TPP will be the most significant FTA in terms of how it impacts textile and apparel manufacturing jobs, production and export. This is mainly due to inclusion of Vietnam in this arrangement and the potential impact Vietnam possesses to manufactures that make up the textile and apparel supply chain in the Western Hemisphere. These concerns are mainly due to Vietnam’s apparel industry, extensive government subsidies and government ownership of VINATEX, the largest exporter in Vietnam.
The textile and apparel chapter of TPP must contain these three provisions:
(1) The Strong Yarn Forward Rule of Origin:
This has been the standard textile rule in FTAs for the past 25 years, and it requires that yarn, fabrics and final garments be produced within FTA countries in order to receive benefits from them. The U.S. has secured a yarn forward rule of origin in all of its FTAs but also contained various loopholes that undercut the overall value of the rule. The U.S. has proposed one major flexibility- Short supply list. This is list of specific yarns and fabrics either unavailable or available in very limited quantities within TPP countries, so the products can be made from these items would be exempted from the rule of origin. Vietnamese government is pushing for a weak rule or origin that merely requires the cut and sew aspect be performed in a TPP country which means that China will continue to supply Vietnam.
(2) Fair Market Access Duty Phase-Outs
Market access rules define how quickly tariffs under TPP will phase-out. In the previous agreements, tariff phase-outs have been extended for longer periods of time. The ability of Vietnam to rapidly surge into the U.S. market along with depth and range of government’s support are primary reasons why longer phase out terms are necessary. The U.S. government normally eliminates tariffs through basket categorization as A – Least sensitive, B – moderately sensitive and X – most sensitive products. All import duties will eventually be eliminated on all textile and apparel products as part of the TPP.
(3) Strong Customs Enforcement Rules
Based on foreign countries in TPP, there are concerns about ability to enforce negotiated principles of agreement regarding the treatment of textile products. Negotiators should include an electronic customs enforcement system to track textile components and eliminate potential fraud and errors. Also, TPP partners should provide sufficient resources for enforcement.
The United States government has a unique opportunity to develop a high-standard FTA in the Trans-Pacific Partnership by including strong textile rules that encourage private investment, export growth, and free market entrepreneurship.