What do lovers of imported mustard, enthusiasts of foreign motorcycles and U.S. textile firms who use European rayon have in common?They were all upset when government officials recently revealed they were thinking of slappingmore than $115 million in sanctions on European imports of these and many other products.
Indeed, in November of last year, the Office of the United States Trade Representative (USTR) announced it was considering a 100% levy on a number of European products in connection with an ongoing dispute over Europe's refusal to import hormone-treated beef. On the proposed target list: yarn, prepared mustard, motorcycles and, of particular interest to the nonwoven fabrics industry, viscose rayon staple fiber (Harmonized Tariff Schedule classification 5504.10).
As Capitol Comments readers know, viscose rayon staple fibers are used in a variety of nonwoven applications, including wipes, feminine hygiene products, baby diapers, surgical drapes, gowns and more. They are also impossible to find domestically since the former sole North American manufacturer of rayon, Liberty Fibers, declared bankruptcy and shut its doors in 2005, forcing many U.S. textile firms to look abroad to source these fibers. A 100% duty increase would devastate these firms, which, like so many others, are struggling to remain competitive in an increasingly difficult economic climate.
Fortunately, this story has a happy ending. On January 15, USTR announced it was removing rayon, yarn, mustard, motorcycles and the other seemingly unrelated items from the proposed retaliation list after hundreds, including members of INDA, Association of the Nonwoven Fabrics Industry, filed submissions objecting to the proposal.
But even though disaster had been averted, this near miss is still noteworthy.To begin with, it illustrates how a simple policy decision can bring with it potentially major unintended consequences. It also demonstrates, once again, the importance of a government affairs office that is ready to respond to these kind of threats.
Perhaps even more importantly, as you will soon see, the example highlights the important role that INDA members themselves played in determining the final outcome, and the value of grassroots advocacy efforts. With this in mind, this article will review the events leading up to USTR's reversal on the rayon duties. But first, everything you have ever wanted to know about the U.S./EU beef hormone dispute.
Although USTR first circulated its plan to slap tariffs on the products last November, the U.S./European Union beef hormone dispute dates back to 1989, when the EU began banning imports of hormone-treated beef due to concerns about the impact on human health.
Believing the move was less about health concerns and more about protecting the European market from shipments of American beef, the United States challenged the ban at the World Trade Organization (WTO), which ultimately ruled in 1997 that there was no scientific evidence to support the health claims and declared the ban a violation of global trade law. In 1999, the WTO gave the United States the right to impose more than $115 million in economic sanctions, which it did by dramatically increasing tariffs on European imports of certain meat products and specialty items like truffles, Roquefort cheese and goose liver.
After numerous EU challenges, a WTO appellate body in October 2008 upheld the United States' right to apply the sanctions, prompting U.S. trade officials to announce they were looking at modifying the list of European products subject to increased duties.
Meanwhile, less than a month later, when most people were preparing for Thanksgiving, INDA received word that viscose rayon staple fiber had been included on the revised list.
This news was particularly surprising because, as noted at the outset, the lack of North American rayon production and the hardships it has imposed are well documented. In fact, as we have previously reported, the rayon shortage has been the subject of several industry petitions, including two filed by INDA members seeking relief under U.S.-North American Free Trade Agreement "short supply" provisions (see Capitol Comments, March 2006).
Regardless, INDA did not waste time trying to understand the logic and instead worked with allied organizations like the American Fiber Manufacturers Association and National Textile Association, to warn industry members about the possible duty increase and provide a template, suggesting talking points for filing a formal submission with USTR.
Armed with these tools, U.S. textile firms, including many INDA member companies, sprang into action, using the format provided by INDA and the other groups to file comments expressing their opposition. As the talking points recommended, these submissions described the role the firms play, the impact of rayon in the supply chain, and the specific economic hardships that would be felt.
The textile industry was not the only one to get involved in the grassroots action. In fact dozens of individuals and groups filed comments addressing the absurdity of many of the items on the retaliatory duty list. As a particularly spicy submission from Eric Nankervis of Atlanta, GA noted: "My father believes the only good thing about mustard is that it can hide the taste of spoiled meat. My mother-in-law, on the other hand, believes that mustard is key to a good sandwich and is the only condiment to be placed on a hot dog or other sausage. For once, I agree with my mother-in-law. Please repeal the unfair tariff on imported mustard."
All in all, USTR received some 600 comments by the December 8, 2008 deadline, leading the agency to conclude it had erred in targeting these products.Noting the government's intent had "never been to raise trade barriers but to lower them," U.S. Trade Representative Susan Schwab announced January 15 the administration was removing rayon and the other items from the list of EU products subject to additional duties.
Since we gave away the ending at the beginning, the purpose of this article was really to make several larger points: first, in these days of shrinking budgets, everyone is looking for ways to minimize expenses and increase their bottom line and the federal government is no exception. As recently inaugurated President Obama and Capitol Hill lawmakers look for creative ways to shrink the United States' projected $1.2 trillion budget deficit, INDA government affairs staff will need to be ever-vigilant monitoring policy developments and be prepared to defend against potential threats that could impact future prosperity. While we are well equipped to do this, now more than ever, we will need your input about the policy matters that impact the industry's future vitality.
Second, INDA's success in dealing with the rayon duty proposal highlights the effectiveness of grassroots advocacy efforts when dealing with policymakers. INDA government affairs staff will do our part by tracking and communicating the most important developments as they unfold, and providing advocacy tools as needed, but we will need a commitment from you, our members, to help us make our message even more meaningful. We look forward to continuing our work together during these exciting times.