Euratex Released Position Paper on Textile and Apparel Rules of Origin in T-TIP

The European Apparel and Textile Confederation (Euratex) recently released its position paper on textile and apparel (T&A) rules of origin in the Trans-Atlantic Trade and Investment Partnership (T-TIP). According to the paper:

First, Euratex supports “double transformation rules” as the basis of T&A rules of origin in T-TIP, with the accompany of flexibilities in some cases. In general, “double transformation” is equivalent to “fabric-forward” rules of origin, which is less restrictive than the “yarn-forward” rules of origin adopted in the United States. Euratex believes that “double transformation rules” is “aligned with market realities and developments of the European industry.”

In contrast, the National Council of Textile Organizations (NCTO) which represents the interests of the U.S. textile industry insists that T-TIP shall adopt the strict “yarn-forward” rule. Particularly, NCTO is worried that a less restrictive rules of origin in T-TIP will have ramifications for the negotiation of future FTAs, including the Trans-Pacific Partnership (TPP).

eu-and-us-ta-rules-of-origin

Second, Euratex opposes applying the “value-added rule” to the T&A sector in T-TIP. Based on the value-added approach, country of origin can be granted when “manufacture in which the value of all the materials used does not exceed certain % of the ex-works price of the products.” Value added is typically calculated based on a subtraction formula, i.e. value added=ex-works price of the product obtained minus the value of all the non-originating material.

Euratex does not think the “value added rule” will work for T&A, because: 1) “variability of the value of originating/non-originating products (fibers, yarns or fabrics) used in spinning or weaving or making-up” will make it practically difficult to calculate value added. 2) “the value added principle is uncontrollable as the added value can be influenced by many factors such as raw materials price, financing, exchange rate manipulations etc.”

Appendix:

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Author: Sheng Lu

Professor @ University of Delaware

7 thoughts on “Euratex Released Position Paper on Textile and Apparel Rules of Origin in T-TIP”

  1. I think it is very interesting that there is a difference in views between Euratex and NCTO. According to the graph, Europe is still spinning fibers, but the most revenue comes from the manufacturing of made-up textile articles. Is there another lobbying firm that supports the fiber producers of Europe? Their view might not align with that of Euratex. The U.S. still has a number of yarn producers in the states, and NCTO is trying to help support them, as well as the weavers and dyers/finishers.

  2. A similarity is that the textiles industries in both areas seem to be better in lobbying and are able to define the rules of origin for their “customers” in the apparel industry.

    1. Hello Bernd, thank you for the comment. One student asked about the state of clothing manufacturing in Germany, because data shows Germany is the third largest apparel producer and exporter in EU, only after Italy and Spain. Clothing production in Germany also rose in volume by 5.3% and increased in value by 7.1% from 2013 to 2014. But we are curious what types of apparel products are made in Germany, especially given German’s high wage level? Any insights? Thank you very much!

  3. The United States takes it’s T-TIPs rather seriously. Our country relies heavily on outsourced production houses to gather materials and make the products from exporting back to the U.S. What this shows is why the U.S. would prefer a T&A process that involves complete FTA region focus.

    Europe on the other hand, does not rely on the same sort of trade agreements as the U.S. What might explain this is the fact that Europe is such an interconnected region that it has less of a need for T-TIPs. They have easier access to materials, making clothing cheaper and readily available. They can source their materials from just about anywhere with no concern for a FTA.

    Take for example, as you brought up Professor Sheng Lu, the apparel products in Germany. There are numerous, world renowned brands branching from their region such as Adidas, Puma, and Esprit. These are big names in an area that has a high desire for fashion and a high wage requirement. What this means is they act as any large T&A company would such as Nike, get materials cheap and make products quickly. The only difference is that the materials are closeby and don’t require the need for a FTA to import or export them. Once they have the pieces for production and the need for distribution is when the need with arise. It is different for the U.S. since we are a region highly reliant on the FTAs in place and imports from foreign countries for goods.

  4. I completely agree with the comment posted above. The United States has a different approach to T-TIPs and other international agreements than the European Union and this is a result of location. Although the US plays a dominant role in the textile and apparel industry, it is more complicated. An example of this is with the Yarn Forward rule of origin, because all manufacturing must occur within a specified FTA region, whereas this same rule is only partially applicable to certain nations outside of the US through the Fabric Forward rule of origin. These other nations are also allowed to source from anywhere; the United States does not have this luxury. In the European Union, it is easier to trade between nations because generally all the same rules of negotiation exist because it is a union. When the United States becomes involved, things become more complicated because US is not part of this “union”. This article even says that the yarn forward rule of origin is more restrictive for the United States in comparison to the fabric forward rule of origin. Global location and the fabric forward rule are reasons why I feel as if Europe has more than one type of advantage in these international trading agreements.

  5. It is interesting to see how different the T&A industry is in Europe compared to the US, even though we both come from similar well developed regions. However, EU encourages their connectedness within their region whereas we don’t have many countries surrounding us that can provide us with various steps in the T&A processes like EU does. We have to import from them or other eastern countries, which makes us a little more reliant on the T-TIP. Is this the only reason why we are reliant on T-TIP?

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