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Senators Call for More Flexible Textile and Apparel Trade Rules

By J. Craig Shearman
Washington Retail Insight
May 2, 2012

A bipartisan group of senators this week called on President Obama to support more flexible rules on textiles and apparels in negotiations over the pending Trans-Pacific Partnership trade agreement, saying a controversial “yarn-forward” rule has limited the usefulness of other recent pacts.

“The current U.S. proposal on rules of origin takes an overly broad approach in advocating a yarn-forward position for nearly all apparel products,” the seven Democrats and eight Republicans said in a letter. “We ask you to take a new approach which reflects the significant value created by American retailers, apparel brands, manufacturers and importers as well as domestic textile producers.”

The yarn-forward rule governs whether apparel can be eligible for benefits provided by a free trade agreement and has been included in most trade deals since 1992’s North American Free Trade Agreement at the insistence of U.S. textile manufacturers.

In order to be eligible for FTA benefits, all materials used in the production of a garment – beginning with the yarn spun or extruded to create the fabric – must be from the country or countries covered by the FTA. Since many apparel-producing countries, including those in the TPP talks, do not have significant yarn and fabric production, the requirement is often impossible to meet. As a result, the rule hinders new trade and investment and renders most existing trade ineligible for preferential tariff treatment under an FTA.

NRF welcomed the Senate letter, which follows a similar bipartisan communication from 30 members of the House last October.

“We are reaching critical mass to reform the onerous yarn-forward rule, which protects one industry at the expense of consumers, retailers, and the promotion of new trade, investment and economic growth,” NRF Vice President and International Trade Counsel Erik Autor said. “There is now strong bipartisan and bicameral support for more progressive and realistic rules-of-origin standards in the TPP negotiations and other trade agreements that are more consistent with the Administration’s goal of making the TPP a 21st Century trade agreement.”

“The United States Trade Representative should immediately heed congressional calls to reform these anti-free trade restrictions in the TPP, and reaffirm the nation’s commitment to free and open trade,” Autor said. “Today’s Senate action is a strong signal to the President and USTR that Congress will support Administration efforts to advance more flexible textile and apparel standards that will actually promote rather than hinder new trade and investment under this agreement.”

NRF contends that trade rules should recognize that 98 percent of apparel sold in the United States is sewn outside the United States. The rules should not be designed to favor one stakeholder group, but rather be crafted to support all U.S. industries in the textile and apparel sector, including retail. NRF has long supported a new approach to trade that reflects the interests and needs of both manufacturers/exporters and retailers/importers.

U.S. apparel and textile makers have supported the yarn forward rule and other restrictive rules on apparel trade under the claim that they protect U.S. jobs. But NRF has countered that most of the apparel products in question are no longer made in the United States, so the restriction merely drives up prices for consumers while doing little or nothing to create jobs.

Besides the United States, the TPP includes Brunei, Chile, New Zealand, Singapore, Australia, Malaysia, Peru, and Vietnam. The next round of negotiations is scheduled to take place in Dallas beginning next week.

© 2012 National Retail Federation

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