The Trans-Pacific Partnership (TPP) free trade agreement currently being negotiated between the US and eight Pacific-rim countries has the potential to shift global trading patterns for textiles and demand for US textile exports, a new report says.

Textiles are a major issue in the talks because the negotiating parties include Vietnam, a major apparel producer that mainly sources yarns and fabrics from China and other Asian nations.

Other participants in the efforts to establish a free-trade zone across the Pacific include Brunei, Chile, New Zealand, Singapore, Australia, Malaysia and Peru, with Canada and Mexico - both significant regional textile markets for the US - poised to join the next round of talks in December.

According to a report released by the Congressional Research Service, the TPP could enable Asian apparel producers, principally Vietnam, to export clothing to the US duty-free.

This would eliminate much of the advantage now enjoyed by Western Hemisphere apparel producers in the US market and, because Vietnamese manufacturers make little use of US-made textiles, could reduce demand for US textile exports.

The report, 'US Textile Manufacturing and the Trans-Pacific Partnership Negotiations', also notes that if the TPP were to allow western hemisphere apparel manufacturers to use yarn and fabric made anywhere in the TPP region and still enjoy preferential access to the US market, an enlarged Vietnamese textile industry could, at some future time, compete with US exporters in Mexico and Central America.

Textile industry trade groups have repeatedly urged the United States to insist on a "yarn forward" rule, requiring that yarn production, fabric production, and cutting and sewing of the finished garment all occur within the TPP region for the garment to enter the US duty-free.

On the other side, retailers and apparel companies want to be able to import apparel from the lowest-cost producer, regardless of whether US textiles are used, and are urging that textiles and apparel be treated like other products in any TPP agreement.

Members of Congress have voiced their support for both sides.

In 2011, the US textile industry generated $53bn in shipments of yarn, thread, and fabric for a range of end-uses including apparel, and directly employed about 238,000 Americans, accounting for 2% of all US factory jobs.

Around one-third of US textile production is exported, with the bulk of the exports going to western hemisphere nations that are members of the North American Free Trade Agreement (NAFTA) or the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA).

Both free trade agreements provide that certain exports from member countries may enter the US market duty-free only if they are made from textiles produced in the region.

This has encouraged manufacturers in Mexico and Central America to use US-made yarns and fabrics in apparel, home furnishings, and other products. Exports to the NAFTA and CAFTA-DR countries contributed to a US trade surplus of $2.5bn in yarns and fabrics in 2011.

The Congressional Research Service report suggests the TPP would have less impact on those segments of the US textile industry that do not supply apparel manufacturing.

Writing on just-style last week, industry consultant David Birnbaum suggested that instead of the yarn-forward rule the TPP should offer duty-free access based on a fibre-only rule to create a system which benefits almost everyone, including US exporters.

The American Manufacturing Trade Action Coalition (AMTAC) has also questioned Vietnam's participation in the TPP trade talks after the country was added to the US government's list of countries using both child labour and forced labour in the production of garments.

Click here to read the full Congressional Research Service report 'US Textile Manufacturing and the Trans-Pacific Partnership Negotiations.'