While details of the X-basket are still a secret, history hints at what products it might contain

While details of the X-basket are still a secret, history hints at what products it might contain

In the ongoing Trans-Pacific Partnership (TPP) negotiation, the United States has tabled a market access offer that seeks to protect the most "import sensitive" textile and apparel (T&A) products - also known as the "X-basket". But what is this likely to include? Dr Sheng Lu, assistant professor at the Department of Fashion and Apparel Studies at the University of Delaware, takes a guess.

According to some media reports, products in the X-basket will be subject to an initial duty reduction, but will then be shielded from further tariff reductions until their elimination between 10 and 15 years after the implementation of TPP. However, at this point, details of the X-basket are still being kept secret.

This article intends to make a wild guess of what might be included in the TPP X-basket. To do this, we need to first figure out what T&A products are regarded as "import sensitive" by US trade policymakers. Although the term "import sensitive" is never clearly defined in any existing trade agreements or regulations, history might offer some hints. Table 1 compiles products covered by three recent trade programmes:

  • US International Trade Commission (USITC) monitoring programme on T&A imports from China based on the US-China Textile Memorandum of Understanding (MOU) (2008 - present);
  • Office of Textiles and Apparel (OTEXA) monitoring programme on US T&A imports from Vietnam (2007-2008);
  • US textile safeguard measures against China (2003-2005).

Products covered by these three trade programmes can be treated as the big pool of "import sensitive" T&A and the likely candidate products for the TPP X-basket, for three reasons.

First, these three programmes were the only major US trade policy initiatives taken in response to T&A quota elimination in 2005. Second, these three programmes all intended to control the rise of T&A imports that were regarded as "sensitive" to the US domestic T&A manufacturing sector, especially in the post-quota era. Third, these three programmes specifically focused on China and Vietnam - which are also the main concerns in the TPP T&A sectoral negotiation and what the X-basket mechanism intends to address.

The "import sensitive" T&A products in Table 1 are further classified into three categories:

  • Category A: refers to products that are covered by all the three programmes;
  • Category B: refers to products that are covered by any two of the three programmes;
  • Category C: refers to products that are only covered by any one of the three programmes.

Understandably, Category A products (OTEXA Code 338, 339, 340, 345, 347, 348, 352, 447, 638, 639, 640, 645, 646, 647, 648 and 652) are the most "import sensitive" T&A to the United States, followed by Category B and Category C.

As further shown in Table 2 and Table 3, within these 47 categories of "import sensitive" T&A products to the United States, in terms of fibre type, most of them are either cotton or man-made fibre (MMF) products, whereas in terms of product type, majority of them are in the apparel category. In particular, 100% of Category A products are apparel products.

So, if the X-basket includes the "import sensitive" T&A products identified in Table 1, will it cover lots of trade volumes? As shown in Tables 4, 5 and 6 which were calculated based on data from the Office of Textiles and Apparel:

First, US import value of these "sensitive" T&A categories totalled $73bn in 2014, accounting for around 85% of total US apparel imports, 64% of fabric imports, 27% of yarn imports and 1% of made-up imports in that year. From 2008 to 2014, US import value of these "sensitive" T&A categories increased by 16%, a little faster than the 12% of other non-sensitive T&A categories.

Second, just looking at Vietnam, these "sensitive" T&A categories accounted for 75.2% of US imports of apparel, 91.1% of imports of fabric, 37.3% of imports of yarn and 1.7% of imports of made-ups from the country in 2014. This means:

  • By the most conservative estimation, i.e. the X-basket only covers Category A "import sensitive" apparel products, it will affect about 41.6% of US apparel imports from Vietnam (or 38.7% of total US T&A imports from Vietnam) if trade patterns remain the same as in 2014.
  • In the second worst case, i.e. the X-basket covers all "import sensitive" apparel products, it will affect about 75.2% of US apparel imports from Vietnam (or 67.8% of total US T&A imports from Vietnam) if trade patterns remain the same as in 2014.
  • In the worst case, i.e. the X-basket covers all "import sensitive" T&A products identified by this study, it will affect about 70.0% of total US T&A imports from Vietnam, if trade patterns remain the same as in 2014.

To conclude, it seems that "import sensitive" T&A in the United States mostly refers to cotton and man-made fibre apparel and fabrics. They are also the type of T&A products to be most likely included in the TPP X-basket. Furthermore, because Vietnam's T&A exports to the United States heavily concentrate on these "import sensitive" T&A categories, the X-basket has the potential to substantially affect the actual trade liberalisation that can be enjoyed by the T&A sector under TPP.