52 Congressmen Sign Letter Urging Textile Strong Rules of Origin in Trans-Pacific Partnership (TPP)

June 1, 2011

Ambassador Ron Kirk
600 17th Street, N.W.
Washington, DC 20508

Dear Ambassador Kirk:

As members of the United States House of Representatives representing districts with substantial textile and apparel industry interests, we write regarding the ongoing Trans-Pacific Partnership (TPP) negotiations. While we understand and appreciate the broad trade and geopolitical opportunities presented by the TPP, this agreement poses unique challenges for the U.S. textile and apparel industry, especially with the inclusion of Vietnam.

Consequently, from the perspective of the domestic textile sector, it is crucial that the United States handle the TPP negotiations carefully. If mismanaged, the TPP agreement could dramatically shift global trading patterns, displace critical U.S. textile, and apparel jobs and undermine important trade relationships in the Western Hemisphere that support nearly two million jobs.

Challenges Posed by Vietnam:

It is important to recognize that Vietnam’s textile and apparel production and export model is heavily influenced by its proximity to and its relationship with China. Like China, Vietnam has a large state-owned and subsidized textile sector. Vietnam also has an undervalued currency, weak environmental rules and lax intellectual property enforcement. Finally, Vietnam depends on China for most of its yarns and fabrics, importing $ 2.2 billion of textile components from China in 2009. Due to the fact that China is the dominant source of Vietnam’s textile and apparel inputs, their market does not offer significant export opportunities for U.S. yarn and fabric producers.

In terms of trade flows, Vietnam, paying full duties, is already the second largest supplier of textiles and apparel to the United States behind China. A partially state-owned company named Vinatex is the 10th largest garment producer in the world. Furthermore, 57 percent of the U.S. merchandize trade deficit with Vietnam is in textiles and apparel.

Vietnam’s ability to flood the U.S. textile and apparel market with imports is also well documented. Since Vietnam was granted “normal trade relations” with the U.S. in 2001, its textile and apparel exports to the U.S. market have increased by 12,855 percent and totaled $ 6.3 billion in calendar year 2010. As a result, it is critical that the United States insist on the strongest possible textile text to address the challenges posed by Vietnam’s inclusion in TPP.

We are encouraged that you have already indicated that textiles and apparel should be handled as a separate negotiating group. The textile and apparel sector has always been treated as an independent chapter under U.S. free trade agreements, and we strongly support separating this product grouping from other manufactured products under the TPP negotiations. Textiles and apparel account for over one-third of two-way trade between the United States and Vietnam and represent a complex area of U.S. trade policy with unique sensitivities compared to virtually all other industrial sectors. As a result, these products are not suitable for treatment under a generic formula for all manufacturing products.

Moreover, we recommend the following key negotiating objectives under the TPP textile chapter:

1. Noting Vietnam’s non-market economy status and the subsequent inherent advantages provided to its textile and apparel sector, special market access rules should be negotiated under TPP. Various approaches for sensitive products should be considered such as excluding certain tariff lines altogether, negotiating tariff reductions versus phase-outs, and extended duty phase-down/phase-out periods. Furthermore, Vietnam should be required to meet certain transparency and market-based economy benchmarks before gaining benefits.

2. The basic yarn-forward rule of origin for textiles and apparel should be adopted under the TPP with no loopholes. The yarn-forward rule is the accepted rule for the industry and is incorporated into all U.S. free trade agreements dating back to NAFTA. This is also the most logical rule because it reserves the benefits for the signatories to the agreement and also aids in Customs enforcement. In addition, the President, in a letter to the U.S. textile industry on October 24, 2008, indicated his strong preference for a yarn-forward rule. As part of the yarn-forward rule, it is also important that all textile components in garments, including linings, narrow elastic fabrics, sewing thread and pocketing, be required to originate in parties to the agreement. Derogations from the yarn-forward rule, including tariff preference levels (TPLS) and single transformation, should not be allowed.

