RILA supports open economic engagement, including in apparel trade. Open competition in apparel creates healthier industries in both the United States and in our trading partners. RILA believes it is time for U.S. trade policy to reflect commercial realities of global value chains, and recognizes that 98 percent of apparel sold in the United States is imported.
RILA believes that the U.S. should negotiate flexible rules governing trade in apparel in the ongoing Trans Pacific Partnership (TPP) talks with Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam.
RILA and other interested associations have formed the TPP Apparel Coalition to aggressively advocate to Congress and the Administration that the U.S. position on apparel should be updated in the TPP to adopt rules of origin for apparel that are simple, flexible, and accommodate global value chains. Moreover, apparel products should be integrated into the TPP market access negotiations, with no separate chapter or separate provisions. This includes no separate safeguard process for apparel products, and no separate customs enforcement measures. Finally, duties on qualifying apparel articles should be eliminated on a reciprocal basis on the first day a TPP agreement enters into force.
After nine negotiating rounds, the TPP talks continue at a positive rate and steady progress was made during the last negotiating round in October. In November 2011, the TPP Heads of State announced the broad outlines of a TPP agreement during the Asia-Pacific Economic Cooperation (APEC) leaders’ summit. TPP leaders also agreed that they would try to substantially finish the talks by July 2012, with tough issues and a legal review to follow in the second half of 2012, and a TPP signing by the end of 2012. The talks are now entering a critical phase, and an “intercessional” round of TPP negotiations is scheduled for the first week of December in Malaysia. The next full TPP negotiating round is expected in March 2012 in Australia.
In September 2011, the Chairman of the Senate Finance Subcommittee on International Trade, Customs and Global Competitiveness, Ron Wyden (D-OR), sent to U.S. Trade Representative Ron Kirk a detailed letter on why he believes the TPP negotiators should reject yarn-forward rules of origin for apparel in the TPP.
In October 2011, thirty bipartisan Members of the House of Representatives sent a letter to USTR Kirk urging the United States to adopt a new approach on apparel trade in the TPP agreement.
RILA recommends that members to reach out to their Congressional delegations to educate them on the significant costs of protectionist U.S. policy toward apparel trade, and to ask them to urge U.S. negotiators to adopt a more flexible approach in the ongoing TPP talks.
Most U.S. free trade agreements (FTAs) have very restrictive rules governing preferential trade in textiles and apparel (as opposed to most other goods). Most importantly, they generally have a yarn-forward rule of origin, which requires originating yarns, fabrics, sewing thread and other inputs for all apparel products, even if there is insufficient availability of quality inputs and a reliable supply chain within the FTA countries. If any one of these inputs cannot be sourced within the FTA territory, the entire garment would fail to be eligible for duty-free treatment.
The FTAs also require significant documentation to substantiate the use of originating materials, which adds further cost and complications and makes the supply chain cumbersome with tracking and monitoring. These added costs often negate any cost benefit from the duty preference. A yarn-forward rule also is very difficult to enforce because it requires U.S. Customs and Border Protection officials to rely solely on documentation instead of verification of manufacturing processing in a FTA country. As a result, previous U.S. FTAs have done little to incentivize new investment in apparel production in the United States or FTA partner countries.
The U.S. textile industry continues to advocate for a yarn-forward rule of origin, including in the TPP talks, out of concern that its export markets in South and Central America would be undermined if the U.S. pursues a more liberal approach to textile and apparel trade.
Meanwhile, U.S. market access for apparel goods from TPP countries is an essential tool the United States has to use as leverage in the TPP negotiations. In 2010, U.S. tariffs on clothing and home linens from the TPP countries were just under $1.2 billion, accounting for about 68 percent of the total U.S. tariffs collected from those countries last year. Eliminating these duties for apparel, coupled with commercially-meaningful rules of origin, is a top priority for some TPP countries. Thus US policy on apparel will be a key factor in the US ability to achieve important market concessions from TPP countries for U.S. exporting industries.
For more information, please contact Stephanie Lester, vice president of international trade, at stephanie.lester@rila.org.