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Historic TPP Trade Deal Signed

TPP_New Zealand

The United States and 11 other nations signed the Trans-Pacific Partnership (TPP) trade agreement Wednesday amid a range of protests in member countries—including in front of the White House with a banner that reads “TPP=Betrayal,” plus both support and outrage on the Internet, and a U.S. senator imploring Congress on Tuesday to reject the deal.

Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam signed the agreement with the United States, which together makes up 40 percent of the world’s GDP, at a ceremony in Auckland, New Zealand.

In a live feed of the signing, New Zealand Prime Minister John Key welcomed the signing ministers and said he hoped they were enjoying his country’s hospitality, adding that soon many more would be able to enjoy that hospitality since New Zealand fish, lamb and wine would be duty free across the TPP, “Because that’s how free trade agreements work,” he said.

“What brings us together is a shared belief that opening and integrating our markets through trade and investment will enhance the prosperity of our peoples,” the prime minister said.

Andrew Robb, Australia’s minister for trade and investment was the first to sign the agreement. United States Trade Representative Michael Froman signed for the United States. The agreement was signed within 20 minutes before the ministers opened to questions.

The first three press questions were all directed to Ambassador Froman: Would the U.S. get the deal ratified? What do you have to say to the protestors? What about China?

“I am confident at the end of the day because of the strong benefits to the U.S. economy,” Froman said in answer to the first question, “That members of Congress will see the benefits for their constituents and it will have the necessary bipartisan support to be approved.”

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To the protesters, he said, “This [the TPP] is the product of a diverse set of countries and reflects our collective view of the appropriate standards for this reason.”

China is still part of the conversation, and Froman said the U.S. is engaged with and continuing to work China in its bilateral dialogue regarding future inclusion in the TPP.

The TPP, once implemented, will make most apparel yarn forward—meaning goods would have to be made using U.S. or other TPP country yarns to qualify for benefits. Dresses, skirts and bags made of textiles will be duty free from day one, while most knit tops and woven pants will be on a duty-phase out plan that could extend as far out as 10-12 post implementation.

A good will qualify for benefits under TPP if it is yarn forward, or made of inputs outlined in the Short Supply List (which includes 194 fibers and fabrics that could be hard or impossible to come by in TPP countries) or if it qualifies under the cut and sew rule (which means for bras, synthetic baby garments and textile bags, yarn or fabric can come from anywhere but the item has to be cut or sewn within the TPP bloc).

For footwear, $450 million in savings will likely be realized in the first year after implementation. The tariff schedule lists 120 different footwear classifications and 102 will be duty-free immediately, including most athletic footwear. Other categories, like work boots, waterproof shoes, leather boots, women’s pumps and cold-weather boots, are considered “sensitive” to trade in the Western Hemisphere, and will not see duty-free benefits right away.

According to Matt Priest, president of the Footwear Distributors and Retailers of America (FDRA), “This historic trade agreement will provide significant savings to footwear consumers and companies once passed and implemented.” Congress, he added, should now approve the agreement right away.

The TPP Apparel Coalition, which includes the United States Fashion Industry Association (USFIA), the American Apparel and Footwear Association (AAFA), the Retail Industry Leaders Association (RILA), the National Retail Federation (NRF) and the Outdoor Industry Association (OIA) and American retailers, brands, manufacturers and importers, agree that Congress should make haste with ratifying the deal.

“Today’s signing is an important step that sets the stage for ratification by each of the TPP countries,” a statement issued Wednesday by the coalition noted. “Timely ratification and seamless implementation is important so that our industry and the millions of American workers they employ can take advantage of the benefits of the TPP.”

Now that the deal has been signed, it will be a race against the upcoming elections to get a TPP implementation bill to a vote before the nation changes hands.

The United States International Trade Commission (USITC) still has to release its report on the deal’s economic impact, which has an expected release date of roughly May, and Congress likely won’t make a move before then. That puts a possible vote at roughly June, but if it doesn’t happen before Congress’ July 18 to Sept. 6 recess, the vote could end up in the “lame duck” period after the elections—the vote date is still all speculation.

“Delaying consideration of TPP until the limited timeframe of a lame-deck session of Congress puts at risk an agreement that would grow the economy and strengthen American leadership in a critical region of the world,” Priest said. “Each day TPP is not in effect is another day where high footwear tariffs drive up costs for American consumers, limit product innovation, and stifle job creation.”

Ron Sorini, principal and founder of Sorini, Samet & Associates added, “This is an important, required step in the process of implementing TPP. This will enable serious consideration in the U.S. Congress and in participating countries of legislation necessary to implement the agreement. The sooner TPP is implemented, the sooner benefits will flow to U.S. manufacturers, brands and consumers.”