On October 5, 2015, the United States completed the Trans-Pacific Partnership (TPP) with eleven other Pacific Rim countries, including Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Finalizing TPP in 2015 was a primary goal of the Obama administration, and securing congressional approval of the agreement is a top priority before the administration leaves office early next year.
NCTO’s Governing Councils and Board of Directors voted to formally support TPP after an exhaustive analysis of the agreement, with a specific focus on the following key areas:
- Rules of origin
- Market access
- Impact on the Western Hemisphere production chain
- Additional standard textile chapter terms in U.S. FTAs, such as customs enforcement
The final text of TPP’s textile chapter broadly meets the objectives NCTO identified as key to gaining the domestic textile industry’s support from the outset of negotiations. The rules adopted under TPP keep faith with the important standards that underpin most of our previous FTAs, including a yarn-forward rule of origin, Market Access terms that cover the majority of the region’s sensitive products, and critical customs enforcement mechanisms. Although there are areas of concern for the industry, NCTO believes that the administration was able to strike a careful balance between concessions and benefits in the final product. As a result, NCTO will urge support for TPP when Congress undertakes its official review of the agreement.
Transatlantic Trade and Investment Partnership
The United States is now heavily engaged in negotiating a major free trade agreement (FTA) known as the Transatlantic Trade and Investment Partnership (TTIP). TTIP is an effort to establish a comprehensive FTA between the United States and the European Union (EU). The U.S. and EU have been meeting on a quarterly basis since the talks were launched in February 2013. To date there have been 12 official negotiating rounds, and the next two formal rounds are slated for late April and July.
The Obama administration is communicating that they have every intention of completing the TTIP negotiations prior to the expiration of the president’s term. Regardless of the exact timetable, NCTO will remain heavily focused on ensuring that the final TTIP agreement includes a sound rule of origin based on the yarn-forward construct, provides extended tariff phase-out periods for sensitive products, and preserves the Berry Amendment in full.
Tariff Preference Levels
Tariff Preference Levels (TPLs) provide a specific exemption from the yarn forward rule-of-origin used under U.S. free trade agreements (FTAs). Countries that are not party to the free trade agreement can supply yarns and fabrics that eventually enter the United States duty-free as part of finished apparel and home furnishings.
TPLs create loopholes in our FTA structure that destroy U.S. exports and consequently displace U.S. workers. These derogations give countries that utilize predatory and illegal trading practices, like China, a “backdoor” entry into the U.S. market through our FTA system. The three TPLs, discussed above, were meant to be temporary and have run their course. In order to spur U.S. production, investment, exports and jobs, NCTO will continue to work with Congress to ensure all proposals to extend TPLs are rejected.
Countries that trade with the U.S. and manipulate currency cause trade deficits that interrupt trade flows by inflating the cost of U.S. exports, deflating the cost of U.S. imports and in turn displace U.S. jobs. Data from the Economic Policy Institute finds that between 2001 and 2008 2.4 million U.S. jobs were lost due to China currency manipulation.
While the Chinese government is the most widely known government to manipulate its currency, many countries wishing to engage in international trade with the U.S. maintain artificially low currencies. According to the Peterson Institute for International Economics, there are several countries participating in the Trans-Pacific Partnership negotiations that are known currency manipulators including Japan, Vietnam, Singapore, and Malaysia.
NCTO opposes foreign governments undervaluing their currency through foreign exchange markets. NCTO believes that currency misalignment distorts the global marketplace and puts countries like the United States at a disadvantage when trading with other nations that artificially undervalue their currencies.