TPP Could Pose Challenges for U.S. Textile Manufacturers, Report Says
The Trans-Pacific Partnership could shift global trading patterns for textiles and lower demand for some U.S. textile exports, according to a recent report from the Congressional Research Service.
U.S. textile manufacturers produce yarn, thread, and fabric for apparel, home furnishings, and various industrial applications, the report states, generating some $55 billion in shipments and directly employing about 232,000 in 2015. More than a third of U.S. textile production is exported, mostly to Western Hemisphere nations whose products have duty-free access to the U.S. market under free trade or trade preference agreements provided that they incorporate U.S.-made yarns and fabrics.
However, TPP’s 11 non-U.S. members would also have duty-free access to the U.S. market for textiles and apparel; tariffs on some of these goods would be eliminated immediately upon the agreement’s entry into force while others would be phased out over a decade or more. As a result, the report states, TPP has the potential to affect U.S. textile exporters in at least three ways.
- Duty-free access for TPP members (principally Vietnam, already the second-largest exporter of apparel to the U.S.) would eliminate much of the advantage now enjoyed by Western Hemisphere apparel producers in the U.S. market and, because Vietnamese manufacturers make little use of U.S.-made textiles, thus reduce demand for U.S. textile exports.
- The TPP would allow Western Hemisphere apparel manufacturers to use yarn and fabric made anywhere in the TPP region and still enjoy preferential access to the U.S. market. Thus, an enlarged Vietnamese textile industry could, at some future time, compete with U.S. exporters in Mexico and Central America.
- U.S. manufacturers of industrial textiles may experience more direct competition from Japan, also a leading producer of industrial textiles. On the upside, U.S. exports of these products could increase because TPP would eliminate tariffs on industrial fabrics that are currently as high as 20 percent in some TPP countries.
The report adds that TPP includes a “yarn-forward” rule of origin that would allow a garment to enter the U.S. duty-free only if yarn production, fabric production, and cutting and sewing of the finished garment all occur within the TPP region. However, 187 fibers, yarns, and fabrics in short supply in TPP member countries could be sourced from outside the region, including China.