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.
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.