Washington Retail Insight - May 19, 2006
Volume 11, Number 12
May 19, 2006
In Today's Edition:
Transportation Secretary Unveils Congestion Plan at NRF Conference
Transportation Secretary Norman Mineta this week chose NRF's 71st annual Washington Leadership Conference as the forum to announce a broad new Bush Administration initiative to help retailers and other businesses that are "slowly being strangled" by highway, freight and aviation congestion in the nation's transportation system.
"Few sectors of our economy are as dependent on transportation as the retail sector," Mineta said. "Without shipping, trucking and air freight, America's retailers would have nothing to offer consumers but blank catalogs, empty websites and bare showrooms."
"While the retail sector plays a vital role in maintaining the strength of the world's economy, it is slowly being strangled by transportation congestion," Mineta said. "We recognize that your products have a shelf life as sensitive as a banana. We don't want to have a situation where transportation becomes the choke point of your economic activity."
Mineta spoke Tuesday morning at the National Press Club, where government affairs executives from major retail companies, owners of independent Main Street stores and representatives of state retail associations gathered for the opening day of NRF's two-day conference. Attendees also heard from White House chief lobbyist Candida Wolff, political pundit Charlie Cook, Senate Health Education, Labor and Pensions Committee Chairman Michael Enzi, R-Wyo.; Senate Deputy Whip Jim Talent, R-Mo., House Education and Workforce Committee Chairman Howard "Buck" McKeon, R-Calif., and Deputy Secretary of Labor Steven Law. The conference also included meetings of NRF committees and more than 100 lobbying appointments on Capitol Hill.
The "National Strategy to Reduce Congestion on America's Transportation Network" plan unveiled by Mineta provides a blueprint for federal, state and local officials to work together on congestion issues including ports, railroads, highways, airports and commuter transportation such as bus lines. States would be encouraged to pass legislation broadening opportunities for private sector investments in transportation infrastructure such as toll roads, and use of technology to help commuters and truckers avoid traffic tie-ups from accidents and construction would be increased. Up to five cities would be chosen as part of a transportation "corridors of the future" program, and $100 million would be provided to fund pilot programs to relieve congestion. Approval processes for transportation projects would be expedited.
As part of the initiative, a new Surface Transportation Policy and Revenue Commission will meet for the first time next Wednesday, tasked with finding solutions that both raise revenue for transportation projects and reduce congestion by focusing more on system performance.
On the cargo front, the plan calls for DOT's existing Gateway Team in southern California -- location of the Los Angeles/Long Beach port critical to retail merchandise from Asia -- to be upgraded to a larger Intermodal Hot Spot Team. DOT will hold a series of "CEO Summits" with retailers and other businesses to hear their concerns, and a DOT-Department of Homeland Security team will be created to address operational and infrastructure improvements at the nation's most congested border crossings.
Mineta said congestion costs the economy an estimated $200 billion a year through wasted fuel, time and other factors.
"Secretary Mineta has recognized that congestion is more than just inconvenience or frustration -- it has a huge impact on the economy," NRF President and CEO Tracy Mullin said. "The plan presented today will go a long way toward reducing the impact that transportation congestion has on our nation's economy. We look forward to working with Secretary Mineta and the Transportation Department to make this plan a reality."
"Retail is a seasonal, time-sensitive business that relies heavily on a sound transportation system, whether it's ships bringing imported goods across the Pacific, railroads carrying merchandise to warehouses or trucks making the final delivery to our stores," Mullin said. "There are swimsuits and gardening supplies that need to be on the shelves in the spring, backpacks and school supplies that have to be ready in time for back-to-school, and toys that need to make it from the dock to the shelf to the tree by Christmas morning. All of that depends on a transportation system that is not hampered by delays and backlogs. It is vitally important that retail goods move quickly from manufacturer to consumer. Efficient ports, rail lines, highways and air carriers are all essential to keeping our business successful."
NRF is heavily involved in transportation issues, both domestically and as part of its extensive work on international trade issues. The NRF Strategic Supply Chain Council is the retail industry's leading panel addressing transportation issues, and NRF works with the consulting firm Global Insight to produce the monthly Port Tracker report on port conditions.
