AAFA Exec: With the TPP, 'We Are Not in Kansas Anymore'

Last week, American Apparel and Footwear Association participated as a stakeholder in the 11th round of the Trans-Pacific Partnership talks that took place in Melbourne, Australia (which the locals call OZ).

It was the third round of TPP talks we’ve had a chance to attend. Last year we participated in rounds in Ho Chi Minh City and in Chicago. AAFA will also continue to participate in future rounds.

Negotiators are trying to trying to hammer out a trade agreement that will bring together Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States, and Vietnam into a single free trade agreement. Already-identified additional partners include Canada, Japan, and Mexico, but future aspirants include Korea, Thailand, and the Philippines. It is intended to be a 21st century trade agreement. Given the ambitious agenda and goals, it hopefully won’t take the entire 21st century to negotiate. If done correctly, the TPP will present incredible opportunities for U.S. textile, apparel, and footwear companies to open up new markets and sourcing venues that will generate trade (both exports and imports), investment, and jobs.

It is with this in mind that we were puzzled and disappointed to see several trade associations urge negotiators to adopt restrictive rules of origin for apparel. The so-called Textile and Apparel Alliance for TPP sent a letter last month to USTR Ambassador Ron Kirk opposing provisions that will help the TPP create new trade and investment flows or the jobs that come with them.The letter urged support for restrictive yarn forward rules of origin to diminish any possibility that the TPP will lead to more trade and investment.

Whether by design or accident, the letter reinforces the view that restrictive rules of origin in apparel do not create trade and investment, undermining an argument that has been advanced at the negotiating table. Of course, AAFA and the TPP Apparel Coalition, have made the point repeatedly for the past year that complex global supply chains, and the millions of U.S. jobs they generate, demand fresh approaches in future FTAs. The data show that apparel companies shy away from FTAs that feature yarn forward rules. Imports of apparel under such FTAs have dropped markedly over the decade, even though the number of these FTAs have increased. A similar story is told on the export side as yarn and fabric exports to the four TPP partners with whom we have FTAs (using a yarn forward rule of origin) have remained static while exports to the quintessential non-FTA country – China – have climbed dramatically. When we unravel the truth behind yarn forward, we find that it does not create the trade, investment, and jobs that a 21st century TPP hopes to promote.

We understand the letter is motivated by fear of competition, but we also know that competition, combined with access to global supply chains, make our industry thrive. We are also aware that many of the countries that signed on to that letter also enjoy access to the very provisions – the ability to gain preferential access regardless of the source of the inputs – they themselves oppose in the TPP.

Negotiators and policy makers have to balance many interests when they forge trade and economic policies. As they complete this task with respect to the TPP, we hope they will adopt an approach that takes us into the 21st century, and which is designed to promote economic growth and U.S. jobs by encouraging trade.

Steve Lamar is executive vice president, American Apparel and Footwear Association.
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