According to reports from the National Council of Textiles (NCTO), the recently completed round of Trans Pacific Partnership (TPP) negotiations conducted in Lima, Peru began to focus on a textile rule of origin. Several prominent textile CEO's, including Andy Warlick of Parkdale and Wally Darneille of PCCA, as well as NCTO staff, attended the meetings and reported that the US unveiled a list of 170 items that would be considered in "short supply" and thus would be given an exception to the yarn forward rule of origin. Under a yarn forward rule of origin, which is the prevailing rule in all free trade agreements, except AGOA and Haiti Hope, to be eligible for duty-free entry to the US, an apparel product must contain yarn produced in the US or the region. Vietnam is pressing the US to provide a more lenient rule in the TPP.
If a product is determined to be in short supply, an apparel article containing that component would be entered duty-free regardless of the origin of the specified component. According to NCTO, the 170 items "was a much larger list than the industry had hoped for and, in fact, 81 percent of the items on the list were objected to by at least one, and in many cases, several, U.S. textile mills" when the list was circulated for review. NCTO also reported "if the size of the list was an attempt to bring Vietnam over to a serious negotiating position, it did not appear to succeed. During meetings between the US and the Vietnamese government and Vietnamese industry, the Vietnamese said they were very disappointed in the list and said it represented only 1/10th of what they were looking for."
The next step will be for all other TPP countries to submit products to be added to the list and NCTO is urging members to carefully review and comment on any additions. NCTO warned that "it is clear from the U.S. proposal that negotiations have entered a much more serious phase, one which could be very damaging to the domestic industry. The U.S. government will now get new proposals from the TPP countries to add additional items to the list. This new list will then be vetted by the domestic industry once again. It will be very important that NCTO member companies participate fully in the process."
The next round of TPP negotiations is scheduled to be held in Kuala Lumpur, Malaysia, on July 15-25, and the US textile industry will once again send a high level delegation to the meetings. According to NCTO, "this round will have an added importance because there will be a Textile Forum just prior to the textile negotiations where Malaysian, Singaporean and Vietnamese textile and apparel companies will be invited to hear more about the yarn forward rule and the benefit it can bring to their countries. This will be a prime opportunity to get our message across to companies in the region." Given the critical importance of the rule of origin included in any eventual TPP agreement, the National Cotton Council is supporting NCTOs effort to have 125 Congressional signatures on a letter to the Administration urging support for a yarn forward rule in the final TPP. The US textile industry has established a significant export business in the Western Hemisphere based on the yarn forward rule of origin. If the TPP includes a more lenient rule, Vietnam will be able to utilize Chinese-made components in products that are granted preferential access, and those products will displace products manufactured in the US and Western Hemisphere using US and regional yarns. The result will be a substantial reduction in cotton consumption in the US and Western Hemisphere and a loss of jobs to Asia. The letter has been signed by a number of Cotton Belt members but more co-signers are needed.