Labour may limit Malaysia TPP apparel shipments
US imports of apparel from Malaysia are expected to increase under the Trans-Pacific Partnership (TPP) agreement – although gains would be smaller in absolute terms than those seen for Vietnam.
The forecast is included in a report by the US International Trade Commission (USITC) on the 'Trans-Pacific Partnership Agreement: Likely Impact on the US Economy and on Specific Industry Sectors'.
Malaysia is a smaller supplier of apparel to the US market, exporting products worth $546m in 2015. This compares with the $10.5bn in shipments from Vietnam, the second-largest apparel supplier to the US after China.
The USITC report released last week suggests the biggest challenge facing Malaysia in taking advantage of the potential trade deal is that the country's labour shortages may inhibit growth in production.
Malaysia's exports to the US would immediately benefit from TPP, as its key exports would be free of duty upon the pact's entry into force (EIF) staging category and/or qualify for "short supply" flexibilities, which allow the use of certain inputs used in textile and apparel products that are considered to be in short supply in the TPP countries.
Men's and boys' woven cotton dress shirts and sweaters of cotton or manmade fibre accounted for roughly one-half of US apparel imports from Malaysia in 2015.
Malaysia, along with Vietnam, would gain duty-free access to the US market for certain men's and boys' cotton dress shirts upon EIF, coupled with short supply flexibilities for fabric inputs.
In addition, Malaysia may have the potential to increase exports of other products, since it has a vertically integrated textile and apparel sector that is better positioned to meet the yarn-forward rules of origin (ROO).
One study found that the Malaysian textile industry could potentially realise gains from greater value chain integration with Vietnam, increasing textile exports to meet TPP ROOs.
The long-awaited USITC report on the likely impact of the Trans-Pacific Partnership (TPP) also offers a broader view on the likely impact on US apparel and textile trade.
It also suggests a shortfall in yarn and fabric production, ability to meet yarn-forward rules of origin, capacity constraints and related price effects could all weigh on its potential
Earlier this year a report from the World Bank Group said Vietnam and Malaysia would be among the biggest beneficiaries of the TPP free trade deal – but suggested there would also be a double-digit rise in Vietnam worker wages by 2030.
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