Less than 15 percent of U.S. apparel imports in 2015 were duty free, despite there being 14 free trade agreements (FTAs) in force with 20 countries. So why do policymakers think that the Trans-Pacific Partnership (TPP), once implemented, will be any different?
That question was posed to Bill Jackson, acting assistant U.S. trade representative (USTR) for textiles and apparel, by an audience member at a Sourcing at Magic seminar discussing the benefits and opportunities of TPP, hosted Tuesday by the U.S. Fashion Industry Association (USFIA).
“There are a number of factors that contribute to why. Part of it is the complexity of the agreements that [currently] exist,” Julie Hughes, USFIA president, explained. “For a company to guarantee compliance you really have to have some serious in-house commitment that you’re going to be able to maintain that. For some companies that acts as a disincentive [to source from FTA countries].”
Not to mention, some of the agreements are with countries that don’t have that strong of a textile industry. But TPP, which the U.S. and 11 other nations signed earlier this month, includes Vietnam, which exported $10.6 billion worth of apparel to the states in 2015, a year-over-year growth of 14 percent to become the country’s number two textile and apparel trade partner.
“Vietnam is our second largest supplier so we have a major apparel supplier already who’s going to be able to have duty-free shipments to the U.S. That can offer the opportunity to expand and change the usage [of FTAs],” Hughes continued.
Jackson agreed. “Other leading sources of much of the apparel are countries that are not free trade partners. Bangladesh, Pakistan, Thailand and the Philippines don’t have access to our market under free trade agreements. [TPP] is different in large measure because Vietnam is currently the number two source of U.S. apparel imports. That’s important. Vietnam alone could move the needle,” he said.
One thing’s for sure: much confusion still remains about the TPP deal, with attendees asking about the tariff commitment schedule, who will lose money and why China wasn’t included.
The biggest question of all, however, was when it will all come into being.
“It is an unknown equation,” Jackson quipped. “What I can tell you is that the Obama administration is very keen that Congress consider the agreement this year, as soon as possible.”
He added, “There are opportunities that will be missed with every month that goes by that we don’t have this agreement in place.”