Apparel Manufacturers, Textile Makers Take on Administration’s Hot-Button Issues

Looking for a good outline of the apparel and textile industries’ take on some of President Trump’s proposals concerning international trade?

Julie Hughes, president of the U.S. Fashion Industry Association, and Augustine Tantillo, president and chief executive officer of the National Council of Textile Organizations, discussed their group members’ view on everything from a proposed border tax on goods coming from Mexico to the fate of the Trans-Pacific Partnership at a recent live webcast.

Robert Antoshak, managing director of Olah Inc., which produces the Kingpins denim trade show, hosted the Feb. 9 webcast, which was sponsored by Just-Style.

Antoshak opened the discussion by asking about the president’s stance on bringing manufacturing back to the United States.

“There are jobs here in the U.S. that are jobs created by trade,” Hughes said, ticking off a list that included product development, design, logistics and supply-chain solutions positions. “Seventy percent of the value of imported product is U.S. jobs.”

Tantillo said his group is “pleased and excited” about the president’s position on domestic manufacturing.

“It’s good for a change to have an administration acknowledge the value of domestic manufacturing,” he said.

Hughes pointed out that her organization’s members are “the customer of Auggie’s members.” She said they hoped that the U.S. jobs created by international trade don’t get “lost in the political discussion.”

The current administration has proposed a 20 percent tax—or a border adjustment tax—on goods coming in from Mexico.

“If we adopt a border adjustment tax or some other form of trade-restrictive policy, is there enough infrastructure here?” Antoshak asked.

Tantillo argued that before discussing a border-adjustment tax arrangement it would be better to look at the U.S. corporate tax structure, which his organization believes is “fundamentally disadvantageous” to business.

Hughes agreed that tax reform is needed but added, “The border-assessment tax proposals out there so far aren’t helpful.”

Tantillo countered that the U.S. has not run a trade surplus since 1975 and while there might be “unintentional consequences” of a border adjustment tax, “we have to be willing to have the discussion.”

The North American Free Trade Agreement, or NAFTA, may also be renegotiated under the new administration, something that both Hughes and Tantillo seemed to think was warranted.

“NAFTA is more than 20 years old,” Hughes said. “Are there things that can be improved? I think we can all agree on that. Mexico consumers are talking about a boycott of U.S. goods. We don’t want to go down that path.”

But Hughes and Tantillo were less in agreement over the yarn-forward rule that is built into NAFTA and other more recent U.S. trade agreements. Under the rule, manufacturers must use fabric and yarn made in the trade agreement countries in order to bring the goods back to the U.S. duty-free.

Tantillo said NCTO is in favor of keeping the “baseline concept of yarn-forward. There are exceptions to yarn-forward—loopholes. We view them as damaging.”

Those exceptions, such as the trade preference levels (TPLs) and Short Supply, allow manufacturers to use fabrics and yarn not made in the region. For example, there are provisions in NAFTA for using silk made in China. Silk fibers are not produced in the NAFTA countries.

“This is a global industry and a global supply chain,” Hughes said. “If there is a product not available—whether it’s silk from China or a product from Italy or Peru—the TPLs help with that and maybe that continues to be the outlet valve.”

Antoshak also asked about the impact of Chinese manufacturing on U.S. business and the fate of the proposed Trans-Pacific Partnership agreement, which was supposed to be a countermeasure to China’s influence on manufacturing in Asia.

Tantillo said the President seems to prefer bilateral agreements to multilateral agreements. He said he thought there are opportunities for bilateral agreements with some of TPP members such as Japan.

Hughes agreed—somewhat.

“We started with a bilateral deal. Maybe we build it back up within the process of bilateral deals,” she said. “We don’t want to be left behind. We don’t want to be fortress America.”

Antoshak concluded the discussion by asking Hughes and Tantillo what advice they have for their members, who are worried about the current state of uncertainty.

Hughes said she advises people to remain calm and wait to see what happens. Although retail sales were not strong last year, she said it’s important to remember that the economy is strong.

“Our members are experienced in uncertainty,” Tantillo said. “It’s the nature of the process for the last 30 years. What you do is be as good as possible in innovation and productivity.”