DOT Office of Freight and Logistics Director Christina Casgar met with the Supply Chain Council and the NRF International Trade Advisory Council after Mineta's speech to discuss details of the proposal with retail industry experts, and pledged to work closely with retailers as the initiative is implemented. Council members raised concerns about congestion at ports and on rail lines, and Casgar said DOT will look at both. Casgar also praised NRF for "great work" on the Port Tracker report, which was established last year to help retailers anticipate and manage congestion issues at major retail container ports.
Mineta's announcement focused news media attention on NRF's transportation work, drawing reporters and camera crews from ABC, NBC, CBS, CNN, the Associated Press, Wall Street Journal, Washington Post, Reuters, Bloomberg and others. Stories ran in more than 40 newspapers nationwide.
For more information, contact NRF Vice President and International Trade Counsel Erik Autor at (202) 626-8104.
Senators Urge Retailers to Continue Health Plan Push
Two key senators this week urged retailers attending NRF's Washington Leadership Conference to continue to push for passage of Small Business Health Plan legislation that would help small retailers deal with rising health insurance costs.
"You've got to talk to your senators because we need those other five votes," Senate Health, Education, Labor and Pensions Committee Chairman Michael Enzi, R-Wyo., said Wednesday morning at the Capitol Hill Club. "You need to tell them how important Small Business Health Plans are to your association. ... If we can get five more votes, that bill will come up (for passage) so quick you won't believe it."
Enzi is the sponsor of S. 1955, the Health Insurance Marketplace Modernization and Affordability Act, legislation that would allow businesses and trade associations to pool their members in order to purchase insurance coverage at rates available to large groups.
The Senate on May 11 voted 55-43 in favor of the bill. But the procedural "cloture" vote to cut off debate required 60 votes to pass, leaving the measure five votes short.
Some states allow employers within the state to form insurance pools to negotiate for large-group rates on employee health coverage, but federal legislation similar to Enzi's measure is necessary in order to allow such pools to operate across state lines.
"We're trying to find a way to get people who are uninsured to be insured and for people who are insured to get a little better insured," Enzi said. "As an association, retailers can have enough clout to negotiate with the big insurance companies but only if you can go across states lines."
Enzi credited pressure from NRF and other business groups for getting the legislation as far as it has in the Senate. Legislation to establish largely similar Association Health Plans has passed the House repeatedly in recent years only to stall in the Senate, so getting the concept through committee and up to a procedural vote on the floor was an accomplishment in itself, he said.
"Actually, it was a success, not just as much of a success as we wanted," Senate Deputy Whip Jim Talent, R-Mo., said of the 55-43 vote. "This bill is where it is now because of the advocacy of small business groups."
Talent said the legislation would bring an immediate 10-20 percent savings for small businesses "and those of you in small business know what that would mean."
Last week's vote was initially seen as the end of SBHP legislation in the Senate for the remainder of the year, but both Enzi and Talent held out hope Wednesday that the measure could be revived.
The two senators were joined by Deputy Labor Secretary Steven Law, who noted that President Bush called for SBHP/AHP legislation during his January State of the Union address, and reiterated the Bush Administration's support.
"We want to make sure (SBHPs) become the law of the land," Law said. Insurance pools "make good sense for a variety of reasons" including lower costs, wider availability of insurance and improved competitiveness for small businesses trying to offer the same benefits as larger companies in order to attract employees, he said.
The call to continue pressure on the Senate to pass SBHP legislation came as WLC attendees headed to Capitol Hill for scores of lobbying appointments Wednesday morning and afternoon. Health insurance was one of the top issues on the list of topics to be discussed, and retailers urged lawmakers to try again to get the measure through the Senate.
NRF has strongly supported AHP/SBHP legislation since the similar concepts were first proposed, seeing it as a means to help small retailers bring skyrocketing employee health costs under control and as part of a multi-component plan for addressing health insurance costs for all retailers.
NRF set up a phone bank that forwarded hundreds of telephone calls from small retailers to senators' offices prior to last week's vote and also wrote to all 100 senators urging them to support the measure.
