WASHINGTON — The U.S. is pursuing an ambitious trade agenda this year and trade negotiators will juggle a spate of bilateral initiatives while simultaneously moving forward with regional and global trade talks.
For many of the big apparel-producing countries entering into negotiations with the U.S., trade pacts are seen as essential to developing and preserving industries that will face stiff competition from China when global quotas are removed in 2005.
First up for Congressional debate are trade pacts with Chile and Singapore. U.S. Trade Representative Robert Zoellick has said his goal is to have those trade agreements passed by the end of the year and in effect on Jan. 1, 2004.
Republicans have the majority in the Senate and House, which could make passage of the deals easier, although trade votes are traditionally very close and a slow economy could increase opposition to the pacts.
Meanwhile, the Bush administration is forging ahead with several other negotiations. In January alone, the U.S. launched trade negotiations with five Central American countries as well as talks with Morocco, both of which it hopes to complete by the end of the year.
The Bush administration also plans to negotiate a free-trade agreement with the five nations of the Southern African Customs Union early this year as well as an FTA with Australia and complete those by the end of the year. The U.S. is also involved this year in ongoing multilateral trade negotiations between 144 World Trade Organization member nations and regional trade talks with 34 Western Hemisphere countries, attempting to create a Free Trade Area of the Americas.
Deals that come up next year will face the additional political pressures of a presidential election. In an election year, passage of trade legislation and deals becomes more difficult. With a slow economy, new trade deals are sure to trigger fireworks.
Below, a list of the most prominent trade deals the administration currently has in the works:
CHILE: Congress is expected to vote on a U.S.-Chile FTA later this year and the rest of Latin America is watching its progress carefully. The U.S. claims the deal will be a template for free-trade negotiations with five Central American countries. Chile is a small supplier of apparel and textiles to the U.S. For the year ended Nov. 30, imports of textiles and apparel totaled 3 million square meters equivalent, split almost evenly between apparel and textiles. The trade pact contains a yarn-forward rule of origin, which requires textiles and apparel to be made of yarn and fabric sourced within the free-trade area, but the agreement allows some exceptions. Under the terms of the tariff-preference level provisions, 2 million SME of cotton and man-made fiber from anywhere in the world can be used in apparel produced in Chile for 10 years and still receive U.S. duty breaks. After 10 years, the amount of apparel made with fabric and yarns from third countries and receiving duty breaks will be reduced to 1 million SME. In addition, Chile can send 1 million SME of cotton and man-made fiber fabric made with yarns from anywhere in the world to the U.S. and receive duty breaks. Duties on all items subject to TPLs, as well as apparel made of American or Chilean yarn and fabric will be eliminated immediately upon implementation of the agreement.
VIETNAM: The U.S. plans to initiate negotiations on a bilateral textile and apparel agreement with Vietnam on Feb. 17. David Spooner, special textile negotiator at the Office of the U.S. Trade Representative, will lead the delegation to Vietnam along with Jim Leonard, Deputy Assistant Secretary of Commerce. Imports of apparel and textiles from Vietnam surged 867 percent over the past year, to 308.2 million SME. U.S. trade negotiators will negotiate with Vietnam to set quota limits on categories that have been deemed to cause market disruption and damage to the domestic industry. Most observers are expecting a heated fight between importers, who are seeking to keep cotton tops and trousers quota-free, and the domestic textile industry, which is seeking quotas on all cotton and man-made-fiber knit shirt imports.
SINGAPORE: Congress is also expected to take up the U.S.-Singapore FTA later this year. Singapore shipped 67.5 million SME of textiles and apparel to the U.S. in the most recent year for which data is available. The Singapore deal also includes a yarn-forward rule of origin and TPLs. Under the TPLs, 25 million SME of cotton and man-made fiber fabric from anywhere in the world can be used in apparel production in Singapore in the first year. But that 25 million SME will be phased out in equal increments over eight years. In addition, duties on the 25 million SME will be phased out over five of the eight years so that in the first year, duties on apparel entering the U.S. made of third-country components will be reduced to 80 percent. On the fifth year, these goods will be able to enter the U.S. duty-free.
MOROCCO: Importers and the domestic textile industry are lining up on opposing sides on rules of origin and TPLs in these recently launched talks. Morocco, located in Northern Africa between Algeria and Western Sahara, has a well-developed textile industry, which exports primarily to the European Union. It shipped 17.8 million SME of textiles and apparel to the U.S. in the past year. One arm of the U.S. textile industry plans to angle for strict rules of origin, a textile safeguard mechanism and no allowances for fabric or yarns sourced outside of the U.S. or Morocco. U.S. importers want liberal rules of origin, which would allow the use of fabric and yarns from around the world, as well as links to the free-trade agreements the U.S. has with Israel and Jordan.
AUSTRALIA: A free-trade agreement with Australia, a key U.S. ally, seems likely but agricultural issues could make negotiations very difficult. Talks on a trade pact with Australia could get under way this month but the tension has already risen over agriculture. Zoellick has pointed to the U.S. industry’s concern about Australia’s use of sanitary measures as a means of restricting trade while Australian Prime Minister John Howard has called American farmers “pampered” and highly protected and a main obstacle to a deal. In the past year, Australia shipped 97.3 million SME of textiles and apparel to the U.S.
SOUTHERN AFRICAN CUSTOMS UNION: The U.S. will also begin negotiations this year with the five member nations of the SACU: South Africa, Botswana, Lesotho, Namibia and Swaziland. These five nations already enjoy textile and apparel breaks under the African Growth & Opportunity Act and in the past year shipped more than 180.8 million SME of textiles and apparel to the U.S. Under AGOA the greatest growth has come in the lesser-developed countries other than South Africa, as a result of a provision in the law that allows those nations to import fabrics from elsewhere in the world — primarily Asia — and still enjoy special treatment. But the LDC provision is set to expire at the end of 2004 and it is still not clear whether the U.S. will attempt to extend those benefits. Potential obstacles in an FTA between the SACU nations and the U.S. include agricultural and intellectual-property issues.