From left to right: Julia Hughes (president of USFIA), Auggie Tantillo (president & CEO of NCTO) and Robert Antoshak (Managing Director of Olah Inc., moderator)
In a panel discussion hosted by Kingpins on February 9, 2017, Julia K. Hughes, President of the United States Fashion Industry Association (USFIA), and Augustine Tantillo, President and Chief Executive of the National Council of Textile Organizations (NCTO) shared their respective perspectives on key trade issues facing the U.S. textile and apparel industry in 2017.
Trade and job creation in the United States
Julia Hughes: Discussion on the relationship of trade and jobs in the public is often misguided. We support U.S. manufacturing. But along the supply chain, from product development, sourcing, marketing to retailing, fashion brands and retailers have also created many well-paid non-manufacturing jobs in the United States. Study further shows that 70%-80% of the retail value of an imported clothing actually stays in the United States.
Auggie Tantillo: Pleased and excited to see the discussion on the possibility of bringing back/expanding manufacturing in the United States. Still the United States produces $65—70 billion worth of textiles annually, which support many manufacturing jobs in the sector. The U.S. textile industry also makes around $2 billion investment annually (updating machines and equipment). We need to acknowledge the baseline value of manufacturing in the United States.
Border Adjustment Tax(BAT)
Julia Hughes: BAT is a complicated issue. However, if the current BAT proposal is adopted, it will raise the retail price (meaning ordinary US consumers will have to pay more) and appreciate the U.S. dollar (meaning U.S. exports will get hurt). This is why USFIA along with 100+ companies and industry associations opposes any BAT.
Auggie Tantillo: NCTO strongly believes that updating the tax structure in the United States is long overdue. NCTO welcomes a serious look at the BAT proposal, since the United States is the only major economy in the world that does not adopt BAT. The United States doesn’t need to run such a high trade deficit. Instead, we need to make the tax structure supporting the U.S. manufacturing base.
North American Free Trade Agreement (NAFTA)
Julia Hughes: NAFTA is 20 years’ old and it can be improved. However, raising import tax (tariff) is NOT a good idea. NAFTA supports the Western-Hemisphere supply chain, which is critical for the U.S. textile and apparel industry. We need to defend this supply chain.
Auggie Tantillo: NAFTA works and benefits its members on all sides of the border, including the United States. NCTO supports the continuation of NAFTA as well as to update and modernize the agreement as necessary.
Yarn-forward Rules of Origin (RoO)
Julia Hughes: Apparel is a global industry and apparel supply chain needs to be nimble. The yarn-forward RoO prevents apparel companies and retailers from fully enjoying the duty-free benefits under a free trade agreement (FTA) since not always the FTA region makes the needed products or their textile components. Exceptions to the yarn-forward rules such as the tariff preference level (TPL), provide necessary flexibility.
Auggie Tantillo: The yarn-forward RoO has been a great success and we need to keep it (in existing and future trade agreements). The only things that need to be improved is the exception to the yarn-forward RoO (such as short supply list and trade preference level). RoO is supposed to keep benefits of a free trade agreement to its members only, yet these exceptions create loopholes and cause damages (to the U.S. textile industry).
Julia Hughes: We need China, which still provides 40% of textiles and apparel consumed in the United States. It will be a disaster to trigger a trade war between the two countries.
Auggie Tantillo: We need to better help the Western-Hemisphere producers (in competing with textile and apparel made in China). China’s 40%+ market shares in the U.S. textile and apparel import market are not all based on its genuine competitiveness. Rather, China’s unfair trade practices such as IPR violation, government subsidy and unacceptable factory working conditions & environmental practices are of grave concerns.
Trans-Pacific Partnership (TPP)
Julia Hughes: TPP is not dead. On the other hand, countries around the world are actively negotiating new bilateral/regional free trade agreements. The United States doesn’t want to be left behind.
Auggie Tantillo: TPP is “in deep hibernation”, but trade agreement will never be really dead. It is still hopeful that TPP will come back later—but very likely to be in a different form, such as bilateral trade agreements. To be noted, many TPP members have already established bilateral/regional trade agreements with the United States.
Discussion questions: 1) Why do you think Julia Hughes and Auggie Tantillo disagree on many trade issues? On which topics they actually agree with each other and why? 2) What’s your response to Julia Hughes and Auggie Tantillo’s comments on trade issues above? 3) Based on the panel discussion, why do you think textile and apparel companies need to care about trade policy? Please feel free to share your views.