For more information, contact NRF Vice President and Employee Benefits Policy Counsel Neil Trautwein at (202) 626-8170.
Bush Signs Tax Bill, Extenders Could Go on Pension Measure
President Bush this week signed a $70 billion tax reconciliation bill that extends tax cuts for capital gains and dividend income, but a top aide said the Administration hasn't forgotten about important retail-related provisions that were left out in order to get the bill past a House-Senate stalemate.
Chief White House lobbyist Candida Wolff told members of the NRF Policy Council during NRF's Washington Leadership Conference that the retail provisions are likely to be attached to a pension reform bill that could be completed by a House-Senate conference committee by Memorial Day.
At issue is language that would have extended the Welfare to Work Tax Credit, the Work Opportunity Tax Credit, the research and development tax credit, deductibility of state sales tax and a 15-year depreciation period for improvements to leased stores for as long as two years. All expired at the end of 2005 and will remain in limbo unless reauthorized by Congress.
The provisions were originally included in both House and Senate versions of H.R. 4297, the Tax Increase Prevention and Reconciliation Act of 2005, sponsored by House Ways and Means Committee Chairman Bill Thomas, R-Calif. But a dispute over the size of the bill had stalled the measure since February, and lawmakers dropped the provisions last week when they unveiled a compromise measure acceptable to both chambers.
The compromise quickly passed both the House and Senate and was signed into law by Bush this Wednesday. The measure extends until 2010 a 15 percent tax rate for capital gains and dividend income that otherwise would have expired in 2008. Without the legislation, the rates would have reverted to their previous levels -- 20 percent for capital gains and as high as 38.6 percent for dividend income. The bill also extends individual Alternative Minimum Tax relief through the end of 2006 and accelerates some corporate estimated tax payments.
WWTC and WOTC offer businesses a tax credit equal of up to $2,400 per employee to hire welfare recipients and other disadvantaged individuals, and have been widely used by retailers to help those individuals move into the workforce.
The depreciation provision would extend a measure passed in 2004 that reduced the depreciation period for improvements to leased store properties to 15 years instead of the previous 39 years. NRF has lobbied for extension of the 15-year depreciation life, but has also urged lawmakers to expand it to include owned stores as well.
For more information, contact NRF Vice President and Tax Counsel Rachelle Bernstein at (202) 626-8168.
Pundit Calls 2006 Elections Too Close to Call
Control of the House and Senate is "teetering on the brink" and too close to call as this fall's congressional elections approach, political pundit Charlie Cook told retailers at NRF's Washington Leadership Conference this week.
Newspaper columnist and television commentator Cook said he uses two models to predict control of Congress, one based on approval ratings for the sitting president and the other based on individual races. The first suggests that Republicans, who currently control the House, Senate and White House, are in "deep, deep trouble" while the second indicates that the GOP may lose seats but narrowly retain control, he said.
Cook said President Bush's approval rating -- as low as 31 percent in New York Times and USA Today polls -- is one of the lowest any post-war president has seen during his second term and could cost his party seats during the mid-term congressional races. Bill Clinton was higher at 53 percent even during the Monica Lewinsky impeachment proceedings and Ronald Reagan dropped only to 43 percent during the Iran-Contra scandal, while Richard Nixon plummeted to 24 at the time of his resignation during Watergate.
"If you're just seven points above where Nixon was when the helicopter as taking off, I'd say ‘Danger, Will Robinson! Danger!" Cook said.
Looking at the election race by race gives more optimistic results for Republicans, he said. Only one Republican Senate seat will be open -- Majority Leader Bill Frist is retiring -- and only five Republican Senate seats are considered vulnerable. In the House, Democrats would need to take 15 seats. Given the high re-election rates of incumbents of either party, a switch would appear unlikely, he said.
Under either scenario, "There's a hurricane coming and it's going to hit in November," Cook said. "If it's a Category 1, 2 or 3, structural integrity will save the Republicans. If it's a Category 4 they could lose the House and retain the Senate. If it's Category 5 they lose everything. It's not going to be a 1 or a 2. The question is whether it's a 3, a 4 or a 5."
