical Trade enforcement will remain important Duty free will be a slow process Trade fatigue plus mischief in Congress will discourage much positive action.

25. © Copyright AAFA. All rights reserved. 2006 American Apparel and Footwear Association 1601 N. Kent Street, 12 th Floor Arlington, VA 22209 703-797-9041 slamar@apparelandfootwear.org www.apparelandfootwear.org Thank You