Debate on the Trans-Pacific Partnership and the Textile and Apparel Industry: Questions from FASH455

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#1 Overall, do you think the Trans-Pacific Partnership (TPP) reflect the commercial interests of the U.S. textile industry and/or U.S. apparel industry? Why?

#2 We know that the U.S. textile industry (such as NCTO) strongly supports a strict yarn-forward RoO in TPP whereas apparel retailers and fashion brands (such as USFIA and AAFA) say the yarn-forward style RoO is outdated and unworkable for apparel companies’ global apparel supply chain.  If you were U.S. policymakers, what would you do to “balance” these two conflicting arguments?

#3 Research shows that many free trade agreements enacted in the United States are with a very low utilization rate. Will TPP face the same fate? Why or why not?

#4 It is said that TPP has the strongest protections for workers of any trade agreement in history, requiring all TPP Parties to adopt and maintain in their laws and practices the fundamental labor rights as recognized by the International Labor Organization (ILO). But why do most U.S. labor unions still oppose the agreement?

#5 Will TPP exert a negative impact on the Western Hemisphere supply chain? Why or why not? How should apparel manufacturers in the NAFTA and CAFTA-DR region respond to the potential impact of TPP, especially the intensified competition from Vietnam?

Please feel free to share your thoughts and recommend any additional articles/readings/resources relevant to the discussion. Please mention the question # in your reply.

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Author: Sheng Lu

Professor @ University of Delaware

18 thoughts on “Debate on the Trans-Pacific Partnership and the Textile and Apparel Industry: Questions from FASH455”

  1. In regard to question #5, the TPP could of course exert a negative impact on the Western Hemisphere supply chain, and even globally. This is because of current FTA agreements like the NAFTA and CAFTA-DR. Since we import apparel to other FTA regions for example Mexico, we expect them to do their part and import textiles for the United States. With the TPP, there will be a bigger playing field since it would be as many as 12 countries, and form a small union. The NAFTA/CAFTA-DR regions will have to work around it and agree on even better tariffs with one another.

  2. In regards to questions 1 and 2, I believe that the Trans-Pacific Partnership reflects the interests of the U.S. apparel industry more so than the U.S. textile industry because the textile industry is yarn-forward. This means that yarn spinning, fabric manufacturing, and apparel manufacturing must occur within NAFTA/CAFTA-DR region. The apparel industry is fabric-forward and only requires that the fabric and apparel manufacturing occur within the NAFTA-CAFTA-DR region. To balance this conflicting argument between the U.S. textile and apparel industries, I would suggest that textiles continue to be produced in the U.S. while apparel should mostly be produced in the U.S. Fibers can be sourced from anywhere, but perhaps both industries should take into consideration where they can achieve the lowest cost and tariff for yarn spinning. If that should be within the U.S., then the apparel industry should take to implementing yarn spinning domestically. The apparel industry is already greatly benefiting from this partnership as many Made in America products are being sold abroad, which in turn diminishes taxes and trade barriers.

    1. US apparel companies actually are not happy about the yarn forward rules of origin in TPP, because they say the rule does not reflect the global nature of today’s apparel supply chain. But it is interesting that you think TPP reflects the interests of the US apparel industry more so than the textile industry. Why is that? Also, most US apparel companies have given up manufacturing. Why do you think they will bring back manufacturing to the US because of TPP?

      1. I feel as though the apparel industry could benefit more from the TPP than the textile industry because the apparel industry is more fabric-forward and they are more interested in sourcing and production outside of our home country. The U.S. is in a later stage of economic development and therefore is more on the end of producing textiles and has more automated machinery to get the work done. This means that the textile industry is going to be more yarn-forward in terms of producing textiles domestically or within a free trade region. Perhaps the TPP could inspire the U.S. apparel companies to manufacture domestically because they will see how cost can be diminished and transportation can become more rapid under the TPP.

  3. In regards to question 1, I think the TPP reflects the commercial interests of the U.S. textile and apparel industries. The TPP will give the United States the ability to remain a key player in the Asian Pacific region. With all of the Asian-only FTAs, the U.S. could loose their stake in global trade. But the TPP would allow the U.S. to expand their export market. The TPP benefits the U.S. textile market more than the U.S. apparel market though. The U.S. textile market would benefit from TPP member countries only being able to use U.S. based textiles. But the U.S. apparel market would be forced to use more expensive yarns in order to produce their goods. Overall, I think the TPP would be beneficial to the U.S. since it gives them a stake in the Asian based supply chain. It allows the U.S. to be included in the Asian based supply chain which is vital since the real 21st century trade competition is between the US-led supply chain and the “Factory Asia” based supply chain. Furthermore, I wonder what will eventually happen to the United States if the TPP is not passed and Asian countries further implement their own Asian-based FTAs.

