The Textile and Apparel Alliance for the TPP (TAAT) expressed deep appreciation to the 76 U.S. representatives who sent a letter to US Trade Representative (USTR) Ambassador Ron Kirk stressing the need for job-creating textile rules in the Trans-Pacific Partnership Agreement. Led by Reps. Gowdy (R-S.C.) and Kissell (D-N.C.), the signatories — many from Cotton Belt states — pledged to work with USTR to ensure a positive outcome for the textile and apparel chapter in the negotiations.
In a news release, TAAT spokesman and National Council of Textile Organizations President Cass Johnson said, "Members of Congress have sent a strong message that they want textile rules in the TPP agreement that support U.S. jobs, develop new export markets, increase opportunities for private investment and entrepreneurship, and reinforce strong trade ties with existing FTA partners."
(For more, see: Coalition pushing pro-job textile rules in TPP)
The TAAT coalition was formed in February after Vietnam, a TPP participant, proposed country-of-origin rules for textiles and apparel that are far weaker than those in current US free trade agreements (FTAs) and preference programs. The release stated that if adopted, the weak rules would allow Vietnam's state-owned enterprises (SOEs) to export textiles and apparel made from subsidized inputs produced by China's massive textile SOEs duty free to other TPP countries. The competitive advantage gained by Vietnam's SOEs would shift business to them at the expense of privately-owned and financed textile and apparel producers in the United States and elsewhere in the NAFTA, CAFTA and AGOA trade blocs, thereby harming potential for new textile and apparel export markets for US producers and those of FTA partners. Moreover, China, the largest textile and apparel exporter in the world and a country not participating in the TPP, would gain substantial new access to the US market without having to make trade concessions in return.
The TAAT coalition is supporting rules proposed by the US government which build on the free trade agreements that have been negotiated over the past 25 years. These include the "yarn forward" rule of origin, responsible market access provisions, and strong customs rules and enforcement. A yarn-forward rule of origin means that all yarn, fabric, and assembly production stages must be done in a TPP country for a textile or apparel product to be eligible for duty-free treatment, unless an exception applies. The US government has also insisted that the TPP agreement ensure "that state-owned enterprises compete fairly with private companies and do not distort competition in ways that put U.S. companies and workers at a disadvantage."
Johnson noted that the TPP will be the most significant US trade agreement since the negotiation of China's 2001 accession to the World Trade Organization, if approved by Congress. In part, this is because the agreement is a 'plug and play' where other countries that wish to negotiate an FTA with the US will plug into the agreement and agree to its existing rules.
In addition to Vietnam, the TPP agreement also includes Chile, New Zealand, Singapore, Brunei, Australia, Peru and Malaysia. Vietnam, a non-market economy, exported $7.2 billion in textiles and apparel to the United States in 2011, making it America's second largest supplier of those products. The Vietnamese government both owns and subsidizes textile and apparel production. Vinatex, Vietnam's state-owned textile and apparel conglomerate, is one of the largest garment producers in the world. In addition, Vietnam depends on China for much of its yarns and fabrics, importing $4.4 billion of textile components from that country in 2010.
The TAAT coalition includes textile and apparel associations from the United States and 26 other free trade and trade preference countries. Coalition members represent nearly two million workers in the textile, apparel, and fiber production sectors, thousands of privately owned factories, and nearly $25 billion in two-way textile and apparel trade.
The next round of TPP negotiations is scheduled for May 8–18 in Dallas. The NCC, meanwhile, sent a letter to Ambassador Kirk asking him to discuss the cotton contract defaults in Peru and Vietnam during that round. The NCC noted that textile mills in those countries have defaulted on millions of dollars of raw cotton contracts that resulted in severe economic losses for US cotton merchants and marketing cooperatives.
"The U.S. government should carefully consider allowing preferential trade provisions for countries whose corporations willfully ignore commercial commitments," NCC President/CEO Mark Lange said. "Contract sanctity is a fundamental building block of trade relations and widespread disregard of the principle should sound a loud warning to the extension of trade preferences."
Regarding the Congressional Members’ letter to Kirk, Lange noted that the NCC has consistently pursued a yarn forward rule of origin for textile and apparel products. He said this rule was adopted in the several hemispheric trade agreements during the past 15 years. The goal was to stem the losses in the US cotton spinning industry, as textile import quotas were phased out beginning in 1995 and China was granted full accession rights to the World Trade Organization in 2001.
Lange said the yarn forward rule encouraged the formation of textile and apparel manufacturing facilities across C. America and Caribbean regions creating several hundred thousand hemispheric jobs as the US spinning industry adjusted to the onslaught of Chinese products in the US domestic market. He noted that since 2001, Cotton Council International has successfully promoted the export of US cotton yarns and fabrics through the COTTON USA Sourcing Program. For example, in 2011, the program led to US exports valued at more than $30 million in the W. Hemisphere, where the Sourcing Program and US industry participants have benefited from proximity and FTAs.
"The U.S. and hemispheric textile and apparel investment, jobs and trade relations will be severely damaged if the trade preferences created by the yarn forward rule of origin are undermined in wider trade agreements," Lange stated.