The National Council of Textile Organizations (NCTO) reiterated its stance before a U.S. International Trade Commission (USITC) hearing that Section 301 penalty tariffs on finished Chinese textile and apparel imports give American manufacturers a chance to compete and provide trade officials with an essential trade negotiation tool.
Removing them, NCTO said, would reward China, put U.S. manufacturers at a competitive disadvantage and do nothing to reduce inflation. Those were among the key points outlined by NCTO president and CEO Kim Glas in a written testimony submitted to the U.S. International Trade Commission during three days of hearings on the economic impact of Section 301 China tariffs and Section 232 steel tariffs on U.S. industries.
Countering that argument was the U.S. Fashion Industry Association (USIA), which said it was joining other retail and fashion industry groups to speak out about “the pernicious impact of the Section 301 tariffs on both the American fashion industry and American consumers.”
NCTO said the 301 penalty tariffs should be maintained “absent substantive improvements in China’s pervasive, predatory trade practices,” Glas said in her testimony. China’s illegal actions “have put U.S. companies at a serious disadvantage and tariffs give American manufacturers a chance to compete.”
Glas noted that U.S. trade officials have stressed that the penalty tariffs also create leverage and are a “significant tool” in ongoing negotiations with China.” While some advocates for lifting the tariffs point to concerns about inflation, Glas said, “canceling these penalty duties would do little to ease Americans’ inflationary pains.”
She also noted that “apparel prices out of China continue to hit rock bottom, even with the Section 301 tariffs in place.
“As detailed in an economic study recently released by Werner International, U.S. import prices for apparel from China have dropped 25 percent since 2019 and 50 percent since 2011,” Glas said.
She also warned that lifting the tariffs would have “a substantial negative ripple effect” on U.S. free-trade agreements, including undermining those with Western Hemisphere partners that have established shorter co-production supply chains and serve other U.S. and regional interests.
On the hand, USFIA told the USITC that the message was clear that “Americans, not China, are the losers here. American businesses and consumers have paid more than $145 billion in extra tariffs that have not discouraged the behavior that triggered the original 301 investigation.”
In her testimony, USFIA president Julie Hughes said tariffs are a direct, regressive tax on the American consumer that affects consumers at all income levels. However, the average low-income U.S. household spends a higher portion of its income on apparel and footwear than wealthier Americans, “meaning that tariffs on apparel and footwear have hit struggling families more than anyone else.” For example, the tariff on a cashmere sweater is 4 percent, while the tariff on a lower-cost acrylic sweater is 32 percent, USFIA noted.
USFIA also contended that the tariffs have discouraged American brands from hiring due to the increased sourcing and production costs. It also charged that they have also not encouraged a large-scale shift out of China as companies diversify their sourcing base. China is still the leading textile supplier of fabrics and accessories in the world and “there are currently no realistic options for sourcing destinations that can viably replace China entirely.”
“We also rebut the claims that removing these tariffs will hurt U.S. workers and do nothing to fight inflation,” Hughes said. “This is the predictable response of protectionists and ignores the reality of the situation. Rather, we agree with U.S. Treasury Secretary Janet Yellen that tariffs increase domestic prices and raise costs to consumers and businesses due to higher cost inputs and that lowering U.S. and Chinese tariffs could help ease inflation.”
According to the 2022 USFIA Benchmarking Survey, which was released earlier this week, increasing production or sourcing costs are the No. 1 business challenge facing the U.S. fashion industry in 2022.
“These tariffs have done nothing to solve China’s Intellectual Property (IP) policies and practices,” Hughes said. “From the experience of USFIA member companies, the best way to address these concerns is action at the multilateral level that includes other global trading partners and USFIA’s member companies are no stranger to IP violations. Let’s find a solution that does not use American companies and American families as the hostages to outmoded protectionist ideas.”
The Section 301 tariffs were first imposed in 2018 in response to China’s persistent violations of intellectual property rules. By law, they are now under review.
The USITC was directed to conduct this investigation as part of the Omnibus Appropriations Act that was signed into law on March 15. As directed, the USITC, an independent, nonpartisan, federal agency, will prepare a public report to provide, to the extent practicable, background information on the Section 232 and 301 tariffs and an overview of the tariffs that were in effect as of March 15, 2022, and an economic analysis of the impact of these tariffs on U.S. trade, production and prices in the industries most affected by these tariffs.
The USITC expects to submit its report to Congress by March 15, 2023.