If ever there was an issue set to divide apparel brands, retailers and textile companies, the Trans-Pacific Partnership trade pact is surely it. Described as the most significant negotiation for the US and its regional trade partners since the NAFTA agreement, the yarn forward rule of origin has emerged as one of the most divisive issues.

As the eighth round of the talks on the Trans-Pacific Partnership (TPP) concluded in Chicago last week, textile, apparel and footwear industry stakeholders all pitched in on how they believe the best interests of their sectors should be treated in any resulting trade deal.

While a campaign has been underway for some months now to negotiate strong textile and apparel rules into the pact, the past week has seen regional textile groups from Africa, South America and Central America also stepping into the fray.

The groups, who between them represent 25 countries and more than $30bn in textile trade with the US, are siding with their North American textile counterparts to call for a yarn-forward rule of origin in the textile chapter of the trade deal.

"If there is to be a TPP, the benefits accrued should go to the signatories rather than to countries that are not part of the agreement," claims Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition (AMTAC).

In contrast, a "single transformation" rule would not only drain potential jobs and investment from the TPP but it also would "cause the catastrophic loss of textile and apparel jobs in the United States and in its free trade partner countries," adds Cass Johnson, president of the National Council of Textile Organizations (NCTO).

As the name implies, the yarn-forward rule means that all stages of production, starting with yarn spinning, moving to fabric formation and the final garment assembly, must be done either in the United States or in a free-trade agreement (FTA) partner country to qualify for duty preferences.

If high value-added elements of the production chain take place outside of the FTA countries, textile groups claim, this lets third parties such as China take advantage of the agreement.

They also have an issue with the inclusion of Vietnam in the talks - which they believe will flood American markets with Vietnamese clothing made from Chinese yarns and fabrics. With shipments valued at $6.3bn, Vietnam is already the second largest exporter of apparel of the US and is also one of the fastest growing exporters, doubling its exports to the US over the last five years.

Multi-lateral trade group
Nine Pacific Rim nations are formally involved in the multi-lateral trade group, which seeks to cover the interests of the US, Vietnam, Brunei, Chile, New Zealand, Singapore, Australia, Malaysia and Peru.

Significantly, not only is the TPP the first regional agreement in which the US is participating in Asia, but its completion will also create one of the world's most important trading blocs. There are also plans for ambitious expansion beyond the current participants.

Groups representing apparel manufacturers, retailers, importers and brands, meanwhile, are seeking "thoughtful" textile and apparel policies that spur new trade and investment.

They have set up the Trans-Pacific Partnership (TPP) Apparel Coalition which believes "modern" textile and apparel rules can "sustain millions of jobs that rely on global value chains" - and plan to issue updates via a new online hub.

Their take on 'yarn-forward' style rules of origin is that they are both "outdated" and "unworkable," and say such an 'all or nothing' approach would not spur new US exports or new apparel trade or new investment in the textile and apparel sector.

Instead, job creation - which is one of the pact's main goals - does not just mean factory production but includes activities such as design, production, marketing, distribution, retail and customer support that take place in the US and TPP partner countries.

Their stance is being backed by Senator Ron Wyden, chairman of the Senate Finance Subcommittee on International Trade, who agrees: "The best [rules] for creating more high skilled, well-compensated American workers is one that promotes finished apparel production within the TPP community, and that is something the yarn-forward rule will not do."

Also stepping into the fray are US lawmakers who want to ensure that the TPP does not lead to lower duties on US footwear imports. Such a move, they claim, would undermine and possibly even spell the end for the American footwear industry, as well as opening it up to a flood of imports, especially from Vietnam.

As negotiators head towards the next and ninth stop in the talks, which is scheduled to take place at the end of next month in Lima, Peru, there will undoubtedly be more clashes between textile and apparel stakeholders.

But they say their concerns are justified as the US textile/apparel market is nearly five times larger than other TPP partners combined, with imports of over $95bn in 2010.