By Megan R. Wilson - 05/21/14 06:00 AM EDT
The government of Nicaragua is calling in K Street giant Akin Gump to help rescue a trade preference that helps power the nation’s textile industry through exports to the United States.
Akin has pledged to mount an “aggressive” lobbying campaign for the tariff preferential levels (TPL), which are set to expire at the end of this year.
The contract with Akin, dated May 16, is worth $3,500 per month until the end of the year, which is modest by K Street standards.
However, if the lobbyists are able to preserve the tariff levels, they could earn up to $350,000 in bonuses.
Contract documents show that Samuels International Associates, a consulting firm founded by former ambassador and State Department official Michael Samuels, will be helping Akin Gump, which has represented Nicaragua for two years.
The lobbyists were directed to engage the Obama administration and lawmakers while bringing together industry allies to pressure Congress to extend the export rules, which were part of the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR) that took effect in 2006.
The other CAFTA-DR countries are Costa Rica, the Dominican Republic, El Salvador, Guatemala and Honduras.
The trade agreement contains specific requirements needed to obtain tax-free access to textiles from the United States, but TPL provides exemptions that make Nicaragua a more attractive place for the U.S. apparel industry to do business.
Under the program, clothing manufactures in Nicaragua can import U.S. fabrics duty-free and then manufacture some apparel that can be sold back to America under the same arrangement. Lobbyists say textile exports from America to Nicaragua increased 60 percent after the trade deal was struck.
Lobbying materials “should clearly communicate the value of the TPL for the textile industry of the United States of America as well as, when appropriate, the apparel industry of Nicaragua. The materials will be framed within the context of recent increases in textile exports from the United States of America to Nicaragua and the impact of the TPL on regional competitiveness,” the contract states.
However, “Nicaragua’s TPL was a controversial element in the CAFTA negotiations,” warned Oscar Alejandro Zamora Hinojos, the consul general of Nicaragua’s Comisión Nacional de Zonas Francas, in one of the contract documents. Given the controversy, “coordination with textile companies from the United States of America, associations of textiles, apparel, manufacturing and retailers” is a must, he wrote.
Several companies and groups, including the National Retail Federation, the Retail Industry Leaders Association, Wal-Mart, American Apparel & Footwear Association and clothing retailer Williamson Dickie, best known for its Dickies brand pants, also reported lobbying on extending Nicaragua’s tariff levels over the first three months of 2014.
“We’re encouraging people to take up these renewal measures sooner rather than later,” said Steve Lamar, the executive vice president of the American Apparel & Footwear Association.
With the future of the tariff exemption uncertain, lobbyists are circulating a Duke University study that said more than 1,000 U.S. textile and manufacturing jobs depend on the Nicaragua program.
Sen. Kay Hagan (D), whose home state of North Carolina serves as a hub of the U.S. textile industry, has introduced a bill that would extend the smaller parts of the tariff exemption. Facing a tough reelection battle, lobbyists say her bill cuts out significant parts of the agreement.
Sen. Dianne Feinstein (D-Calif.) introduced a bill last year that would extend the tariff program across the board for 10 years, but that legislation has yet to move in the Senate Finance Committee.
Lobbyists say an extension of the tariffs program could be folded into a tax breaks bill that many on K Street expect to pass Congress by the end of the year.
Squire Sanders Public Advocacy has also been working with Nicaragua since 2011, according to Foreign Agents Registration Act forms. David Spooner, of counsel at the firm, says there is a chance that legislation could move forward this year.
“If this trade program gets extended, it almost surely has to be folded into a larger trade bill,” he said. “The water cooler talk is that an omnibus trade bill won’t move before the elections, maybe until the beginning of next year.”
Spooner said he’s meeting with lawmakers and administration officials to communicate how the deal is good for his client and for U.S. businesses.
“Nicaragua was at the time, and it still is, by far the poorest of the Central American countries and had a much smaller apparel industry [than some of its neighbors],” he said. “That [TPL] flexibility attracted apparel brands.”