The US apparel and footwear industry has submitted a number of suggestions to the International Trade Commission's investigation into the economic impact of trade agreements, including calls for better alignment of FTAs and a more creative approach to ensure they are better utilised. 

In an open letter to Lisa Barton, secretary of the US ITC, Stephen Lamar, EVP of the American Apparel and Footwear Association (AAFA), emphasises the "critical importance" of FTAs to the competitiveness of the US apparel, footwear and accessories industry. 

"When they function well, FTAs can lower costs, open up new markets, and support trade-based employment. Conversely, FTAs that are poorly negotiated or implemented miss opportunities to accomplish those same goals," he notes. 

The USITC initiated its probe into trade agreements in August last year. It is a requirement under section 105(f)(2) of the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, and a report will be submitted to the US House of Representatives Committee on Ways and Means and the US Senate Committee on Finance by 29 June.  

The report is the first of two required by the statute; the Commission will submit a second report in five years' time. It covers the Uruguay Round Agreements, the North American Free Trade Agreement (NAFTA), and US free trade agreements (FTAs), and is seeking input from all interested parties. 

In its letter, the AAFA offers three suggestions, the first of which is to ensure FTAs are aligned and able to connect with each other.

"The current US FTA system can best be described as a 'hub and spoke' approach where each FTA partner connects up to the US, but FTA partners have limited ability to connect with each other and the US. Restrictive rules of origin – which are often negotiated to "limit the benefits" to the US and a specific FTA partner – create and exacerbate this problem," Lamar wrote. 

"Linking FTAs together more creatively to enable US apparel and footwear companies to efficiently use their supply chains is not new. Provisions in several FTAs permit the use of Israeli inputs. CAFTA-DR features a provision that enables the use of Mexican fabrics. European FTAs routinely feature such cummulation provisions. In fact, the recently released text of the new Europe-Vietnamese FTA qualifies Korean inputs – even though Korea is not a party to the agreement – for the rule of origin under that agreement."

Lamar also highlights a need for FTAs to be kept updated, especially for the apparel and footwear industry, where "restrictive rules of origin" have usually meant the economic and political assumptions that governed the industry during the negotiations dictate the terms of trade in perpetuity. 

NAFTA's apparel or footwear terms of trade, he says, have not been updated since 1992, and DR-CAFTA has seen only "modest" updates in the ten years since it came into force.

"The CAFTA-DR example is particularly troubling. One temporary provision – the US Nicaragua Tariff Preference Level (TPL), which had shown strong success – was allowed to expire."

The AAFA has been studying utilisation rates of FTAs for some time, Lamar says, and points to the need for "more creative approaches" to ensure they are utilised more by the industry. 

According to the Association, which represents apparel and footwear brands, retailers and importers, the amount of apparel that enters under US FTAs, or preference programmes, has been declining since 2004 and now equals only around 20%. 

"This is distressing, especially since the number of FTAs (and preference programmes) has increased since 2004," Lamar writes. "Our members report that complicated rules of origin, combined with burdensome record-keeping provisions, has discouraged many companies from using these programmes."

Similarly, the AAFA says that the utilisation of FTAs for footwear is in the low single digits, primarily because few have been negotiated with countries that produce footwear.

As a final note, Lamar urges the Commission to continue measuring the value of free trade agreements on the benefits that also accrue through imports.

"While we remain strong proponents of FTAs through the ability to open up foreign markets for US exports and US branded products, we find equal value in the ability of FTAs to open up the US market as well. This is especially important because the US still maintains high duties on a range of apparel, footwear, and travel goods products, and because reduction of those duties benefits US consumers, particularly those at the lowest end of the income scale."