As renegotiations of the North American Free Trade Agreement continue, U.S. textile companies are hoping to be rid of a “loophole” affecting the import of raw materials.
In a letter to Senators Orrin Hatch (R.,Utah) and Ron Wyden (D., Ore.) of the Senate Committee on Finance, and Congressmen Kevin Brady (R., Tex.) and Richard Neal (D., Mass.), of the House Ways and Means Committee, the National Council of Textile Organizations and the National Cotton Council, along with several other manufacturing groups, pushed for and end to the tariff preference levels embedded in NAFTA.
Citing reports that the possible elimination of TPLs was discussed during the most recent round of renegotiation talks in Ottawa between representatives of the U.S., Canada and Mexico, the groups said they “strongly support” putting an end to the TPLs.
TPLs allow “key” raw materials to be sourced outside of NAFTA countries and exported at preferential rates, but the government has so far refused to confirm which areas of the deal are being discussed.
“TPLs were an ill-conceived mechanism that cost the U.S. thousands of textile and apparel jobs in the early years of NAFTA and to this day deny U.S. textile manufactures hundreds of millions of dollars in annual sales to our NAFTA partner countries,” the NCTO and the NCC wrote in the letter.
The likelihood of the TPLs being removed is “anybody’s guess,” Augustine Tantillo, president and chief executive officer of the NCTO, said, but the opportunity presented by the renegotiations is one he’s been waiting for.
“For 22 years, we’ve had to live under this ridiculous, one-sided concession, and now we have a chance to fix it and we’re really quite anxious for the U.S. government to do way with it,” Tantillo said.
The groups went on to characterize TPLs as a “blanket exception to the yarn-forward origin rule,” a NAFTA provision requiring yarn used to form a fabric to originate from a NAFTA country, and a “loophole” that allows duty-free shipping within NAFTA countries, even when textiles are imported from abroad.
The equivalent of more than 235 million square meters of apparel, fabric and textiles originating from abroad is shipped to the U.S. duty free every year, according to the letter, along with 13 million kilograms of cotton and yarns. In 2015, the U.S. received apparel and textiles worth an estimated $725 million.
“These and other loopholes unnecessarily drive textile production and employment out of the NAFTA region and should be eliminated,” the groups wrote. “Importers and retailers need no further incentive to disenfranchise U.S. products and workers in favor of textile components from Asia that are often artificially priced due to substandard labor practices, substandard environmental practices, rampant intellectual property violations and state sponsored subsidies.”
The NCTO, NCC and other manufacturing groups could be waging a losing battle, as representatives from Mexico and Canada have been open about their desire to keep the TPLs as they are.
But the negotiations are still very much in flux and Secretary of Commerce Wilbur Ross, a former banker best known for buying bankrupt companies and selling them at a profit, seems focused on increasing the level of NAFTA-sourced parts in manufactured products.
In a recent op-ed in the Washington Post, Ross While Ross argued that the amount of U.S. parts in “manufactured goods in general” imported from Mexico and Canada has dropped “significantly,” citing a new study by the U.S. Department of Commerce, which he heads.
Ross also said the trade deal as it currently stands is “killing” U.S. jobs, a tone President Donald Trump often took during his campaign when he called for the U.S. to withdraw from the deal entirely.
Since taking office however, Trump has instead chosen to renegotiate the terms of NAFTA, something groups like the National Retail Federation readily supported, so long as the deal remains in place.
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