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Denim Dispute Jeopardizes US-EU Agreement

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A free-trade agreement between the U.S. and the European Union will soon be underway, but a denim dispute between the world’s most powerful traders has threatened the agreement before negotiations have even started.

At the end of April, U.S. jeansmakers were blind-sighted by an EU decision to raise the tax on U.S.-made women’s and girl’s jeans to 38%–more than tripling the previous tax on one of the U.S.’s biggest exports. Stephen Lamar, executive VP of the American Apparel & Footwear Association, told Women’s Wear Daily that the development was “not an auspicious way to start a round of trade talks.”

Other serious hurdles? France has expressed dismay over U.S.-imposed audiovisual controls, agricultural subsidies, and tax preferences for American-made products. But according to Gary Hufbauer of the Peterson Institute for International Economics, Europeans are “keen” on the trade, despite their contentions. “They need something to get their economy going,” he told WWD, “and this is something that causes optimism in Europe, where the pessimism is so thick right now.”

In a statement, U.S. President Barack Obama noted that the U.S. and EU are already the most powerful trading partners in the world, exchanging about $1 trillion in goods and services, each year. He told press that was hopeful a trade agreement would be reached, despite “sensitivities” between nations.

In 2012, apparel imports from Italy to the U.S. were valued at $1.1; imports from France totaled $151 million; and the U.K. imported $98 million to the U.S. Analysts predict that the new agreement could boost the EU’s economy by as much as $157 billion, and add $126 billion to the U.S. economy.

Negotiations are scheduled to begin on July 8, 2013.

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