In the 2008 presidential campaign, Cook said Senator John McCain, R-Ariz., appears to be the frontrunner for the GOP nomination while Senator Hillary Clinton, D-N.Y., is the leading Democratic nominee.
For more information, contact NRF Senior Vice President for Government Relations Steve Pfister at (202) 783-7971.
Veteran Alabama Retail Leader Receives NRF Award
Recently retired Alabama Retail Association President Charles McDonald this week received NRF's prestigious J. Thomas Weyant Lifetime Achievement Award as part of NRF's annual Washington Leadership Conference.
McDonald was presented with the award during a Tuesday night reception at the U.S. Capitol attended by Alabama Senator Richard Shelby and Alabama Representatives Michael Rogers, Robert Aderholt and Spencer Bachus.
"NRF is very pleased to be honoring one of the leaders of the state retail association community," NRF President and CEO Tracy Mullin said. "This award is given to veteran state retail association executives who best exemplify the stature, ethics, leadership and achievement of Tom Weyant, one of our industry's most beloved and revered executives. With a career in retailing that spans more than 35 years, Charlie McDonald has continued Tom's fine tradition."
Mullin called McDonald "one of Alabama's most influential lobbyists." Among other accomplishments, McDonald led a coalition that saw major state tort reform legislation passed, chaired another group that spearheaded completely revised workers' compensation laws, and headed a successful effort to amend the state constitution after the U.S. Supreme Court invalided the state's onerous franchise tax. McDonald is a former chairman of the National Conference of State Retail Associations and has been honored for achievements in management by the American Society of Association Executives.
The Weyant award was established by NRF in1995 to honor individuals who have committed their professional careers to state retail associations. It is named for J. Thomas Weyant, former president of the Pennsylvania Retailers Association, who died of cancer in 1994.
"This is a very, very great recognition that I am proud to be the recipient of," McDonald said, noting his personal friendship with Weyant. He said he had worked closely with NRF and other state retail associations over the years, and that "much of what I have done is a product of their wise counsel."
For more information, contact NRF Director of Grassroots and Industry Relations Marsha Dionne at (202) 626-8152.
U.S. and Vietnam Conclude Trade Agreement Negotiations
The United States and Vietnam last weekend concluded negotiations on a bilateral trade agreement that is a key step necessary before the Asian nation can join the World Trade Organization. The agreement avoided a textile and apparel safeguard mechanism opposed by NRF but allows the United States to impose temporary quotas if Vietnam is found to violate WTO rules on subsidies to those industries.
"This is a very good agreement for the United States," U.S. Trade Representative Rob Portman said. "Vietnam recognizes that broad-based reform and economic liberalization are essential to its integration into the global economy. We intend to work hard with Vietnam to complete the process of its full accession to the WTO in the near future."
The agreement, announced last Sunday, stipulates that current U.S. quotas on Vietnamese textiles and apparel will expire immediately once Vietnam becomes a member of the WTO.
Unlike the terms reached when China became a member of the WTO, the agreement does not include a safeguard mechanism -- a process that allows domestic manufacturers to seek temporary limits on imports if they feel threatened by an influx of foreign goods. NRF strongly opposed safeguards for Vietnam, seeking to avoid a repeat of the chaos that occurred last year when the Bush Administration approved two dozen safeguards quotas limiting imports from China even though there was little evidence of harm to U.S. manufacturers.
The pact does, however, allow the United States to seek a different form of temporary quotas if U.S. officials believe Vietnam is providing subsidies prohibited by the WTO anytime within the first year after joining the WTO. If WTO-prohibited subsidies beyond those identified in the negotiations are suspected, the United States could ask Vietnam for consultations on a mutually agreeable solution. If the matter could not be resolved, it could be referred to a neutral third-party from the WTO, who would have 120 days to determine whether a violation exists. If a violation is found, the United States would be allowed to impose quotas for up to one year. The quotas could not be renewed, and any disagreement remaining after the quotas expired would have to be resolved through WTO dispute settlement procedures.
A number of details remain to be resolved, including on what basis quota levels would be set, what textile and apparel categories would be targeted and how quota levels would be determined.
