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Op-Ed: Time to put the TPP out of its Misery?

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After the Super Tuesday Primary results, more and more U.S. Congress members who supported fast-tracking the TPP last year are now finding reasons to oppose the deal. With no significant presidential candidate supporting it, isn’t it time to abandon the pretense there’s any chance the deal’s ever going to go ahead?

TPP: Signed but not agreed

The 12 countries negotiating the TPP signed an agreed text on Feb. 3. They now need to ratify it. To simplify a complicated position:

  • The U.S. Congress has 90 days to ratify the TPP once the president submits it for approval.
  • Once the Congress has approved it, the president must certify that all other partners have faithfully implemented the agreement.
  • Once all 12 partners have ratified the TPP, it becomes effective two months later. If all have not ratified by February 2018, but at least six—accounting for 85 percent of the TPP group’s total GDP—have ratified, it becomes effective in April 2018. If the TPP does not receive 85 percent ratification by February 2018 (and it can’t if America has not ratified by then), the process collapses.

U.S. politicians change their tune

The three major current presidential contenders—Trump for the Republicans, Clinton and Sanders for the Democrats—are now all solidly opposed to the TPP. Of the two other Republicans still seriously fighting, Cruz is opposed and Rubio—once a staunch supporter—is avoiding comment.

Former TPP supporters in Congress, like Senate Majority Leader Mitch McConnell (R-Ky), Senate Finance Committee Chairman Orrin Hatch (R-Utah), and former U.S. Trade Representative Senator Rob Portman (R-Ohio), have spent the past few months finding reasons to oppose TPP.

As views stand right now, there’s no chance the TPP would pass through Congress. No one is now seriously suggesting the TPP should be submitted to Congress before the November presidential elections. President Obama, though, told America’s National Governors Association on Feb. 22 he was going to send “some sort of implementation documents to Congress at some point this year.” As things stand, that can mean only between the elections and the end of the current president’s term in mid-January, a suggestion that creates real problems, like:

  • The improbability of Congresspeople who’d campaigned against TPP in November changing their views again
  • Even were Congress to approve the pact, the president then has to certify other countries have faithfully implemented it. It’s impossible to imagine that could be done properly before mid-January: practically certain Obama’s successor would simply refuse certification if the process weren’t complete before Obama leaves.

Is the TPP now a walking corpse?

A lot can happen in 10 months, and it’s never safe to say “never” in politics. But, barring some spectacular change in America’s political landscape (like Michael Bloomberg choosing to run, and then winning) it looks practically certain TPP won’t make it onto the U.S. statute books before February 2018.

In just about every way that matters, it’s dead.

The deal’s clearly still important to many politicians and it’s unlikely President Obama will admit defeat until his last day in office. But for anyone planning the next few years in the apparel industry, the overwhelming likelihood has to be that there won’t be a TPP.

Even if there were a TPP, of course, it couldn’t become fully effective till mid-2024 at the earliest: until then, the U.S. will continue imposing some import duty on apparel from Vietnam.

But even that’s a remote possibility. Apparel brands and retailers currently look as unlikely to import Vietnamese apparel duty-free into the U.S. before 2030 as I am to write this article in Vietnamese.

Does it matter?

For U.S. and Canadian brands and retailers? In competitive terms, probably not. The lack of a TPP hits everyone in the same way.

But TPP did offer lower-cost manufacturing alternatives, especially in Vietnam. Retailers and brands probably wouldn’t have given all those cost savings away in lower prices, so losing TPP would be lost profit opportunities – at a time their shares are all under pressure.

That’s all the more reason, I’d argue, for switching attention now to how to make more money in a world without an imminent prospect of a TPP.

For businesses planning Vietnamese investments, it matters a bit. Vietnam offers duty-free access to Japan, Australia, New Zealand and China already. Vietnam’s duty-free deal with the EU looks likely to be ratified in the next two years (though full duty-free access for apparel is still going to take a further seven years), and even without duty-free status Vietnam’s prices to the U.S. and Canada are generally competitive. But those investments aren’t going to be quite as remunerative as Vietnam boosters thought.

For U.S. government strategists, it certainly matters. TPP was an opportunity for the U.S. to shape the rules controlling 21st century trade across the Pacific, which now risks being lost. That’s why the current administration will keep pushing for its ratification. It’s why—in spite of opposition to TPP—the Democrat that appears most likely to win the presidency might seek a TPP 2 quite quickly. And why that TPP 2 will have to lose some of the features that alienated core Democrats.

What should the apparel trade do?

I’m arguing it should forget about TPP till after the presidential elections.

Though the Republicans supported TPP, Trump— at present the likeliest Republican presidential candidate—would be implacably opposed to a TPP in any form. The likeliest Democrat candidate, though, might well create an opportunity for a daughter-of-TPP that gave the apparel industry most of what it wants, without features like Investor-State Dispute Resolution, or absurdly secret negotiations.

And it would help advocates of such a program if the industry helped explain, as it’s failed to throughout the eight years America’s been involved with TPP negotiations, why TPP’s benefits to our industry helps average Americans.

 

Mike Flanagan, CEO Clothesource. Clothesource offers consultancy on the world garment industry using the wide resources of The Clothesource Knowledge Base – the most comprehensive collection of information anywhere about sourcing for the apparel industry. He can be contacted at Flanagan@clothesource.net.

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