Jeans Brands, Suppliers Urge House to Move Quickly on Approving USMCA

December 6, 2019 by Dan McCue

WASHINGTON – Inaction in Congress on USMCA, the proposed new trade deal between the United States, Mexico and Canada, isn’t just a political matter, it’s causing real concern for some of the nation’s most recognizable brands and the network of small businesses supporting them.

That was the message Scott Deitz, vice president of corporate relations for Kontoor Brands, sought to drive home on a recent visit to Washington, D.C., where he met with lawmakers to discuss the trade deal — and the ramifications of not getting it done.

Kontoor Brands was spun off from the much older VF Corporation only this past Spring.

The company produces the iconic Lee and Wrangler jeans.  It is because of those brands and how they’ve grown that USMCA’s presence in legislative purgatory has become a real concern.

As Deitz explained, the VF Corporation, for whom he worked previously, adhered to a philosophy of producing its products in the region in which they’d eventually be sold.

When the North American Free Trade Agreement went into effect in January 1994, the company embraced the opportunities it presented.

While every element of Lee and Wrangler jeans — from cotton, denim, buttons, snaps to labels and tags and even thread — would be sourced in the U.S., those items would be trucked, duty-free, to Mexico and Nicaragua for assembly, and then shipped back to the U.S., duty-free, for sale.

Kontoor Brands still relies on that supply chain.

“NAFTA was an invitation from the partner governments to regionalize our business, and it came with both upsides and, to be honest, a few downsides,” Deitz said.

“On the plus side, Mexico’s production environment was less costly than that in the United States and there were people in Mexico who were interested in and eager to do this kind of work,” he said. “It was a wonderful combination.

“On the other hand, we essentially had to create a whole new business model premised on a hemispheric approach to doing things that we weren’t really accustomed to,” he said.

Although nobody involved thought NAFTA worked perfectly, companies like VF Corporation and Kontoor Brands adapted to its realities.

Then, in 2016, candidate Donald Trump declared war on NAFTA, calling it a U.S. job killer that he intended to scrap.

“I’m going tell our NAFTA partners that I intend to immediately renegotiate the terms of that agreement to get a better deal for our workers. And I don’t mean just a little bit better, I mean a lot better,” Trump said as he campaigned in Rust Belt states like Ohio and Pennsylvania.

Deitz conceded NAFTA caused the loss of certain kinds of jobs, particularly in the Southeast, but he said it also supported thousands more. “And to be sure, there were things about NAFTA we wanted to see fixed,” he said.

He admitted Trump’s rhetoric created an air of uncertainty, even as the company was adopting a general position of, ‘We’ll just have to see what happens.'”

“Uncertainty is never really good for business, especially when the uncertainty is related to decisions made by other parties,” Deitz said.

As Trump’s attacks on NAFTA piled up, company officials concluded the old trade deal was in jeopardy.

Their biggest concern was the consequences of tossing the old deal without a suitable replacement.

‘It required us to go to the drawing board and to begin to build business scenarios,” Deitz said.

USMCA provided companies like Kontoor Brands with a tangible vision of their future and the future of their workers.

Then the House refused to ratify it, citing concerns with several provisions, including its enforcement, leaving companies and employees “with an uncomfortable level of uncertainty.”

“We do believe things are moving in the right direction, but the reality is the holiday season and the end of the year are approaching, and while Washington is doing a lot of talking about USMCA, tens of thousands of employees who work for our suppliers are worrying about their futures,” Deitz said.

To drive that message home on Capitol Hill, Kontoor Brands and its 75 suppliers in the U.S. have been working as a coalition to secure a vote in the House on USMCA by the end of the year.

“We’re doing everything we can to create a sense of urgency about this,” Deitz said. “And while a vote by the end of the year is beginning to move outside the realm of the possible, our hope is that if we keep telling our story and keep beating our drum, the various parties will come to an agreement and act on USMCA immediately after the new year.”

The position of the coalition is basically this: while USMCA is ensnared in Washington politics, there are thousands of people — in congressional districts across the country — who are going to work every day wondering if they’ll lose their jobs if the trade agreement suddenly goes by the boards.

“Our coalition partners aren’t big businesses that enjoy national or international influence, these are small business owners who want to manage their own affairs and keep people in their communities employed,” Deitz said.

“We believe that USMCA and its ratification should be a nonpartisan issue, and that at some point, everybody will understand the best thing to do is to sign this agreement and keep U.S. workers employed.

“I honestly believe that in the final analysis, the House will vote on and ratify USMCA, and then it will quickly move through the Senate and be signed by the president, but the uncertainty won’t go away until it’s done,” he concluded.

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