There are still a lot of barriers before a TPP agreement emerges from negotiations and gets approved by all the necessary legislatures

There are still a lot of barriers before a TPP agreement emerges from negotiations and gets approved by all the necessary legislatures

A bipartisan package of bills introduced last week could pave the way for "fast track" negotiations on the Trans-Pacific Partnership (TPP). But there are still a lot of barriers before a TPP agreement emerges, believes Mike Flanagan – and it more than likely won’t be the deal US apparel importers have pushed for.

When America’s National Council of Textile Organizations (NCTO) endorses a plan intended to speed up agreement on a free trade deal, it’s not hard to guess what’s going to be in that plan. But will it work - and what will happen either way?

Last week (Republican) House of Representatives Ways and Means Committee chairman Paul Ryan and (Democrat) Senator Ron Wyden announced they’d agreed on a process – known as Trade Promotion Authority (TPA) – for the US Congress to approve trade deals such as the proposed Trans-Pacific Partnership (TPP).

The Bill they’re recommending says Congress should lay down broad objectives for US trade treaty negotiators. Once negotiators have agreed a deal with the other parties, Congress will then – subject to the fine print in the TPA rules – be required to accept or reject the whole agreement.

The TPP was first conceived in 2005. Intended to be wrapped up by 2012, it is still mired in negotiations. Its US supporters blame the delays on the other 11 signatory nations (especially Japan) avoiding concessions while there’s a threat the US Congress will demand even more concessions later. That’s what happened between 2007 and 2012 when Congress debated the free trade deal that negotiators had agreed with Korea.

The Bill sponsored by Ryan and Wyden was warmly received by many businesses. The usually anti-free trade NCTO liked it because it included an objective for US negotiators "to achieve fairer and more open conditions of trade in textiles and apparel. " Decoded: the TPP will require the US to give duty-free access only to garments made from yarn spun in a TPP member country.

US spinners think garment exporting TPP members like Vietnam will, without this restriction, prefer to import what NCTO believes to be unfairly cheap yarn from China.

Until recently, the independent Congressional Research Service was dubious the TPP benefited US textile manufacturers, repeatedly saying that "a TPP agreement could result in apparel made in Vietnam displacing apparel from the Western Hemisphere in the US market, weakening the export markets now served by US textile producers in Mexico and Central America."

The NCTO now seems a lot more confident the TPP can benefit its members. A year ago, Textiles World said plans for $4bn worth of new textile investment in the US had been reported over the previous 12 months. But they involved just 6,000 new jobs. At the time, the NCTO was boasting about "$17.7bn worth of investments between 2001 and 2011" – a period in which the US upstream textile industry lost 280,000 jobs.

Free trade deals losing their lustre
While most US garment and textile businesses applauded the Ryan/Wyden legislative proposals, America’s unions reflected widespread anger at the last 20 years’ job losses, which many blame on free trade deals.

The unions launched their campaign against TPA and TPP almost the moment the Ryan/Wyden Bill was announced. It is generally agreed that the US Senate will pass it: it’s very unclear the House of Representatives will. Even though the unions have few members these days, their case is popular with US voters, and even if the House doesn’t reject the Bill, there’s every likelihood it’ll keep delaying a decision until the end of 2016.

If either House fails to pass the Bill this year, TPP – already years behind schedule – may drift even further back. That wouldn’t be the worst either. Ryan and Wyden announced similar bipartisan agreement on other trade issues, including extensions:

  • To September 2025 of the AGOA duty-free programme for African countries;
  • From 2017 to 2025 of the "almost no strings" duty free programme for imports from Haiti;
  • To 2017 of America’s General System of Preferences, offering reduced or no import duty on many goods (though not apparel or textiles) from most developing countries.

If TPA doesn’t get approved, I suspect these three relatively uncontroversial agreements will get lost in a new outbreak of political acrimony. As the anger in the unions’ reaction to the Ryan/Wyden proposals showed, it’s not just politicians who are divided: most Americans (like many others around the world) are just tired of free trade.

If TPA does get passed, of course, it doesn’t follow that the TPP will be approved quickly:

  • America hasn’t got the only difficult legislature in the TPP group. It took Australia even longer than the US to approve the US-Australia Free Trade Agreement in 2004 – and even then, it didn’t accept the version US and Australian negotiators agreed.
  • Other partners are struggling to make concessions. Japan’s farmers and car makers are determined to stop Japan from doing what the US wants. Vietnam seems very reluctant, in both TPP negotiations and in similar talks on an EU-Vietnam Free Trade Agreement, to create the open markets both Europe and the US see as deal-breakers.
  • TPA doesn’t guarantee approval. The Ryan/Wyden agreement still allows Congress to strip a proposed deal of fast approval if Congress judges it doesn’t meet the agreed objectives. So TPP opponents will inevitably resume their opposition once negotiators publish their deal.

There are still a lot of barriers before a TPP agreement emerges from negotiations and gets approved by all the necessary legislatures. And there’s no guarantee it ever will.

And it won’t be the TPP that US apparel importers have pushed for. But:

  • By encouraging exports of US-spun yarn it will provide evidence free trade deals don’t just mean the US ends up importing more from the outside world.
  • It will encourage spinners and weavers worldwide to invest in Vietnam – where a mothballed investment by ITG’s Cone Denim is still a warning against big investments.
  • For TPP to materialise, the US has to be happy that Vietnam isn’t distorting its markets. Which will also make an EU-Vietnam FTA more likely.

I think the TPP will now be better for America and the free-trade cause than the one US retailers were chasing. But I still doubt it will be implemented this decade.

For more information on the measures included in the ‘Bipartisan Congressional Trade Priorities and Accountability Act of 2015’, click on the following link: US fashion industry applauds trade bills package.