Modernizing NAFTA and Other U.S. Trade Agreements
In keeping with promises made during the campaign, the Trump administration has made forging and renegotiating free trade agreements (FTAs) in a manner that benefits U.S. workers, U.S. manufacturers, and U.S. exports a high priority in its trade policy. Chief among these promises was the commitment to address the 23-year-old North America Free Trade Agreement (NAFTA) so that it better serves American manufacturing interests. NCTO supports making common sense improvements to NAFTA that improve U.S. textile producers’ ability to compete on a level playing field with foreign competitors, and notes that similar improvements can be implemented when negotiating new FTAs or addressing existing ones.
NCTO supports the reopening of NAFTA to make common sense improvements that can also serve as a model for future FTA talks. U.S. textile manufacturers and workers will benefit from increased focus on and resources for customs enforcement, and the elimination of unnecessary exceptions to the yarn forward rule of origin.
Miscellaneous Tariff Bill
The Miscellaneous Tariff Bill (MTB) provides duty relief on imported manufacturing inputs not available domestically, offering U.S. manufacturers an aggregate savings of up to $500,000 annually per imported product approved under this system. The MTB process is designed to ensure that U.S. manufacturers are not at an unnecessary competitive disadvantage relative to their foreign competitors when sourcing vital manufacturing components.
When Congress allowed the last MTB to expire at the end of 2012, U.S. manufacturers were forced to pay an estimated $748 million in additional materials costs annually for every year without a new MTB in place. This has undermined the competitiveness of domestic manufacturers, with an estimated broader cost to the U.S. economy of $1.86 billion annually.
NCTO strongly supports the MTB as a tool to promote the competitiveness of U.S. manufacturing. Congress, however, actively must protect the integrity of the MTB process and longstanding U.S. trade policy by rejecting MTB petitions for end-products. Permitting end-products MTB status is inconsistent with Congress’s stated intention of the MTB, directly harms U.S. manufacturers, and undermines our FTAs by breaking faith with our free trade partners.
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 displace U.S. production, exports, and jobs. These harmful derogations from the yarn-forward rule also give countries that utilize predatory and illegal trading practices, like China, a backdoor entry into the U.S. market through our FTA system. As such, NCTO will continue to work to remove all TPLs from existing U.S. FTAs.
Transatlantic Trade and Investment Partnership
The United States and the European Union (EU) have been negotiating the Transatlantic Trade and Investment Partnership (TTIP), a proposed comprehensive free trade agreement (FTA), since February 2013. TTIP negotiations, however, have been put on the back burner as the Trump administration formulates its trade policy objectives and the EU negotiates the United Kingdom’s exit from membership.
Assuming TTIP moves forward and regardless of any 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.
Countries that trade with the U.S. and manipulate their currencies distort trade flows and fuel trade deficits by inflating the cost of U.S. exports and deflating the cost of U.S. imports. This unfair trade practice in turn displaces U.S. jobs. As an example of the kind of damage this practice can cause, the Economic Policy Institute found that 2.4 million U.S. jobs were lost between 2001 and 2008 due to China’s currency manipulation.
While the Chinese government is the most widely known currency manipulator, many countries engaging in international trade with the U.S. maintain artificially low currencies. According to the Peterson Institute for International Economics, several countries party to the now rejected Trans-Pacific Partnership were well-known currency manipulators including Japan, Vietnam, Singapore, and Malaysia.
NCTO opposes foreign governments undervaluing their currencies through foreign exchange markets. NCTO believes that currency manipulation distorts the global marketplace and puts countries like the United States at a disadvantage when trading with other nations that artificially undervalue their currencies. Consequently, the U.S. government and Congress should use their respective authority and influence to deter and counteract harmful currency manipulation.