WASHINGTON — As the eighth round of the Trans-Pacific Partnership trade negotiations in Chicago gets under way on Thursday, apparel brands, retailers and domestic textile companies are descending on the Windy City to lobby negotiators on the critical textile rule of origin and other issues.
The industry has a lot at stake in the TPP negotiations, which encompass nine countries: the U.S., Vietnam, Singapore, Australia, Peru, Brunei, New Zealand, Chile and Malaysia. While several of the countries serve as apparel production hubs, the industry has its sights set on Vietnam in these negotiations. The second largest apparel supplier to the U.S., Vietnam has become a major apparel sourcing alternative to China, which has been battling rising labor, raw material and transportation costs.
The central component of the negotiations for the fashion industry is a textile rule of origin, which determines how apparel made in the countries can receive duty-free benefits. Other important outstanding issues include whether the agreement will allow “cumulation,” linking the TPP with other countries that have free trade agreements with the nine countries; a “short supply” process 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 country, and a tariff phaseout schedule for sensitive imported products.
A U.S. trade official, who spoke on the condition of anonymity, confirmed the U.S. has proposed a yarn forward rule of origin to the other eight countries. Under the rule, apparel must be made of fabric and yarn supplied by the U.S. or other TPP partner countries in order to be eligible for duty-free treatment. The trade official added that U.S. negotiators would also consider more “flexibilities” in the rule based on ideas proposed by importers.
It was unclear whether each of the other eight countries will offer separate textile rules of origin proposals, offer them as a bloc, or work from the U.S. proposal.
Gail Strickler, assistant U.S. Trade Representative for textiles, will head up the textile negotiations in Chicago, which conclude on Sept. 15. The debate has pitted apparel importers against the U.S. textile industry, and companies and trade groups from both sides have lined up to participate in a day-long stakeholder meeting on Saturday at the Hilton Chicago, where they will present their positions to what is expected to be a standing-room-only audience.
Among industry executives scheduled to speak are Anderson Warlick, president and chief executive officer at Parkdale Mills Inc.; Bill Jasper, president and ceo at Unifi Inc., Toni Dembski-Brandl, senior council for Target Corp.; Jerry Cook, vice president of government and trade relations at Hanesbrands Inc., and Carlos Arias, president of Guatemala-based Denimatrix. Trade and lobbying groups are also slated to speak, including executives from the American Apparel & Footwear Association, American Manufacturing Trade Action Coalition, National Council of Textile Organizations, African Cotton & Textile Industries Federation, The Hosiery Association, the Footwear Distributors & Retailers of America and the Vietnam Textile & Apparel Association.
The domestic textile industry is advocating a yarn forward rule of origin with no exceptions, but importers plan to push for a “flexible” rule that does not restrict where the fabric and yarns are made in order to qualify for duty-free benefits.
“We are not interested in talking about exceptions and loopholes,” said Auggie Tantillo, executive director of AMTAC, who is slated to speak on Saturday. “It’s not like we are doing an agreement with Uruguay [an insignificant apparel supplier to the U.S.]. We are doing an agreement with eight other countries, many of which are significant textile producers themselves, in addition to being apparel producers.”
Stephen Lamar, executive vice president at the AAFA, said a yarn forward rule will not help develop trade flows.
“It is an all-or-nothing approach that is very difficult for companies in the global supply chain,” said Lamar. “It is a disincentive to developing the kinds of investments both for apparel and textiles that you want to see grow throughout the U.S. and the region.”