The TPP was agreed deal after five days of talks in Atlanta in the US

The TPP was agreed deal after five days of talks in Atlanta in the US

After more than five years of negotiations, leaders of 12 Pacific Rim countries, including the US, Japan and Vietnam, have finally concluded negotiations on the Trans-Pacific Partnership (TPP) – paving the way for what will be the world's largest free trade agreement.

Linking about 40% of the global economy, or $28.1 trillion of GDP, the controversial deal was signed after five days of talks in Atlanta in the US.

The other countries included in the TPP are Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru and Singapore.

The agreement is significant for textiles and apparel since it involves the US – the single largest consumer of apparel globally – and Vietnam, the third largest emerging market apparel supplier after China and Bangladesh. Indeed, in 2014, textile and apparel exports from the TPP countries to the US totalled $19bn. If passed, the industry could benefit from tariff savings of 16-33% per item, including 16-17% on woven shirts and 18-19% on denim.

According to a summary of the agreement, the TPP will eliminate tariffs on textiles and apparel, with most tariffs eliminated immediately, but those on some sensitive products phased out over longer timeframes. 

There will also be specific rules of origin that require use of yarns and fabrics from the TPP region, which will promote regional supply chains and investment in this sector, with a “short supply list” mechanism that allows use of certain yarns and fabrics not widely available in the region. 

In addition, there are commitments on customs cooperation and enforcement to prevent duty evasion, smuggling and fraud, as well as a textile-specific special safeguard to respond to serious damage or the threat of serious damage to domestic industry in the event of a sudden surge in imports.

A separate general rules of origin chapter says the parties agreed on a single set of rules of origin that define whether a particular good is originating and therefore eligible to receive preferential tariff benefits.

It adds that "the agreement provides for accumulation so that, in general, inputs from one TPP party are treated the same as materials from any other if used to produce a product in any TPP party. A common TPP-wide system of showing and verifying that goods made in the TPP meet the rules of origin has been created, and importers will be able to claim preferential tariff treatment as long as they have the documentation to support their claim. The agreement also provides the competent authorities with the procedures to verify claims appropriately."

The full text of the TPP is expected to be released later this year.

The American Apparel & Footwear Association (AAFA) today said that while it welcomes the conclusion of the TPP talks, "We look forward to reviewing the details of the agreement when they are released. Throughout this process, we communicated what's needed to create trade opportunities for the clothing and shoe industry. Now we plan to evaluate those provisions that impact the industry, review the details, and consult with our members."

The United States Fashion Industry Association (USFIA), meanwhile, remains hopeful the TPP agreement will benefit the fashion industry.

“We understand the final agreement contains a yarn-forward rule of origin and limited short-supply list, though we remain hopeful it also will include many opportunities for fashion brands, retailers, importers, and wholesalers to expand their global businesses,” according to USFIA president Julia Hughes.

According to the 2015 USFIA Fashion Industry Benchmarking Study released in June, the group’s members already source from five TPP partner countries: Vietnam, Peru, Mexico, Malaysia, and the US.

Nearly 80% of respondents said they expect the TPP to affect their business practices. However, the level of impact depends on the rules of origin and market access provisions; 83% called for abandoning the strict “yarn-forward” rule of origin, and 45% hoped the TPP short-supply list would be expanded. 

However, the National Council of Textile Organizations (NCTO), which had been calling for TPP to establish a yarn forward system as the basis for rule of origin determinations, and the setting of multi-year tariff phase-outs on sensitive textile and apparel products, now says: "Based on our debrief with the US government in Atlanta we believe that, in great part, these key objectives were met." 

While the deal has been agreed, it still needs to be ratified by the individual countries involved - a process that could take some time.

The AAFA suggests that under the provisions of Trade Promotion Authority (TPA), which was signed into law in June, Congress will have the opportunity to review and vote on the TPP agreement sometime in 2016. If approved by Congress and the legislatures of the 11 other TPP countries, the TPP agreement could potentially go into effect by late 2018 or early 2019, it says.

Writing on just-style today (6 October), Mike Flanagan says he still believes it is unlikely to take effect this decade: The Flanarant: TPP – now the real fight starts.

Click on the following links for earlier coverage on the pact and what it might mean for the textile and apparel industry.