TPP countries urged to abandon yarn forward rule

The following is from the 18 September 2012 edition of American Shipper.

The latest round of Trans-Pacific Partnership negotiations, held earlier this month in Leesburg, Va., yielded progress on a number of contentious issues between the nine prospective member nations, but no deadline on for conclusion of the wide-ranging trade pact.

"We think there is momentum coming out of this meeting that gives us hope that we can move toward conclusion of the agreement," said chief U.S. negotiator for the talks Barbara Weisel, adding that 2013 would be a “pivotal year.”

Current nations involved in the negotiations, aside from the United States, are Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. Canada and Mexico will join in the next round of negotiations, set for Auckland in December, while it is hoped Japan will also join.

Meanwhile, a group of apparel, textile, and footwear importers has called on negotiators to abandon out-of-date apparel trade rules to promote and sustain apparel value chains that employ millions of American workers.

The group, dubbed the Trans-Pacific Partnership Apparel Coalition, met with negotiators during the Leesburg session to press their vision.

“A TPP agreement that preserves rigid and outdated apparel rules would almost certainly prevent U.S. agriculture exporters from gaining access to lucrative Asian markets, undermine the overall value of the TPP for American families, and deny many American industries the job creating growth that would otherwise result from a successful TPP,” said Sandy Kennedy, president of the Retail Industry Leaders Association, one of the organizations involved in the apparel coalition.

Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association, said the addition of Canada and Mexico may help TPP members better understand the negative ramifications of the so-called yarn-forward rule, which denies duty-free treatment for apparel unless it is almost entirely manufactured in the FTA country. Under the rule, if any component of the item—thread, yarn, elastic strips, or fabric—is sourced elsewhere, duties are applied on the entire garment.

“We welcome the inclusion of Canada and Mexico in the TPP as both countries will be able to provide first-hand knowledge of how the trade-restrictive and outdated yarn forward rule undermines the potential benefits of FTAs,” Burke said. “Flexible apparel rules that reflect the commercial realities of global value chains and stress the importance of market access will create jobs, trade and investment here in the United States."

Burke said the U.S. free trade agreement with Central America and the Dominican Republic (CAFTA-DR) demonstrates that yarn-forward does not promote trade, U.S. exports, or U.S. jobs.

“Inflexible rules on apparel trade, like yarn-forward, don’t work because they are not compatible with how business operates in the 21st century,” said Matt Shay, president and CEO of the National Retail Federation. “Without a more flexible approach, these rules will continue their record of failure in promoting new trade and investment, and will end up being a barrier to both U.S. imports and exports.”

The apparel coalition argued that more flexible rules on apparel imports could pave the way for greater access for U.S. agriculture exports in TPP nations, especially in Vietnam.

A letter sent to U.S. Trade Representative Ron Kirk and Secretary of Agriculture Tom Vilsack last week by 46 organizations representing U.S. agricultural interests said “Vietnam holds far and away the greatest market potential for the vast majority of U.S. food and agricultural products” and to “make every effort to ensure that the Vietnamese agricultural market is fully liberalized as part of a final agreement.”

Vietnam is unlikely to open its market to U.S. agricultural products without flexible apparel rules, the apparel coalition said. - Eric Johnson