Home Front: Retailers Find Little Trouble With Pakistani Imports

Editor's note: This is the eighth installment in TheStreet.com's Home Front series, a collection of twice-weekly features examining how American business, society and investing have changed in the post-Sept. 11 landscape.

In the aftermath of Sept. 11, when it became clear that war in Central Asia was imminent, many retailers and apparel outfits that conduct business in Pakistan feared a logistical nightmare.

The first worry was for the safety of partners in the region. The second was whether deliveries could still be made on time.

On both counts, fears have eased. "People were expecting a much bigger problem," says Candace Corlett, a partner at consulting firm WSL Retail.

Few large, publicly traded retailers have seen their business disrupted from the war, say company officials and analysts. Now those fears have given way to hopes that U.S. legislation may create closer economic cooperation between the U.S. and Pakistan and reduce the cost of business between the two countries by lowering tariffs.

Business as Usual

While instability in the region has compelled a few retailers such as American Eagle Outfitters AEOS to cut back on orders from Pakistan, which exported $1.9 billion of textiles to the U.S. last year, most companies are finding their businesses unaffected, say analysts and consultants who follow the industry.

"We are not having any issues," says Carol Sanger, a spokeswoman at Federated Department Stores FD, which imports textiles from Pakistan for its private-label sheets and towels.

Other U.S. retailers consider it their patriotic duty to continue doing business in Pakistan, a key ally in the war on terrorism.

"In light of our government's efforts to work with Pakistan, we felt we should continue to do business with them," says Quinton Crenshaw, a spokesman at department store chain J.C. Penney JCP.

While many companies have worried about possible increased shipping costs, the Gap GPS has seen neither higher expenditures in this area nor any difficulty receiving timely shipments from Pakistan, according to Tamsin Randlett, a spokeswoman for the apparel retailer. Nor has the company cut orders for goods from the region. "We don't have any current plans to change that," Randlett says.

Legislation to Lower Tariffs

Meanwhile, Sen. Sam Brownback (R., Kan.) introduced legislation this week that would reduce or suspend tariffs on textile imports from Pakistan, a reward for the country's assistance in the war. In public statements, the Bush administration has backed such reductions.

"This act is vitally important to shore up the economic strength of our strategic ally, Pakistan, so central to our nation's ability to continue to prosecute the war against terrorism," Brownback said in a statement. "By failing to help strengthen the market for Pakistani textile exports by adjusting or eliminating tariffs on Pakistani textiles and textile products, we will only be strengthening the social and economic unrest in Pakistan on which the fundamentalists prey."

Retailers say a reduction in tariffs, which published reports say account for about 17.5% of the cost of goods from Pakistan, would be a boon.

"It may definitely change the extent of business we do in Pakistan," says Federated's Sanger.

With the consumer economy stumbling, that is especially good news for retailers.