Early last month, Bob Kirke, Executive Director of the Canadian Apparel Federation (CAF), voiced his support for the Canada-Japan Bilateral Trade Agreement, while also proposing amendments to the agreement, which he felt would benefit the Canadian apparel industry.
Specifically, Mr. Kirke called for a change to the agreement’s wording regarding rule of origin for yarns and apparel products.
Currently, the Canada-Japan Bilateral Trade Agreement includes a “yarn-forward” rule of origin concerning apparel imports. In short, the yarn-forward rule states that in order to receive the preferential trading status accorded by the agreement, garments must be manufactured using components originating almost entirely from the country that is claiming itself as the garment’s originator.
Yarn-forward rules have become a contentious issue in recent years as many apparel trade organizations, the CAF included, have claimed that these rules hamper commercial viability. With garment supply and manufacturing chains vertically integrated and, in many cases, spanning the globe, apparel retailers, manufacturers and importers have had an increasingly difficult time meeting the requirements of the yarn-forward rules set out in many free trade agreements. In his address to the Canadian House of Commons Standing Committee on International Trade, Mr. Kirke brought up the example of the North American Free Trade Agreement (NAFTA), whose yarn-forward rule of original has caused repeated problems for the Canadian apparel industry.
At present, Japan and Canada are robust trading partners, and the proposed bilateral trade agreement looks to strengthen this relationship. In 2009, Canada imported CDN12.3 billion dollars worth of Japanese products, a number that rose to CDN13.4 billion in 2010. Over those same two years, Canada exported CDN8 billion and CDN9 billion worth of products to Japan.
Architects of the Canada-Japan Bilateral Trade Agreement have speculated that once in place, it will increase trade between the two countries by an annual amount of CDN4 billion.