3. Customs enforcement rules must be strengthened. The past five years have demonstrated that the present set of customs rules developed under the CAFTA agreement are easily evaded by fraudulent producers, most of whom reside in China. This has cost both the domestic textile industry and U.S. Treasury dearly. Customs rules should be updated to include effective tracking of yarn and fabric inputs as well as other measures. Given Vietnam’s heavy reliance on China for yarns and fabrics, strong customs rules are mandatory if fraudulent activity is to be contained.

In conclusion, we believe that risks to the domestic textile industry can be greatly reduced if the TPP textile text is negotiated following the recommendations described above. While the TPP countries, particularly Vietnam, have substantial capability to produce finished textile and apparel goods for export, they have limited ability to consume finished textile products manufactured in the United States. A weak textile text could lead to an increase in the U.S. trade deficit and cause the loss of significant textile and apparel jobs in the United States. Consequently, we strongly urge you to include these key points in a final agreement.

Thank you for your consideration of our views, and we look forward to your response on this important matter.

Sincerely,

Trans-Pacific Partnership TPP Letter Signatories by State 52 Total (26 Republicans / 26 Democrats)

ALABAMA
Martha Roby (R-AL-2)
Mike Rogers (R-AL-3)
Terri Sewell (D-AL-7)

ARIZONA
Raul Grijalva (D-AZ-7)

CALIFORNIA
Linda Sanchez (D-CA-39)

CONNECTICUT
Joe Courtney (D-CT-2)
Rosa DeLauro (D-CT-3)

GEORGIA
John Barrow (D-GA-12)
Sanford Bishop (D-GA-2)
Paul Broun (R-GA-10)
Phil Gingrey (R-GA-11)
Hank Johnson (D-GA-4)
David Scott (D-GA-8)
Lynn Westmoreland (R-GA-3)

IOWA
Bruce Braley (D-IA-1)
Thomas Latham (R-IA-4)

MAINE
Mike Michaud (D-ME-2)

MASSACHUSETTS
Jim McGovern (D-MA-3)

MICHIGAN
Thaddeus McCotter (R-MI-11)

MISSISSIPPI
Alan Nunnelee (R-MS-1)

NEW JERSEY
Bill Pascrell Jr. (D-NJ-8)

NORTH CAROLINA*
G.K. Butterfield (D-NC-1)
Howard Coble (R-NC-6)
Renee Ellmers (R-NC-2)
Virginia Foxx (R-NC-5)
Walter Jones Jr. (R-NC-3)
Larry Kissell (D-NC-8)
Patrick McHenry (R-NC-10)
Mike McIntyre II (D-NC-7)
Brad Miller (D-NC-13)
Sue Wilkins Myrick (R-NC-9)
David Price (D-NC-4)
Heath Shuler (D-NC-11)
Mel Watt (D-NC-12)

OHIO
Marcy Kaptur (D-OH-9)
Betty Sutton (D-OH-13)

OREGON
Peter DeFazio (D-OR-4)

PENNSYLVANIA
Tom Marino (R-PA-10)

RHODE ISLAND*
David Cicilline (D-RI-1)
Jim Langevin (D-RI-2)

SOUTH CAROLINA*
James Clyburn (D-SC-6)
Jeff Duncan (R-SC-3)
Trey Gowdy (R-SC-4)
Mick Mulvaney (R-SC-5)
Tim Scott (R-SC-1)
Joe Wilson (R-SC-2)

TENNESSEE
John Duncan Jr. (R-TN-2)
Phil Roe (R-TN-1)

TEXAS
Mike Conaway (R-TX-11)
Randy Neugebauer (R-TX-19)

VIRGINIA
Morgan Griffith (R-VA-9)

WISCONSIN
Tom Petri (R-WI-6)

Source: National Textile Association, Jun 1, 2011

TPP Rules of Origin for Textiles & Apparel: Yarn-Forward