Trans-Atlantic Trade and Investment Partnership

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From Just Style, March 2013

Textile and clothing industry groups on both sides of the Atlantic have welcomed the news that the EU and the US are to commence talks on the biggest bilateral trade deal ever negotiated.

European Union (EU) clothing and textile industry association Euratex has hailed the launch of talks between the United States and the EU to forge what the European Commission calls the “biggest bilateral trade deal ever,” saying EU exporters will benefit.

A deal, once sealed, could eliminate American duties as high as 19%, says Euratex.

The EU’s textile and clothing industry already has a positive trade balance with the US. “Tariffs are still high in the US” for textile and clothing, Euratex president Alberto Paccanelli has stressed.

And it is worse when it comes to exporting products containing wool where the “duties are generally higher, sometimes above 19%,” Luisa Santos, head of international trade at Euratex, told just-style.

So “we expect to have duty-free access from the entry into force of the agreement and we are willing to give the same benefit to the US,” Ms Santos noted. With exports being highly price-sensitive, an elimination of the duties could “help substantially our competitiveness in the market.”

The EU’s textile and clothing exports to the US have been steadily increasing and are already substantial. In 2009, these exports stood at EUR2.8bn (US$3.7bn) and in 2010, they rose to EUR3.3bn, while they reached EUR3.7bn in 2011.

In negotiations, the EU would have a “forward looking approach” in terms of tariff and duty-free access from day one, according to Santos.

US sees opportunity

There was also optimism from American importers and retailers. Julie Hughes, president of the United States Association of Importers of Textiles & Apparel (USA-ITA), said a free trade agreement “presents a terrific opportunity” to remove duties and resolve regulatory issues that hold back trade between the US and the EU.

“We are especially enthusiastic about the launch of the US-EU trade negotiations,” Hughes told just-style adding: “Many people don’t realise that the EU is actually one of the top destinations for US exports of yarns, fabrics, and apparel” or that US brands import yarns and fabrics from the EU to manufacture ‘Made in the USA’ garments.

However some US groups are concerned because of different tax and regulatory regimes between the two regions.

“We are eagerly watching how the US government is going to engage with the EU,” said David Trumbull, vice president of the USA’s National Textile Association.

He is concerned about the fact that the US does not have the comprehensive sales tax systems in place in Europe, which do not apply for exports. Meanwhile, American producers can pay more through income tax or corporate tax: so US exporters could be placed at a comparative tax disadvantage, also having to pay VAT in Europe.

He said: “We do not want to get subjected to double taxation when exporting to the EU while EU producers get away with paying import duties to the US.”

Other issues to discuss

Meanwhile, back in Europe, the European Commission is compiling an impact study on “which sector benefits how”, said Helene Banner, EU trade spokesperson. The study will be released in two months.

An earlier report from the EU-US High-Level Working Group on Jobs and Growth (HLWG) had, noted Banner, recommended “eliminating all duties on bilateral trade, with a substantial elimination of tariffs upon entry into force, and a phasing out of all but the most sensitive tariffs in a short time frame.”

But there are host of other issues to discuss, notably, labelling, safety and consumer protection, during clothing and textile talks.

One issue is that “the information that has to be included on the label is more extensive in the US than in the EU,” Ms Santos stressed. For instance, the US has mandatory origin labelling – which is currently only a (recent) proposal in the EU.

And when it comes to safety and consumer protection, the US has its own legislation that varies from the EU. – for example requirements in terms of testing.

Santos said it is important to focus on “harmonisation to reduce costs for companies, especially small-and-medium enterprises in both sides of the Atlantic”.

Brussels and Washington aim to conclude the talks “ideally in about two years from now,” said EU trade Commissioner Karel De Gucht: “But more paramount than speed is achieving an ambitious deal.”

The European Commission will present draft negotiating directives to the EU Council of Ministers for approval in March and similar proposals are being sent to the US Congress. “Both sides aim to advance fast once negotiations are started,” added Banner.

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Author: Sheng Lu

Professor @ University of Delaware

10 thoughts on “Trans-Atlantic Trade and Investment Partnership”

  1. This article interests me a lot as a designer and owner of my own swim and resort wear company. I am looking into exporting my clothing to Portugal. With a free trade agreement, I will not have to pay any duties, which would be a decrease from potential expenses and increase my profit. This news has created a new future export time frame for my company.

