Zero percent represents the duty rate that the U.S. fashion industry would like to see on day one of the Trans-Pacific Partnership (TPP) agreement. Zero percent, unfortunately, also represents the number of fashion brands and retailers that currently use several Free Trade Agreements (FTAs) the U.S. has already negotiated, according to a recent U.S. Fashion Industry Benchmarking Study.
Obviously, the TPP negotiators need to do something different this time around.
In June, the United States Fashion Industry Association (USFIA), in conjunction with Dr. Sheng Lu of the University of Rhode Island’s Department of Textiles, Fashion Merchandising and Design, released the survey of executives at 29 of the largest, leading textile and apparel brands, retailers, importers, wholesalers and manufacturers based in the U.S. and doing business globally. These companies provided insight into their sourcing strategies and business outlook for the next 2-5 years, as well as views on key trade policy initiatives.
The top concern for sourcing executives in the fashion industry is the rising cost of doing business, which is impacting all types of business decisions–from where they source, to where they plan to expand, to what types of employees they plan to hire. You might think the first step for these companies would be to take advantage of the 20 FTAs and several trade preference programs negotiated by the U.S., and save some of the $4,207,712,097 paid in duties on textiles and apparel last year, right?
Wrong. We hear again and again that the agreements are simply too complicated and require too many resources to make the duty savings worth the effort. They don’t cover the countries where companies are already doing business. And for the few that do, the rules for textiles and apparel are outdated and do not recognize the global value chain of the 21st century.
The data shows just how little companies are utilizing these agreements. In 2013, just 16 percent of U.S. apparel imports were duty free, a slight decrease from the previous year. The survey found that only NAFTA, CAFTA-DR, the African Growth and Opportunity Act (AGOA)–which is set to expire next year–and the U.S.-Korea FTA are currently used by 20 percent or more of the survey respondents. Some are not used at all.
But the TPP could be a game changer for the industry. It could address the fact that we don’t have many FTAs with countries in Asia. In fact, 81 percent of respondents said TPP will have a somewhat, or very positive, impact on their business.
However, if we look at the data from the U.S. International Trade Commission and from the survey, this simply will not be the case unless there are dramatic changes to the rules of origin and market access provisions. USFIA agrees with the 85 percent of industry leaders who support abandoning the yarn-forward rules of origin, and the 81 percent who support expanding the short-supply list in the agreement.
FTAs and preference programs should cut costs and minimize the impact of high duties. The agreements should encourage companies to source products from our trading partners who are willing to open their markets and set high standards for trade. The outdated rules that were created in times of special protections and restrictive quotas don’t work for companies in 2014, and in fact, discourage them from utilizing the trade agreements.
The USFIA is eager to see the completion of the TPP, which could be a real hero for our industry, and for the broader U.S. economy. Until we see dramatic changes to the rules of origin, we know it will just be a zero.
Julia K. Hughes is the president of the United States Fashion Industry Association (USFIA), which represents textile and apparel brands, retailers, importers, and wholesalers based in the United States and doing business globally.