TPP and the garment industry – are there any winners?
The yarn-forward provisions of TPP have led to a surge in spinning, weaving and knitting investment
David Birnbaum is trying very hard to understand how the garment provisions of the Trans-Pacific Partnership (TTP) will affect US stakeholders. I can understand just who will fall into the loser column, he writes. The problem is finding anyone to place in the winner column.
Is it possible that the US Trade Representative (USTR) has spent over eight years negotiating an agreement where the US enjoys no benefit whatsoever? This is not an exercise in humour.
I would be grateful if anyone, having examined the TPP garment provisions, can point out the winners.
Here is my list:
The US domestic garment industry: Currently domestic production accounts for a pathetic 3% of US garment retail sales. I do not think anyone believes that offering free-trade status to yet another bunch of countries will help.
The US textile industry: As of 2015, NAFTA (the North American Free Trade Agreement) and DR-CAFTA (the Dominican Republic – Central America Free Trade Agreement) account for close to 70% of all US textile exports, and that dependency has been increasing each year since 2010. As of 2015, NAFTA and DR-CAFTA market share totalled an anaemic 14.7% of US garment imports and has been declining each year since 2011. Once again, I do not think anyone believes that offering free trade status to yet another bunch of countries will increase NAFTA/DR-CAFTA market share.
We are in the midst of greatest investment in spinning, weaving and knitting facilities since the quota phase-out, which is the direct result of the yarn-forward provisions defining country of origin for TPP.
In a real sense not only is the USTR forcing the global textile industry to invest in Vietnam, the USTR is subsidising those investments. The US is creating a cutting-edge textile industry in Vietnam, which will inevitably take market share from US textile exporters
The US consumer: Since FOB price accounts for between 10%-17% of retail price, duty-free imports will account for a relatively small reduction in retail prices, even assuming that importers pass on the cost reduction to the consumer.
ZERO: I welcome any suggestions because I cannot find any.
Historically the USTR has never lost an opportunity to lose an opportunity. Once again, TPP has lived up to expectations.
Early in the negotiations, I suggested that the USTR replace the yarn-forward requirements with a simple fibre-only requirement. TPP members would receive duty-free access regardless of where the fibre was spun, the yarn woven (or knitted) or the fabric dyed/printed/finished. The sole requirement would be that the initial fibre comes from a TPP country.
Almost everyone in TPP would benefit because TPP includes many of the world's largest wool, fine animal hair, synthetic and cotton producers. By far the biggest winner would be US cotton farmers. Not only would they have a guaranteed market, but they would even be able to charge a premium price. We live in a period where demand for synthetic and artificial fabrics is increasing at the expense of cotton, while at the same time cotton inventories are forcing cotton prices down.
Had USTR considered fibre-only rather than yarn-forward, people in the US would now be celebrating TPP rather than attacking it.
At the end of the day, the greatest losers once again have been the American people.
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