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This Bill Could ‘Reverse the Cashmere Supply Chain’

Cashmere importers could soon get their raw materials or finished goods from Mongolia duty free if the Mongolia Third Neighbor Trade Act gets through Congress and receives White House approval.

Because it has bipartisan support and would boost direct commerce between the U.S. and Mongolia and bypass China in the supply chain, it seems to have a good chance, according to Stephen Lamar, executive vice president of the American Apparel & Footwear Association (AAFA).

Lamar explained that while the U.S. used to import more than $200 million worth of textiles and apparel from Mongolia around 15 years ago, that has dwindled to almost nothing today. In the interim, Mongolia has shipped its raw materials like cashmere to China for manufacturing and exporting to the U.S.

“This would reverse [the] cashmere supply chain,” Lamar said. “China is really the only game in town when it comes to cashmere and what this does is try to recognize that Mongolia can be competitive. It will take some time because the industry there has been decimated, but this would create a reason to invest.”

The AAFA supports the act, which has been introduced in the House and Senate. The bill would provide duty-free access to the U.S. market for products made in Mongolia using Mongolian cashmere for a five-year period.

“This bill would provide a market for Mongolia’s authentic cashmere, supporting growth and creating jobs throughout the U.S. cashmere value chain,” Rick Helfenbein, president and CEO of the AAFA, said. “At the same time, by passing the Mongolia Third Neighbor Trade Act, Congress would forge a stronger partnership with our friends in Mongolia and provide American consumers with better access to these high-end products.”

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Mongolian President Khaltmaa Battulga was in Washington this week for meetings with President Trump and U.S. representatives. During the visit, his team will be discussing the Mongolia Third Neighbor Trade Act (HR 2219 / S. 1188). AAFA noted that not only would this support jobs in Mongolia, but it would also promote U.S. trade priorities by emphasizing strong environmental standards, market access, intellectual property rights, and workers’ rights.

It would also create manufacturing opportunities for U.S. textile mills and apparel manufacturers.

“This is a small bill when you look at is from the U.S. lens; this is an enormous bill when you look at it from a Mongolia lens,” Lamar said. “It could put 30,000 to 40,000 people back to work in a very short amount of time.”

Matthew Scanlan, CEO of cashmere brand Naadam, said, “I hope it gets passed, it would be great for the Mongolian economy. We still do some production in Mongolia and would most likely invest more in that strategy.”

The World Bank’s board of directors approved $100 million in financing this week to help Mongolia further stabilize its economy and move towards a more sustainable development path.

The World Bank said Mongolia’s economy has recovered strongly from the brink of a macroeconomic crisis in 2016, but underlying vulnerabilities remain. The economy grew by 6.9 percent in 2018, compared to 1.2 percent in 2016.

To enhance the competitiveness of the economy, the program also supports measures to improve the business and trade environment such as strengthening investor protection, streamlining permit requirements, and promoting trade facilitation reforms. Moreover, it supports economic diversification by promoting animal health management.

Lamar said there is strong bipartisan support for the bill as a commercial and geopolitical action.

He added, “There’s a very strong interest in Congress in looking for alternatives and allies to balance out the U.S.-China relationship. There’s a lot of people on the Hill that would like to see this become law sooner rather than later.”