In 2015, the US and EU together exported $91bn worth of textiles and $136bn worth of apparel

In 2015, the US and EU together exported $91bn worth of textiles and $136bn worth of apparel

Over the past four years, the United States and the European Union (EU) have been negotiating the Trans-Atlantic Trade and Investment Partnership (TTIP or T-TIP) free trade agreement, which intends to unlock market access opportunities for businesses on both sides of the Atlantic through the elimination of trade and investment barriers as well as enhanced regulatory coherence. Here Dr Sheng Lu, assistant professor at the Department of Fashion and Apparel Studies at the University of Delaware, looks at what the pact might mean for the US and EU textile and apparel industries.

The textile and apparel (T&A) industries are critical stakeholders in the TTIP talks. In 2015, the US and EU together exported $91bn worth of textiles and $136bn worth of apparel, which accounted for a world export share of 31.2% and 30.7% respectively. Meanwhile, as much as $117bn worth of textiles and $294bn worth of apparel were imported by TTIP members in 2015, which accounted for a world import share of 40.5% and 64.8% respectively.

However, what does TTIP mean for the US and EU textile and apparel industries – and should they support TTIP based on their commercial interests? 

  • 1: The US and the EU are mutually important T&A trading partners

Specifically, the US was EU's largest extra-region export market for textiles and the EU's fifth-largest extra-region supplier of textiles in 2015. Meanwhile, the EU is one of the leading export markets for US-made technical textiles as well as an important source of high-end apparel products for US consumers.

Statistics from the Office of Textiles and Apparel (OTEXA) under the US Commerce Department confirm the pattern. In 2015, US T&A exports to the EU totalled $2,607.9m, of which 72.7% were textile products, such as specialty & industrial fabrics, felts & other non-woven fabrics and filament yarns. In comparison, the EU's T&A exports to the US totalled $4,294.5bn in 2015, among which textiles and apparel accounted for 48.4% and 51.6% respectively.

  • 2: Textiles and apparel 'Made in the USA' and 'Made in the EU' do NOT constitute a major competing relationship 

In the US, capital and technology intensive textile products have accounted for the majority of the output from the T&A industry, and very limited capacity of labour-intensive apparel manufacturing remains in the country. By 2012, only 12% of the total US fibre output in value was used for traditional apparel production purposes, whereas around 48% was used for producing technical textiles. Additionally, around 30% of textiles made in the US are exported and over 70% of them go to members of the North American Free Trade Agreement (NAFTA) and Central America Free Trade Agreement (CAFTA).

In Europe, Southern and Western European countries, which include most developed EU members such as Germany, France, and Italy, accounted for more than 76% of the EU's textile manufacturing in 2015. Compared with the US textile industry, however, the value of textile products used for apparel assembly purposes still accounted for 34% of the EU's total textile output in 2015, whereas the value of technical textiles accounted for around 27%.

Apparel manufacturing in the EU includes two primary categories: one is the production of low to medium-priced products for the mass market. With relatively abundant cheap labour, developing countries in Eastern and Southern Europe, such as Poland, Hungary, Romania and Portugal, are the primary suppliers of this type of apparel. The other category is the high-end luxury apparel made by developed EU members such as Italy, France and Germany.

Based on the state of the industry, overall it seems the US and EU T&A companies prioritise different markets. Technical textiles is one the few areas where the two sides may directly compete. However, compared with traditional yarns and fabrics for apparel-making purposes, technical textiles have a greater variety in usage, which allows US and EU companies to differentiate products and find each other's niche. Regarding apparel, because the US is no longer a major apparel producer, the EU's apparel exports to the US mostly fulfil US consumer demand for high-end luxury products.

  • 3: Results of a quantitative analysis based on the Global Trade Analysis Project (GTAP) model and the latest GTAP9 database show that the elimination of tariff and non-tariff barriers (NTB) under TTIP will create additional market access opportunities for the US and EU T&A industries 

Specifically, with a full elimination of existing tariff rates between TTIP members and a ten percentage saving of cost of trade as a result of NTB removal:

  • Annual US textile exports to the EU will increase by around $1,896m, and the EU's textile exports to the US will increase by around $3,430m. Since the US and EU textile industries continue to shift towards making more high-end technical textiles, the expanded US-EU intra-industry trade for textiles under TTIP will most likely benefit the technical textile sectors on both sides of the Atlantic.
  • Annual EU apparel exports to the US will increase by around $3,129m. Particularly, countries located in the Southern and Western EU, such as Italy, Germany and France, which concentrate on high-end luxury apparel production, will contribute over 80% of the EU's expanded apparel exports to the US. This suggests TTIP will substantially boost US consumer demand for EU-made high-end luxury apparel.

To sum up, TTIP overall means an exciting opportunity for the US and EU T&A industries. Despite Brexit and the rising anti-trade rhetoric in the Trump administration, it will be in the commercial interests of T&A companies on both sides of the Atlantic to continue to support the conclusion and implementation of the agreement.