The latest monthly round-up of updates to key free trade agreements and trade preference programmes involving the EU, US and Japan covers developments in September 2019. Trade agreements, rules of origin, tariffs and schedules are all covered in depth in the re:source by just-style strategic planning tool.

UNITED STATES

US-Japan Free Trade Agreement
On 25 September 2019, the United States and Japan reached a limited trade deal regarding tariff reduction for certain agriculture and industrial goods and digital trade. While the official text of the agreement is yet to be released, a fact-sheet prepared by the Office of the US Trade Representative (USTR) says it will provide "staged tariff elimination for products such as cheeses, processed pork, poultry, beef offal, ethanol, wine, frozen potatoes, oranges, fresh cherries, egg products, and tomato paste." The United States also will reduce or eliminate tariffs on certain industrial goods from Japan, such as certain machine tools, fasteners, steam turbines, bicycles, bicycle parts, and musical instruments.

The fact-sheet doesn't mention whether the tariff cut will include textiles and apparel. The chance is low, however, as these products are regarded as "import sensitive" in the United States.

Should the US-Japan trade deal remove tariffs on textiles and apparel traded between the two countries, the overall economic impact on related trade flows could be modest. Data shows that in 2018 the US imported US$656m in textiles and US$88m in apparel from Japan, accounting for 2.1% and 0.1% of total US textile and apparel imports that year respectively. Meanwhile, in 2018 Japan imported around US$353m in textiles and US$121m in apparel from the US, accounting for 3.7% and 0.4% of Japan's total textile and apparel imports that year. In comparison, over 70% of US textile and apparel exports went to the western hemisphere, while the US mostly imported textiles and apparel from members of NAFTA and DR-CAFTA and other Asian countries (such as China and Vietnam). Likewise, Japan also has a much closer trade tie with countries in Asia because of regional textile and apparel trade patterns.

It remains unclear when the limited trade deal will take effect. However, the Trump administration plans to utilise Section 103(a) of the 2015 Trade Promotion Authority law, which allows the president to modify tariffs WITHOUT congressional approval.

On the other hand, Japan and the United States will continue to negotiate a more comprehensive free trade agreement (USJTA) as announced in December 2018.

African Growth and Opportunity Act (AGOA)
On 19 September 2019, the Committee for the Implementation of Textile Agreements (CITA) released the new quota level that applies to the special apparel rule for lesser-developed countries under the African Growth and Opportunity Act (AGOA). During the period of 1 October 2019 to 30 September 2020:

  • Apparel exports to the US from qualified AGOA members that use sub-Saharan African (regional) yarns and fabrics are limited to 2,146,573,294  square metres equivalent (SME). [Note: this refers to the regional cap, which is no higher than 7% of all apparel articles imported into the United States in the preceding 12-month period.]
  • Apparel exports to the US from qualified AGOA members that use fabric originating anywhere in the world are limited to 1,073,286,647 square metres equivalent (SME). [Note: this refers to the "third-country" fabric provision; usually, the quota level is no higher than 3.5 percent of all apparel articles imported into the United States in the preceding 12-month period.]

EU-US trade tensions

The World Trade Organization (WTO) is expected to finalise its ruling regarding a 15-year old trade dispute between the United States and the EU on aircraft subsidies on 30 September 2019. If approved, the United States will be authorised to impose retaliatory tariffs on around $7.5bn of imports from EU annually. In early 2020, the WTO may also authorise the EU to impose its retaliatory tariffs on a certain amount of US imports.

In April and July 2019, the Office of the US Trade Representative (USTR) released two lists of EU products on which it may consider imposing retaliatory tariffs. Some EU apparel items are on the list.

  • List 1 (released in April 2019) 
  • List 2 (released in July 2019)

JAPAN

Regional Comprehensive and Economic Partnership (RCEP)
The 28th round of the RCEP negotiations took place in Danang, Vietnam from 19-27 September 2019. In this round, the talks focused on trade in goods, trade in services, rules of origin, intellectual property and e-commerce. According to the media, the RCEP negotiation is reaching its final stage. The negotiating parties are working with India to solve its concern about a potential surge in the trade deficit with China. It is still hoped that the RCEP negotiation may conclude in late 2019 or early 2020.