Positions on Key Trade Issues: US Fashion Industry Association (USFIA) V.S. National Council of Textile Organizations (NCTO)

 

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).

On China

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.

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Author: Sheng Lu

Professor @ University of Delaware

6 thoughts on “Positions on Key Trade Issues: US Fashion Industry Association (USFIA) V.S. National Council of Textile Organizations (NCTO)”

  1. 1. The National Council of Textile Organizations is a unique association representing the entire spectrum of the textile sector. However, the United States Fashion Industry Association represents apparel brands, retailers, importers, and wholesalers based in the United States and doing business globally. In other words, they represent the benefits of different groups. Moreover, USFIA and NCTO have different goals. The goal of USFIA is to eliminate the global apparel quota system and trade barriers and create economic opportunities in the United States and abroad. However, the mission of NCTO is to advance the interests of the U.S. textile sector. With different group interests and missions, the presidents of these two organizations disagree on many trade issues except North American Free Trade Agreement (NAFTA). Both USFIA and NCTO agree that NAFTA supports the Western-Hemisphere supply chain and the U.S. also get benefit from this agreement. For example, many American small businesses depend on exporting their products to Canada or Mexico, this trade supports thousands of small- and medium-sized businesses in the US.
    2. I incline to Julia Hughes comments. Even though the gross output value of textiles in the U.S. is about $70 billion annually, but I believe the whole supply chain including textile and apparel producer, importer, retailer should create more value than one textile sector. I agree textile industry support many manufacturing jobs, but as Julia said, along the supply chain, from producers, marketing to retailing, fashion brands and retailers have also created many well-paid non-manufacturing jobs in the United States either. Moreover, manufacturing and textile are labor-intensive industries which the U.S. has no comparative advantages. But the U.S. has advantages on branding, marketing and retailing, why not focus on the things you good at? It can create more value. In addition, in fashion industry, textile is only a part of the supply chain, we cannot sacrifice or weaken other parts benefits to support one part.
    3. Every industry, includes textile and apparel industry, is shaped by rules, and the rules and policies are closely related to every company’s benefit in the industry. For example, North American Free Trade Agreement mentioned in the article, if this agreement abolishes, the companies which import or export goods to or from Canada and Mexico might be under the pressure of tariffs and have to rise the price even under the risk of reducing volume. It is easy to trap in a vicious cycle and some small businesses might go bankrupt. Therefore, trade policy influences every company in the industry.

    1. Thank you for your great comment! I am very glad that you checked USFIA and NCTO—you’ll hear their names from time to time in the course. Later on in FASH455, we will discuss in detail the state of the US textile industry and apparel industry. This will help you understand deeper why USFIA and NCTO agree and disagree on many trade issues.

  2. Julia Hughes and Auggie Tantillo agree on some topics and disagree on others. I believe their divide comes from their background of where they work. Julia Hughes is the President of the United States Fashion Industry Association whereas Auggie Tantillo is the Chief Executive of the National Council of Textile Organizations. The US Fashion Industry Association’s mission is to remove barriers that impede the free movement of textile and apparel products to the US and international markets, whereas the NCTO’s mission is to create powerful national and international alliances to advance the interests of the US textile sector. Hughes and Tantillo can agree on some trade issues and policies such as the Yarn Forward Rule, which prevents apparel companies and retailers from fully enjoying the duty-free benefits under a free trade agreement. However, they disagree when it comes to the topic of China. Hughes’s opinion is that the US needs China in that it provides 40% of textiles and apparel consumed in the US, where as Tantillo’s opinion is that the US needs to better help the Western-Hemisphere producers in competing with textile and apparel made in China because China’s 40%+ market shares in the US textile and apparel market are not all based on its genuine competitiveness. Tantillo is coming from a Chief Executive of the NCTO standpoint in that he is thinking more about the social responsibility aspect, whereas Hughes is coming from a President of the USFIA in that she is thinking along the lines of an international market.

    1. Agree with your observations! You may further think about why NCTO and USFIA hold very different positions on trade. We will discuss these topics in detail later in the course 🙂

  3. It is very interesting to see the divide that Julia Hughes and Auggie Tantillo have amongst the vast variety of topics discussed in this discussion. I also must agree that their difference of opinion has partially to do with where each individual is employed and their professional experience with the following topics examined here. As Julia holds her position as the President of the United States Fashion Industry, she seems to be engrained with ideals that broaden trade and keep cordial relations with countries such as China. She keeps in mind how detrimental it could be to trigger a trade war or even lose out on what the U.S. does benefit from globalization. Mrs. Hughes explains how 70-80% of the retail value of imported clothing stays in our country once received. However, Auggie Tantillo is the President and Chief Executive of the National Council of Textiles Organizations where he appears to be content with the idea of bringing manufacturing back to the U.S. His beliefs almost oppose Julia’s. Auggie wishes to help the Western-hemisphere first, rather then focusing on trading with China. He brings to light the unfair wages and worker treatment these factories face when using overseas trading. He wants the baseline value of manufacturing in the U.S. to be acknowledged. One thing both individuals do agree upon is the updating of NAFTA. Both parties understand this agreement is outdated and it will be beneficial nonetheless for all parties involved to modernize it. After reviewing this discussion and analyzing each panels take on these topics, I realize that it is imperative such issues get resolved and worked out. Destructive things could happen if an inappropriate tariff be imposed upon China or an unsettling decision be made about NAFTA for example. The textile and apparel industry could and would suffer. Maybe and increase in loss of jobs or an actual war?

    1. Great thinking! Two follow-up comments: 1) As you see, textile and apparel trade & sourcing is closely connected with many critical global affairs and public policy debates. I hope FASH455 can help our students understand these debates and see the importance of our textile and apparel sector in today’s global economy. 2) While taking the course, you can think about why NCTO and USFIA hold quite divided views on many trade agendas but their views on NAFTA seem to be close.

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