The agreement is expected to be signed during the next meeting of the Asia-Pacific Economic Cooperation forum in Hanoi June.
The WTO working party on Vietnam's membership will now combine the bilateral agreement with the United States along with those reached with other nations into a single report and a document outlining Vietnam's terms of membership. Those items must be approved by the WTO General Council and ratified by the Vietnamese legislature, a process that could take several months.
Once Vietnam is in the WTO, the United States is obligated to provide Permanent Normal Trade Relations status. Legislation could be introduced in Congress by the end of this month, but a vote is not expected before July at the earliest and might not come until the membership process is completed later this year.
NRF has been a strong supporter of trade with Vietnam, one of the retail industry's fastest growing suppliers, and met with Vietnamese Trade Minister Truong Dinh Tuyen last week as negotiators began work to complete the bilateral agreement.
For more information, contact NRF Vice President and International Trade Counsel Erik Autor at (202) 626-8104.
NRF Supports Net Neutrality Legislation
NRF this week welcomed introduction of a House bill that would require "net neutrality" among companies providing Internet service, and urged a Senate committee to include a similar requirement in telecommunications legislation currently being drafted.
"Online and multichannel retailers have spent the past decade revolutionizing the way Americans shop by giving each and every consumer greater access to a wide variety of goods and services at highly competitive prices," NRF Senior Vice President for Government Relations Steve Pfister said in a letter to House Judiciary Committee Chairman James Sensenbrenner, R-Wisc., and Ranking Member John Conyers, D-Mich. "Because of the importance of this medium to the retail industry, NRF hopes that the Internet will remain an open highway of commerce. Recent interest in a system of tiered Internet usage as expressed by major telecommunications companies threatens to eliminate network neutrality, forcing the Internet into a system more like cable TV where retailers and other content providers would have to pay for the best access to consumers."
"Without specific protections, the Internet could become a ‘pay to play' communications medium, stifling growth and eliminating now-robust competition in the retail space," Pfister said. "Further, if large telecommunications and cable companies begin to restrict the amount of content that users can readily access, it could lessen the overall value of the Internet for American consumers."
Sensenbrenner on Thursday introduced H.R. 5417, the Internet Freedom and Nondiscrimination Act of 2006. The measure would amend the Clayton Act federal antitrust law to require that network providers interconnect with the facilities of other network providers on a "reasonable and nondiscriminatory basis." Providers would have to operate their networks in a nondiscriminatory manner providing non-affiliated providers of content, services and applications with an equal opportunity to reach customers. Network operators would not be allowed to interfere with users' ability to choose the lawful content, services and applications they want to use. The companies would still have the ability to manage their networks, offer consumers different tiers of service and earn compensation from users of the network.
NRF also wrote to Senate Commerce, Science and Transportation Committee Chairman Ted Stevens, R-Alaska, and Ranking Member Daniel Inouye, D-Hawaii. The committee on Thursday held its first hearing on telecommunications legislation introduced by Stevens. The Stevens bill requires the Federal Communications Committee to conduct annual studies of how market conditions impact the free flow of information but stops short of requiring net neutrality.
"As the Commerce Committee moves to consider its version of a comprehensive telecom bill, we hope that the principle of net neutrality will be included," Pfister wrote.
In both letters, Pfister noted that the growth of online retailing in recent years has outpaced that of brick-and-mortar stores. The latest State of Retailing Online study conducted by Forester Research for NRF's Shop.org division found that online retailers had 2004 sales of $141 billion, up 24 percent over the prior year. Online sales now account for 6.5 percent of all retail sales and the total was projected to grow 22 percent to $172 billion in 2005.
For further information, contact NRF Director of Government Relations Alison O'Donnell at (202) 626-8193.
Congressional Outlook:
House: Returns 12:30 p.m., Monday, May 22.
Senate: Returns 1 p.m., Monday, May 22
- June 1, Retail Education Event with Representative Jon Porter, Henderson, Nev.
- June 27, General Counsels Forum, Washington, D.C.
For information on NRF events, contact Eileen Pryor at (202) 626-8114 or pryore@nrf.com.
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