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Ministers Say TPP Talks On Track

President Obama called having to cancel his trip to the Asia-Pacific Economic Cooperation summit and the TPP leaders’ meeting in Bali a "missed opportunity."

President Obama

The debt ceiling brinkmanship in Washington set retailers back on Tuesday — both on Wall Street and in Bali, where officials from 12 nations were working to complete a Trans-Pacific trade deal by yearend.

This story first appeared in the October 9, 2013 issue of WWD.  Subscribe Today.

The S&P 500 Retailing Industry Group suffered its worst drop since June, falling 2 percent, or 16.57 points, to 826.48 as the Dow Jones Industrial Average declined 1.1 percent, or 159.71 points, to 14,776.53. The Dow is now off more than 900 points since Sept. 18.

At a White House news conference, President Obama warned that a “very deep recession” could be in the offing if lawmakers allowed the country to default on its debts. The federal government has been partially shut down for eight days as some conservatives have pressed Obama for changes to his signature health care overhaul. Markets were largely taking the shutdown in stride, but investors are beginning to contemplate what would happen if Congress didn’t raise the debt ceiling.

The government is expected to run out of money by Oct. 17 without action by Congress. If that happened, the country might fall behind on its debt payments, sending a severe shock through the global economy, which depends on the reliability of Treasury debt.

“This is the credit worthiness of the United States that we’re talking about,” Obama said. “This is our word. This is our good name. This is real.”

Obama had to cancel a trip to Asia to deal with the impasse. He was scheduled to participate in the Asia-Pacific Economic Cooperation summit and the TPP leaders’ meeting in Bali, Indonesia, this week.

Obama said when he has to cancel trips abroad: “It sends a message to foreign leaders and governments that we don’t have our act together,” and lowers confidence in U.S. financial stability and hurts the reputation of the U.S. abroad.

Industry officials said the government shutdown and Obama’s absence at key meetings in Asia had slowed the pace of progress on outstanding textile issues in the trade talks.

Even so, the trade ministers negotiating the Trans-Pacific Partnership agreement said they are “on track” to complete the regional trade deal this year even though many sensitive issues, including apparel and textile rules of origin and market access, remain unresolved.

The U.S. is in talks with 11 countries — Vietnam, Canada, Mexico, Japan, Australia, Brunei, Chile, Malaysia, New Zealand, Peru and Singapore — on a TPP trade accord.

“Ministers and negotiators have made significant progress in recent months on all the legal texts and annexes on access to our respective goods, services, investment, financial services, government procurement and temporary entry markets,” the ministers said in a joint statement at the close of a high-level leaders’ meeting in Bali. “We have agreed that negotiators should now proceed to resolve all outstanding issues with the objective of completing this year a comprehensive and balanced regional agreement that achieves the goals we established in Honolulu in 2011, ensures the benefits of the agreement are fully shared and takes into account the diversity of our levels of development.”

The ministers said they have “made significant strides” in five “defining” areas of the agreement, including market access, a key area for retailers, brands and the domestic textile industry. The U.S. has proposed a yarn-forward rule of origin that requires apparel be made of fabric and yarns supplied by the U.S. or other TPP partner countries to qualify for duty-free benefits when shipped back to the U.S. Importers oppose the rule, but American textile producers claim they need it to compete. The U.S. has also proposed a short supply program that allows importers to use third-country fabric and yarns in apparel production if the U.S. determines they are not commercially available in the TPP member countries.

“[Obama’s absence] made it harder to achieve the goal set out for the APEC ministerial, which was to have the politicians resolve some of the key sticking points [in TPP],” said Nate Herman, vice president of international trade at the American Apparel & Footwear Association. “It would be very difficult for them to reach the type of agreement outlined in today’s announcement by the end of the year.”

Responding to a question on missing the APEC and TPP meetings, Obama said: “It didn’t help that I wasn’t there to make sure we were able to close a trade deal that would create jobs and open up markets to U.S. businesses and make sure that countries were trading fairly with us. I should have been there.”

The President said he didn’t think it would cause lasting damage, as long as the current political crisis is dealt with, but called it a “missed opportunity.

“We continue to be the one indispensable nation,” Obama said. “Countries admire our economy and our entrepreneurs…and our freedom of commerce…and they want us to be there and want to work with us.”

The President added that the U.S. is a driving force in organizing these meetings, “so it’s like we’re not showing up at our own party. I’m sure the Chinese don’t mind that I’m not there right now. On trade, for example…we’re trying to raise the standards for intellectual property rights,” which he said hasn’t always been a priority for the Chinese.

Obama noted that Secretary of State John Kerry attended the APEC and TPP meetings.

Herman said there was some expectation that negotiators would reach an agreement on the short supply process in Bali and then move forward on textile and apparel rules and market access.

Julia Hughes, president of the U.S. Association of Importers of Textiles and Apparel, said: “When the government reopens, I think there will certainly be an effort to move quickly to finalize [the short supply concept] part of the discussions so we can all move on to talk about the larger areas of importance — rules of origin, market access and enforcement language.”

Auggie Tantillo, president of the National Council of Textile Organizations, said: “We believe the U.S. government has been clear about a yarn-forward rule with the only exception being short supply and we want hold them to that.”