Tran Quoc Khanh, Deputy Minister of Trade

Vietnam signals willingness to work with U.S. on Short Supply Proposal – TPP Textiles & Apparel

Tran Quoc Khanh, Deputy Minister of TradeSINGAPORE , Mar 15, 2013 Vietnam is open to working with the United States and the private sector to see whether a U.S. proposal aimed at resolving the controversial issue of rules of origin for apparel will lead to a solution that would be acceptable to both countries in a Trans-Pacific Partnership (TPP) agreement, according to a Vietnamese trade official.

In a press conference to mark the end of the 16th round of TPP talks here, Vietnamese chief negotiator Tran Quoc Khanh said Vietnam “welcomes any idea that can help us move forward, including the idea a short-supply list.”

The Office of the U.S. Trade Representative in December proposed the creation of permanent and temporary shortsupply lists of items that could be sourced from outside the TPP region and still be made into apparel eligible for tariff benefits. These short-supply lists would serve as an exception to the restrictive yarn-forward rule of origin for apparel the U.S. has proposed in the talks

Additional flexibility from the yarn-forward rule would be key for Vietnam because that would make it easier for Vietnamese apparel products to qualify for reduced U.S. tariffs under TPP. But the U.S. wants to ensure that the TPP benefits accrue only to participating members, meaning it wants to limit the number of exceptions to the yarn-forward rule.

In addition, U.S. textile manufacturers are worried that Vietnamese imports — which are made with low labor costs and, according to U.S. manufacturers, benefit from a host of subsidies — could displace apparel imports from Central America and other countries that are made with U.S. yarns and fabrics. Khanh said that Vietnam understands the importance of the textile issue for the U.S. and that he believes the U.S. recognizes its importance for Vietnam. “And that is why we’ve been working very closely, not only with the USTR but also with the business sector, in order to find all the possibilities that can help us to set up a formula that can be acceptable to both sides in this negotiation,” he said.

But he emphasized that any potential solution to the rules of origin issue must meet two criteria. It must take into account the nature of the current globalized supply chain, and it must result in commercial benefits for businesses in the TPP region. “So, in fact, we are working and open to any proposal that can help us to move forward,” Khanh said.

After announcing its short-supply idea at the December TPP round, USTR began collecting suggestions for the lists from U.S. apparel importers and retailers as well as textile manufacturers through a complicated submission and vetting process on a White House website (Inside U.S. Trade , Feb. 7). That process is still ongoing. See TPP Short Supply List – U.S. Initiative on Textiles & Apparel Chapter

USTR officials had hoped to present some initial proposals for items to include on the two lists at the round here, but apparel sector sources said they were not aware that this had occurred. They said the textile discussions held here on March 8 most likely consisted of USTR briefing other countries about the process it has set up for accepting proposals for the lists and vetting them with domestic industry.

Khanh said his government had not yet decided whether Vietnam would consider coming up with its own proposals for items to be included on the short-supply lists. “We need to understand about the way to construct the list first, and then if we … see that it could be a good way forward, then we might proceed to contribute to the list,” he said.

In general, Khanh stressed that Vietnam would prefer a more flexible rule of origin for apparel that would take into account the globalized nature of supply chains. “But at the same time, we understand it is a sensitive issue for a number of , and that is why we are keen on working with them.

Source:  INSIDE U.S. TRADE –  – March 15, 2013

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