  2. It’s funny that Elizabeth mentions Portugal because my boyfriend’s family lives in Portugal. Whenever he wants to send his family a package, and vise versa, it almost isn’t worth it because there are such heavy duties. He says that it is very expensive and often costs more than the actual item being shipped! I don’t really understand why it is so expensive, but I can definitely see that the Trans-Atlantic Trade and Investment Partnership will benefit many people as well as the textile and apparel industry.

  3. Although there are some issues that come along with the Transatlantic Trade and Investment Partnership, I believe that it would be highly beneficial for the US and EU. Just like the previous comments, the tariffs and duties are relatively high and this agreement will eliminate the extra trade expenses. Since the EU is one of the top destinations of US yarn, fabric, and apparel exports, this agreement will allow more trade to happen between the EU and US. This also benefits the US because they import yarn and fabric from EU to make “Made in US” garments. Since manufacturing in the US is already expensive, the agreement will help to lower the costs and satisfy thousands of people who strive to have domestically made products. Also, since there will be more trade happening between the US and EU, the European region will have an increase in their productivity and consumer spending. Since one of the EU’s challenges is consumer spending, it will be beneficial for them to have this agreement because they will be getting materials from the US at a cheaper price. This Trade agreement overall will boost their competitiveness in the market as well as allowing the US to export more materials, and import goods without duties and tariffs.

    Although this free trade agreement brings benefits to both the EU and US, there are some issues that need to be addressed. One reason is that the US and EU have different legislations from one another. For example notably, labeling, currency, safety and consumer protection, and textile talks are all a little different. However, I believe that the Transatlantic Trade and Investments Partnership is necessary to have and will benefit both sides incredibly.

    1. kaylas comment points out all the main issues that we all have learned and talked about in class and our case study. the US and EU have a good relationship but there is always a way to make things better. the expenses and duties involved in transatlantic trade are both things i dont completely understand but have learned a lot about within this class.

  4. I believe that the Transatlantic Trade and Investment Partnership negotiation is one more step along the way towards becoming a fully globalized world. This trade deal will greatly benefit the US and the EU because they rely on each other for yarns, fabrics, and apparel. With this partnership, they will be able to trade these materials freely, be able to achieve lower manufacturing costs, and ultimately, offer lower prices to their consumers.
    However, some may say that this partnership will be a one-way street and only benefit the EU. One reason is because the EU’s T&A industry has a full supply-chain, and hardly needs to rely on importing from other countries. The other reason is because the US does not have a similar tax and regulatory system to the EU, which may cause the US to pay double the taxes while the EU pays nothing. Overall, I believe that this will all be worked during the talks expected to take place in the next two years.

  5. It is very interesting to see what is going on with the Transatlantic Trade and Investment Partnership negotiation. This will definitely help globalize the world and can help the U.S. become more competitive in Global markets. I really want to see what they end up deciding.
    Heavy tariffs turn off potential buyers. People do not want to pay fees that are often worth more than the item itself! It seems kind of useless. So this negotiation can definitely help out these countries.

  6. When Sheng first mentioned the Trans-Atlantic Trade and Investment Partnership (TTIP) between the EU and the U.S. majority or our entire class did not see the point of such as agreement. We know that the EU’s textile and apparel supply chain is pretty compete so there is no point for the EU to trade with the U.S. We also see EU as more technology advance than the U.S., in short, EU do not have to trade with the U.S. We see EU as the one that will benefit from this agreement because we will be importing from them more; however, after the panelist discussion on “Is Europe Back yet?” I feel the U.S. and the EU will equally benefit from this agreement. From the panelist discussion, the employment rate is still very high. The way the EU is approaching the unemployment issue is that they increase the age when workers could enter the workforce and cut back on benefits and etc. According to the article above, EU’s exports to the U.S. have been experiencing a steady increase. While at the same time which many of us might not know, but “EU is one of the top destinations for U.S. exports of yarns, fabrics and apparel.” Although both sides will be benefiting from this agreement, but the EU and U.S. must discuss about the notably, labeling and safety, consumer protection and etc. While labeling in the U.S. is more extensive than the EU, the two countries would need to find a middle ground on such issues.

  7. Although many concerns and problems may come from this TTP agreement between the US and the EU, it would be highly beneficial for these to parties to agree to this deal. Both the US and the EU are receiving major hits in both employment and income when dealing with exports vs imports, due to sourcing manufacturing overseas to developed countries where labour is cheaper. Therefore I feel that this agreement would help increase the employment rate and income level in both countries.

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