Is the Trans-Pacific Partnership Dead on Arrival?
With all the political rhetoric flying during an election year, apparel and textile experts are wondering whether the Trans-Pacific Partnership has any chance of being approved by Congress before a new president takes office in January.
The two presidential candidates—Hillary Clinton and Donald Trump—are sounding a steady drum beat against the 12-nation trade deal, which is made up of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States.
The most recent death knell for the trade pact was delivered by Senate Majority Leader Mitch McConnell, the Republican senator from Kentucky.
Weeks ago he announced at a Kentucky State Farm Bureau gathering that the Trans-Pacific Partnership had some serious flaws and would not be acted upon this year.
This summer, California Congresswoman Nancy Pelosi, the House minority leader, said she wouldn’t support the 12-nation trade deal in its current form.
“Please be assured that I will oppose the TPP as it is currently written or any deal that attempts to separate commerce from the environment and will work to ensure our nation’s trade policies include increased transparency, more consultation and stronger protections to create jobs, strengthen human rights and protect the environment,” Pelosi wrote.
Despite the anti-TPP rhetoric, leaders at the American Apparel & Footwear Association, a trade group in Washington, D.C., believe there is a glimmer of hope for passage during the lame-duck session of Congress in November or December.
“TPP is very much alive, and there is a lot of energy around it,” said Steve Lamar, the AAFA’s executive vice president and a former trade analyst with the U.S. Dept. of Commerce. “All the political noise is casting a lot of doubt in people’s minds about whether it can happen or not. Because of the election and the congressional calendar, there is a narrow window for it to be approved this year, but the window is still wide open. It depends on the administration and Congress resolving pending issues.”
In the past, McConnell has warned against TPP provisions that won’t let tobacco companies use arbitration under the investor-state dispute-settlement process to seek damages against countries that invoke public health concerns to limit tobacco marketing and sales.
Another issue many aren’t happy with is how the TPP treats patents on medicine. Under the TPP, biologic medicines can earn between five and eight years of market exclusivity, well short of the 12-year period stipulated in U.S. patent law.
But the U.S. textile industry is happy with TPP’s yarn-forward provision that requires apparel manufacturers in the TPP countries to use regional yarns to qualify for duty-free status. This makes U.S. cotton and U.S. textiles more essential to TPP members who don’t manufacture their own yarns.
“Vietnam was pressing diametrically in the opposite direction,” recalled Augustine Tantillo, president of the National Council of Textile Organizations in Washington, D.C. “We partnered with Mexico and Latin American manufacturers to press for the yarn-forward provision.”
Tantillo said it is hard to read whether Congress will approve TPP before a new president takes office because of the strange political climate the country is going through. “Normally, I would say that pre-election rhetoric never really translated into a major breakdown regarding the passage of a trade agreement. If you look at NAFTA [the North American Free Trade Agreement], CAFTA [the Central American Free Trade Agreement] and China’s accession to the World Trade Organization, they have always been viewed very negatively in the run-up to the election. But they never seemed to result in those trade deals being sidetracked,” he said. “But this is the most unusual election I have seen in my lifetime. It is hard to compare it to the previous presidential campaigns, and potentially it could result in a delay on TPP.”
Tantillo, however, isn’t completely convinced that passage of the controversial trade pact is dead. “I would say I am closer to the view that it is in serious trouble than I would normally state,” he said.
Obama is clearly doing some quiet TPP lobbying on Capitol Hill without making too much noise before the presidential elections on Nov. 8. “The bigger the issue, the more it becomes an issue in the campaign,” Tantillo said. “A pivotal aspect will come through the debates. Clinton has been forced to the left by [Sen.] Bernie Sanders, by Trump and by concerns by the rank-and-file-union members who are disenchanted with her. As we get to the debate, you can only assume Trump will push her hard on this point where she may be forced to make a more demonstrative and somewhat irrevocable statement about her position here.”
Clinton has reversed her position on the trade pact since running for president. When she was secretary of state from 2009 to 2013, she was instrumental in helping to negotiate TPP and counted it as one of her major achievements.
“It’s unclear what Hillary would do if elected president. In the heat of the campaign, politicians will say things and when they get elected, they find they have to match that rhetoric with reality,” Tantillo said.
When Barack Obama was running for president, he did not support the U.S.-Colombia Free Trade Agreement, but that trade deal passed during his first term.
The AAFA would like to see the Trans-Pacific Partnership passed before Obama leaves office because of the many benefits. It means $1 billion in tariffs will be eliminated on apparel, footwear and travel goods among the 12 nations during the first year of the accord. “It unifies 40 percent of the world’s gross domestic product,” Lamar said, referring to the GDP of the 12 signatory countries.
Even though Mexico already has a free-trade agreement with the United States, it can further reduce tariffs on apparel made there because now Mexico can use Japanese fabric or Australian wool made from regional yarns and get a duty reduction or elimination because it will be part of the yarn-forward regulation.
Under NAFTA, Mexico can only use fabric made from yarns that come from Canada, the United States and Mexico to qualify for tariff reductions or eliminations.
“We don’t think the TPP needs to be changed. It should be enacted the way it is,” Lamar said. “You approve a trade agreement and strive to make it better.”