Updating Key Textile Provisions in NAFTA
In talks launched in 2017, the Trump administration initiated a renegotiation of the North America Free Trade Agreement (NAFTA) with the aim of improving the deal to better serve American manufacturing interests. NCTO supports making common sense updates to this now 24-year-old agreement that meet the President’s stated goal of bringing more employment, production, and investment back to the U.S. in manufacturing sectors such as textiles.
NCTO strongly supports making common sense improvements to NAFTA that help create a level playing field for American textile manufacturers and workers. NCTO urges negotiators and members of Congress to insist on ending TPL handouts to China; bringing NAFTA in line with CAFTA-DR rules for secondary components; closing the loophole that allows Mexico and Canada to qualify as “Buy American;” and taking concrete steps to tighten up customs enforcement.
Miscellaneous Tariff Bill
The Miscellaneous Tariff Bill (MTB) temporarily reduces or eliminates import duties on specified raw materials and intermediate products used in manufacturing that are not produced or available domestically. The MTB ensures that U.S. manufacturers are not at an unnecessary disadvantage to their foreign competitors when sourcing vital manufacturing components.
The last MTB passed by Congress expired at the end of 2012. As a result, U.S. manufacturers pay an estimated $748 million in additional materials costs each year that the MTB issue remains unresolved. In addition, since the failure to approve an MTB ultimately undermines the competitiveness of domestic manufacturers, it is estimated that the broader cost to the U.S. economy is $1.86 billion annually.
After passing the House in January 2018, the MTB legislation has moved to the Senate where it is awaiting passage. NCTO urges the Senate to pass the MTB as soon as possible, whether as a standalone bill or as part of a larger package.
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.