As of Thursday, May 26, 2016
Under the new 12-nation Trans-Pacific Partnership agreement, U.S. apparel imports and exports would only increase slightly under the trade pact, which must be approved by Congress.
The U.S. International Trade Commission recently published an independent study of the free-trade accord and found that U.S. apparel imports would inch up 1.4 percent with a $1.9 billion increase by the year 2032 while exports would barely budge, seeing a 0.3 percent rise, or a $10 million increase.
The U.S. textile industry would see modest gains too. By 2032, TPP would help U.S. textile imports see a 1.6 percent increase by $869 million while U.S. textile exports would edge up 1.3 percent, or $257 million.
The study showed that Vietnam, one of the TPP member countries, would benefit the most from the free-trade pact when it comes to manufacturing and exporting apparel to the United States because tariffs will be eliminated on many items produced there using regional yarns and fabric, a requirement for duty-free status. In 2015, U.S. duties on apparel coming from Vietnam totaled $10.5 billion and the average tariff was set at 17 percent.
Vietnam is the No. 2 provider of clothing to the United States, accounting for 10 percent of all U.S. apparel and textile imports. China is still No. 1 with shipments making up 38 percent of all apparel and textiles imported into the United States.
When the free-trade pact goes into effect, additional clothing imports from Vietnam are expected to be moderate because of Vietnam’s inability to meet many of the yarn-forward requirements needed to qualify for duty-free status. Vietnam gets about 88 percent of its yarn and fabric from China, South Korea and Taiwan, which are not TPP members.
Although there is some domestic textile production in Vietnam, only about one-quarter of it is considered to be of export quality.
Also, Vietnamese-produced yarns and fabrics are more expensive than similar items produced in China. In 2014, Vietnamese yarns were estimated to be 5 percent to 10 percent more expensive than similar yarns manufactured in China while Vietnamese fabric prices were 5 percent to 8 percent more expensive than Chinese fabrics.
In 2014, Vietnam’s textile industry consisted of 145 yarn spinners, 401 weaving facilities, 105 knitting mills, 94 dyeing and finishing plants, and seven nonwoven manufacturers.
With Vietnam’s immediate inability to produce yarns as required for duty-free entry, manufacturers were concerned that the demand for regionally made yarns would lead to higher prices in the immediate future and make Vietnam less competitive in supplying clothing to the United States.
But in the long run, increased domestic yarn and fabric production would shorten lead times and prices, benefiting Vietnam’s apparel exports.
Anticipating yarn-forward rules in the TPP accord, domestic and foreign firms have been investing to improve Vietnam’s fiber and textile capabilities with foreign direct investment in the sector estimated to be in excess of $1 billion.
In the overall economy, the report found that U.S. annual real income would see a 0.23 percent rise, or an added $57.3 billion, by 2032 if the trade pact is enacted. Real gross domestic product would creep up 0.15 percent, or $42.7 billion.
The TPP is supported by the American Apparel & Footwear Association as well as the National Association of Manufacturers. Many Democrats in Congress oppose it.
The 12 countries in the pact are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States.