TPP Free Trade Agreement for Garments: Plan B

For over 20 years all negotiations for U.S. garment related free trade agreements have been governed by 2 assumptions.

1.    Without the support of the textile industry, the U.S.  Congress  will reject any proposed garment free trade agreement.

As a result all negotiations between the U.S. and garment exporting countries have been based on a never ending series of compromises in an effort to achieve some consensus with the U.S. textile industry

Through these compromises, we have reached the point where most of the clauses of the free-trade agreement exist to limit free-trade:

Here are but a few.

To qualify for duty-free access the garment must be produced in the free-trade area, from fabric woven (or knitted) in the free-trade are, which in turn was produced from yarn spun in the free trade area — the yarn forward rule.

To qualify for duty-free access, the garment must be produced using U.S. made thread.

To qualify for duty-free access, the garment must be produced using U.S. made  pocket lining.

2.    The benefit of Free-trade agreements is that they increase  trade liberalization which directly benefits the United states

The assumption is that more liberal trade leads directly to reduced retail garment prices saving money for consumers while reducing inflation.

Here comes the good news:  The Trans Pacific Partnership has brought us to the end of the line,  where these assumptions no longer make any sense.

1.    Compromise to build consensus with the U.S. textile industry is out window:  TPP includes Vietnam, the U.S.’ second largest supplier of garment imports, after China.  No one believes that the U.S. textile industry will support a trade agreement granting duty free access to made-in-Vietnam garments.

2.    Regional free trade agreements as a source of trade liberalization leading to lower prices is flushed down the toilet:  Imports account for 97% of all garments sold in the U.S.  As a result regional free-trade agreements are now 0-sum, where exporters in the free-trade zone take market share from exporters outside the zone which has no effect on FOB prices or inflation.

Once we accept that the textile industry will not support TPP under any circumstances, and that TPP has nothing to do with trade liberalization, we are finally free to look at the challenges facing the TPP negotiations, rationally.

Here is something worth considering.  Free trade agreements exist to bring benefit to the insiders, at the expense of the outsiders.  The problem is that the traditional negotiating strategy on both sides — TPP PLAN A ­— will benefit every member, with the exception of the U.S.

It is for this reason that the U.S. Congress has 0 interest in supporting duty free access for TPP garments.  Why should they support an agreement where the  big  winner will be Vietnam while the U.S. is the big loser.

The TPP negotiators on both sides must come to terms with the new reality.  They must recognize arguing about the yarn forward rule versus the fabric forward rule is as irrational as standing on the deck of the sinking Titanic, watching your fellow passengers fighting to get on the life-boats and feeling happy because if they leave, you stand a better chance to win tomorrow’s shuffle-board tournament.

TPP provides the perfect opportunity for change, because of the nine original members, eight[1]  have enough in common to benefit from the same free-trade agreement, and the greatest beneficiary will be the U.S.

For the first time in 20 years we are in a position to create a new strategy which will change forever the way the U.S. Government views garment free-trade agreements.

I have spent a lifetime creating and implementing garment industry strategies for companies, governments and regions.  I am certain that working together, we can create a new workable strategy for TPP which can be replicated for virtually all future garment free-trade initiatives.

Our industry has more than its fair share of original creative and innovative minds. The time has come to work together to create a new Plan B, which will benefit everyone;  which would allow the USTR representative to  return to the administration and say,  here is a free trade agreement agreeable to all TPP members that will provide real quantifiable benefit to the U.S. economy, and bring Republicans and Democrats — liberals and conservatives — to a consensus, at little or no cost to us.

 Why argue to achieve failure, when we can all agree to achieve success?

[1] Brunei has little to gain from free-trade in garment exports

This entry was posted in Customer Strategies, Factory Strategies, Global Issues, U.S. Government and tagged , , , , , , , . Bookmark the permalink.

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