View all newsletters
Receive our newsletter – data, insights and analysis delivered to you
  1. News
May 25, 2022

How the Indo-Pacific Economic Framework impacts apparel

US apparel trade bodies have welcomed the launch of a new Indo-Pacific Economic Framework (IPEF) but say there should be a tariff negotiation component, particularly for goods such as clothing and footwear.

By Beth Wright

US President Joe Biden launched the Indo-Pacific Economic Framework for Prosperity (IPEF) in Tokyo, Japan, earlier this week with a dozen initial partners: Australia, Brunei, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. Together, the partners represent 40% of world GDP.  

The White House says the Indo-Pacific Economic Framework for Prosperity will strengthen US ties in the region to “define the coming decades for technological innovation and the global economy.”

Specifically, the framework will focus on four key pillars:

  • Connected economy: On trade, we will engage comprehensively with our partners on a wide range of issues. We will pursue high-standard rules of the road in the digital economy, including standards on cross-border data flows and data localisation. We will work with our partners to seize opportunities and address concerns in the digital economy, in order to ensure small and medium-sized enterprises can benefit from the region’s rapidly growing e-commerce sector, while addressing issues such as online privacy and discriminatory and unethical use of Artificial Intelligence. We will also seek strong labour and environment standards and corporate accountability provisions that promote a race to the top for workers through trade. 
  • Resilient economy: We will seek first-of-their-kind supply chain commitments that better anticipate and prevent disruptions in supply chains to create a more resilient economy and guard against price spikes that increase costs for American families. We intend to do this by establishing an early warning system, mapping critical mineral supply chains, improving traceability in key sectors, and coordinating on diversification efforts.
  • Clean economy: We will seek first-of-their-kind commitments on clean energy, decarbonisation, and infrastructure that promote good-paying jobs. We will pursue concrete, high-ambition targets that will accelerate efforts to tackle the climate crisis, including in the areas of renewable energy, carbon removal, energy efficiency standards, and new measures to combat methane emissions. 
  • Fair economy: We will seek commitments to enact and enforce effective tax, anti-money laundering, and anti-bribery regimes that are in line with our existing multilateral obligations to promote a fair economy. These will include provisions on the exchange of tax information, criminalisation of bribery in accordance with UN standards, and effective implementation of beneficial ownership recommendations to strengthen our efforts to crack down on corruption.

IPEF has received support from US apparel trade bodies, with both the United States Fashion Industry Association (USFIA) and the American Apparel and Footwear Association (AAFA) submitting comments with the United States Trade Representative (USTR) about the Administration’s negotiating objectives in advance of this week’s launch.

Apparel sector reaction to The Indo-Pacific Economic Framework for Prosperity

Julia Hughes, USFIA president, told Just Style the key points are that the organisation supports more engagement with the Indo-Pacific countries and supports a fresh approach to the region. 

“We emphasise that we believe that there should be a tariff negotiation component to the Framework, especially for products like apparel and footwear that are still burdened with high tariffs,” she said, adding it also supports the development of joint policies to eliminate forced labour in supply chains.

USFIA says in its comments to USTR: “USFIA would be remiss if we did not convey that import taxes such as tariffs are the primary obstacle to the creation of fair and resilient supply chains in the region. Any agreement that fails to lower tariffs on clothing will represent a missed opportunity to create a more equitable trading system.”

Meanwhile, the AAFA’s senior vice president of policy, Nate Herman, told Just Style: “The proposed IPEF is a small first step. It offers the potential to reengage with our allies in that part of the world. At the same time, it shows the danger of the US not fully executing important trade agreements. Partial engagement and half measures are not the path to long-term success.”

In its own comments to USTR, the AAFA said its members welcome the development of a new IPEF but noted for trade agreements to work well and benefit all the parties, they must be comprehensive and reciprocal.

“We understand the Biden Administration’s stated position that the framework will not include market access through tariff liberalisations, however, lower tariffs benefit US stakeholders. For instance, 98% of apparel, footwear, and related goods sold in the United States today are imported. Yet the US still maintains high duties on these products – some of the highest we levy on any products – adversely affecting US consumers who ultimately pay those duties in the form of higher prices. When trade agreements reduce those duties, US consumers benefit, particularly those at the lowest end of the income scale.

“Lower US duties also enable investment in US job creation and investment in US innovation in the US global value chains that fuel our industry. At the same, we note there are sensitive subsectors in our industry – such as certain footwear lines where there is domestic production – that may require separate handling as a result of those sensitivities.

“Our strong recommendation is that any lengthy tariff phase-outs that reflect those sensitivities be tailored so they affect just those products, and not impose border taxes unnecessarily on products that do not require special treatment.”

AAFA also recommends the Indo-Pacific Economic Framework for Prosperity (IPEF) incorporates less restrictive rules of origin requirements if they are to be fully utilised.

“Restrictive rules of origin for apparel and footwear have usually meant that the economic and political assumptions that governed the industry during the negotiations dictate the terms of trade in perpetuity. Furthermore, US trade agreements should be aligned and be able to connect with each other to enable US apparel and footwear companies more efficiently utilise supply chains and more effectively utilise the trade agreement. A small example is the provision in the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) that enables the use of Mexican fabrics. This provision should be expanded to include all materials and be replicated to include all US trade agreements.

“Echoing our comments on duties, we recognise that sensitive product lines may require special treatment. Again, our strong recommendation is that any restrictive rules be focused just on those sensitive lines so that other products are not afflicted by more burdensome rules.”

Related Companies

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. The top stories of the day delivered to you every weekday. A weekly roundup of the latest news and analysis, sent every Monday. The industry's most comprehensive news and information delivered every quarter.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Just Style