Q&A: Francisco Sanchez, Undersecretary of International Trade

The implementation of President Obama’s National Export Initiative, which seeks to double the amount of U.S. exports by 2015, is a top priority.

Francisco Sanchez

As undersecretary of international trade at the U.S. Commerce Department, Francisco Sanchez lists as one of his top priorities the implementation of President Obama’s National Export Initiative that seeks to double the amount of U.S. exports by 2015. Here, he discusses the importance of sourcing in the Western Hemisphere, the MAGIC Sourcing in the Americas Summit, and the role textile and apparel companies play in making the region a number-one platform for apparel production and market for U.S. textile exports.

This story first appeared in the August 9, 2011 issue of WWD.  Subscribe Today.

How does the President’s NEI dovetail with the Sourcing in Americas Summit at MAGIC?
If we focus in on the textile market, 60 percent of all textiles are exported within the Western Hemisphere, most of that going to NAFTA [North American Free Trade Agreement] and CAFTA [Central American Free Trade Agreement] countries. So this hemisphere is important to us generally and it is very important to us within the context of the textile industry. Then add to this another strategy that I believe very strongly in, which is supply chain integration within the Western Hemisphere to make us more competitive vis-à-vis other parts of the world.

[A lot of] textile products go south and then you see a lot of products coming back in as finished goods here, but my dream would be that, particularly through this summit and this showcase, we are going to have…in Las Vegas, we can show that you can source a whole wide range of products in the Western Hemisphere and it doesn’t have to just be for the U.S. market. Hopefully, this can broaden and you can source here, certainly for the U.S. market, using U.S. content. But you can source here and be competitive for other parts of the world, as well.

Most of what we export to Central America and Mexico [in the textile and apparel sector] is piece goods to be assembled there [into finished garments]. Is part of the overall vision or dream to boost exports of finished products to these markets as well?
Sure, the answer is yes, but I would also envision perhaps selling to Europe. It isn’t just necessarily selling back and forth within the Western Hemisphere, but perhaps to be competitive with other parts of the world. Though, I would say we already do well. We have been seeing increased activity in the Western Hemisphere in the sale of our yarn and the sale of our textiles. Again, to borrow from the aerospace industry, by and large we don’t make a lot of regional airplanes here. Those are made by Bombardier Inc., a Canadian aircraft manufacturer, and Embraer, a Brazilian aircraft manufacturer, and they in turn sell back into our market, but they do so with 60 to 70 percent U.S. content. I like the fact we’ve seen in 2010 a more than 30 percent increase in sales of U.S. textiles to our partners in the NAFTA and CAFTA countries, in particular. Nicaragua is a good example — 51 percent of their trade with us is in the apparel market, using largely U.S. content.

Can you address one other sensitive issue that the textile industry has raised in this context: a yarn forward rule of origin? They believe CAFTA has been a big benefit and boost for the business. But they also argue that giving Vietnam, for example, a liberal textile rule of origin (in the context of the Trans-Pacific Partnership negotiations) might undermine their benefits in this region. What kind of balancing act is that for you, so that you don’t erode preferences in one agreement when you negotiate a new agreement? I know part of the NEI is passing three trade agreements that are pending. How do you balance it?
I think as we look to open markets — and certainly free trade agreements help us do that — we have to make sure we’re creating a level playing field. At the end of the day, free trade agreements bring tariffs down to either very low or eventually down to zero. The idea behind these trade agreements is not only in tariffs, but also historically in nontariff barriers to create level playing fields for both countries. As we do that, we want to make sure we are doing it in a way that is fair and that our industry can compete fairly. I think that will be a guiding principle for us as we go forward, whether it is with Vietnam or any other country.

Do you feel you can achieve the goal of doubling exports without passing the three FTAs (with Colombia, Panama and South Korea, which have stalled in Congress)?
I believe they will be passed because I think the President and the business community together have made the case for passing those three agreements. Take South Korea, for example. Independent studies have concluded we’ll increase exports by $11 billion and that we will create some 70,000 high-paying jobs. Export-related jobs tend to pay between 15 and 18 percent more than the national average wage. Here you have a free trade agreement that will generate billions more in exports and thereby support thousands more high-paying jobs.…I am optimistic that we’ll see a package that includes the three trade agreements as well as a [Trade Adjustment Assistance] package. [TAA is a government-funded program that offers retraining programs for workers who lose their jobs because of import competition.]