    1. great comment! I particularly like the perspectives of your answer. And you asked a great question at the end as well. 1) personally I am still with modest confidence that TPP will eventually get passed, but maybe it won’t happen until 2018. 2) there will be consequence of not passing TPP… it is more than just about the textile and apparel industry, but credibility of the US. Here is one WSJ article recommended for reading:http://www.wsj.com/articles/u-s-faces-setback-in-asia-if-tpp-trade-deal-doesnt-pass-1471814373

  4. 4. It is said that TPP has the strongest protections for workers of any trade agreement in history, requiring all TPP Parties to adopt and maintain in their laws and practices the fundamental labor rights as recognized by the International Labor Organization (ILO). But why do most U.S. labor unions still oppose the agreement?
    U.S. labor unions still oppose the agreement because there’s nothing in this agreement that will give them more rights, more ways to enforce workers’ rights and environmental rights and to protect the American public, the American worker and the American environment. The union has long stood against this trade deal because it will “only pad the wallets of the richest few, not lift the economic fortunes of everyday Americans.”

  5. In response to question three, I believe the TTP regions will not have the same problems other free trade agreement regions have faced. After the implementation of NAFTA, imports from that area actually decreased. This was because at the same time imports from China became more desirable, so companies chose to import from China even though NAFTA had just been implemented. The TPP includes Vietnam, which changes the game. Vietnam is becoming very strong in the textile and apparel industry, even without the TPP’s help. Vietnam will not have as big of competition as NAFTA and CAFTA regions because it is already such a big player in the industry.

  6. In regards to question 1, I think the TPP reflects the commercial interests of the US textile and apparel industry. The TPP benefits the textile industry more than it does the apparel industry. The TPP promotes trade and allows countries to be included in different supply chains. It would most likely generate some overall gain for the US economy, measured in terms of GDP. It also would provide more US exports and some imports would also become cheaper as well, benefiting consumers.

  7. Concerning Question #3, I think whether the TPP gets used or not depends on whether it adopts yarn-forward or fabric forward rules of origin. If fabric-forward rules of origin is adopted, then many apparel producers will be keen on sourcing from Vietnam , enjoying a 0% tariff rate and faster delivery . However, if yarn-forward is adopted then Vietnam will have to source yarn and fabrics within TPP regions (ex: U.S. Textile Industry)–increasing costs and delivery times, making U.S. apparel companies less motivated to use it.

  8. In regards to question 2, I think it is somewhat impossible to please both the apparel industry and the textile industry. Yarn-forward clearly benefits the textile industry, but the apparel industry is against it because it makes it more expensive for them. They would rather have a fabric forward rule, so from the fabric on, it would have to be made within the regions of the agreement. In terms of helping the US, I would suggest a yarn-forward rule, that way we are benefiting the US with the support of our industries. This would benefit the US economy since we have a large textile industry and many other countries would have to get their textiles from us, rather than a cheaper country.

  9. #1 Overall, do you think the Trans-Pacific Partnership (TPP) reflect the commercial interests of the U.S. textile industry and/or U.S. apparel industry? Why?

    If adopting the yarn forward rules, the TPP would reflect the commercial interests of the U.S. textile industry. Because the textile industry in the U.S. could raise market share due to the rules. For instance, Vietnam has to import textile from the U.S. instead of China because it must happens in the TPP region. Nevertheless, the U.S. apparel industry would not like the rules if the TPP adopts the yarn forward rules because of high costs of domestic producing textiles. The U.S. apparel industry wants lower costs to produce apparel for raising their gross margin.

  10. I think the Trans-Pacific Partnership (TPP) reflects the commercial interests of the US textile and apparel industry if passed following a yarn forward rule. The US textile industry pushes for yarn-forward in hopes that more TPP or US produced fibers, yarn and fabric manufacturers are used. This would increase US market share due to the rules and allow for the US to have a greater presence in the global supply chain.

    However, it would benefit the textile industry more so than the apparel industry because it a fabric forward rule would allow for more flexibility for companies. Many US retailers and importers of apparel do not have domestic manufacturing— implementing a more lenient rule would make it easier for companies to switch their suppliers as fashion needs change.
    For instance, Vietnam is one of the leading US importers of clothing. Vietnam would be practically forced to import US yarns over Chinese yarns in order to trade with the US. It is likely for this to occur due to Vietnam’s geographical preference and non-contracting parties of the TPP. Vietnam is of high importance in TPP negotiations because the Asian country is one of Americas leading importers.

    However, if passed as fabric forward it could disrupt the supply chain, and encourage Vietnam to import Chinese yarns rather than US yarns. Further more, if yarn forward were not chosen, it would increase the US cost of domestic textiles and weaken the export market.
    The rules of the TPP will greatly impact how the supply chain will function and the overall performance of the US commercial textile and apparel industry.

  11. In regards to question 4 I think many of the US labor unions are still opposed to the TPP even with its strict labor enforcement because just because there are more labor laws does not mean the jobs will come back to the US it means that the factories abroad will be better and more sustainable and there fore this might bring even more jobs abroad if the working conditions are better, which I’m sure scares some of the labor unions that even more people in them will become unemployed.

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