On behalf of the American Apparel & Footwear Association (AAFA), thank you for providing an opportunity to share our perspectives on the Transatlantic Trade and Investment Partnership (TTIP).
By way of background, AAFA is the national trade association representing apparel, footwear, and other sewn products companies, and their suppliers, which compete in the global market. Our membership consists of about 530 American companies that represent one of the largest consumer segments in the United States. The apparel and footwear industry overall represents $350 billion in annual domestic sales and sustains more than four million American jobs. Our members are present throughout Europe, where they employ millions of Europeans and sell billions of dollars’ worth of clothes, shoes, and other fashion products.
AAFA strongly supports negotiation of a high standard comprehensive trade agreement with the European Union (EU) that actually reduces barriers to trade and investment between Europe and the United States. Europe is an important partner of the U.S. apparel and footwear industry. Not only is Europe a top market, but it is also a source of key fabrics and other inputs that are used in the production of apparel in the United States and around the world by top American brands. Strong US-EU synergies exist throughout the supply chains as designers, compliance experts, and logistics professionals from both continents routinely collaborate to bring today’s fashions into homes in the United States, Europe, and throughout the world. For U.S. apparel and footwear manufacturers, Europe represents both one of the largest, and the fastest growing market, for finished U.S.-made apparel and footwear. From 2009-2012, U.S. exports of finished apparel to Europe jumped 41.4 percent to $683 million. That phenomenal growth has continued into 2013, with U.S. apparel exports to Europe climbing 8 percent in the first 10 months of 2013. Yarn and fabric exports to Europe are also up. Likewise, U.S. footwear exports to Europe rose 15.9 percent from 2009-2012 to $54 million, and are up this year as well. On the import side, apparel and footwear imports from Europe equaled about $2 billion and $1.5 billion, respectively, for the year ending October 2013. Yarns and fabrics, used in garments manufactured in the United States, add in another $1.2 billion.
Eliminate all Trade Restrictions Taken Since January 1, 2013
Critical to the negotiation of the TTIP is the knowledge that neither country will undertake new or expand on any restrictive trade measures while the agreement is under consideration and negotiation. We remain deeply concerned the EU continues to maintain a punitive 26 percent tariff (on top of an existing 12 percent duty) on certain women’s jeans made in the United States and exported to Europe. We urge that these duties be eliminated immediately.
Immediate Reciprocal Elimination of Duties
We often hear that the T-TIP is not about duty reduction since the overall tariff rates between the EU and US are relatively low. While this may be true of duties collected in other industries, it is not the case of tariffs affecting our sector. In 2012, the United States collected more than $580 million worth of duties on imports of textiles, apparel, and footwear from Europe. This figure represents more than 12 percent of all duties collected on U.S. imports from Europe, even though textiles, apparel, and footwear represent less than 2 percent of all total U.S. imports from Europe. Duty reduction and elimination on the goods in our sector, on an immediate and reciprocal basis, would have a huge effect in reducing trade costs and barriers that disproportionately affect this industry, and which unnecessarily impose costs on consumers in both the United States and Europe.
Use Flexible Rules of Origin (ROO)
Duty elimination is meaningless if the rules of origin are so restrictive that they cannot be used. Restrictive rules of origin – such as the yarn forward rule of origin used in some of the free trade agreements the United States has negotiated – serve as “localization barriers to trade” by forcing companies to use certain inputs in order to gain the benefits of the agreement. Ultimately, such restrictive rules discourage use of the agreement by both importers and exporters. We urge that the ROO in the TTIP be simple and flexible to encourage the development of trade and investment of U.S. companies using global supply chains.
On a related point, the ROO should specifically envision cumulation among shared FTA partners so companies are not forced to abandon supply chains they have developed to take advantage of previous FTAs. We are concerned that development of US FTA partners in silos – where each agreement stands alone and supply chains that span agreements are discouraged – creates an unhealthy dynamic by setting up U.S. FTA partners as competitors and discouraging integration that can return value to U.S. firms, U.S. workers, and U.S. consumers, as well as all U.S. FTA partner countries.
Preserve the Berry Amendment in Government Procurement Chapter
The Berry Amendment, a staple of U.S. procurement law for more than 70 years, has ensured that all clothing and footwear purchased by the U.S. military is made in the United States. This law has supported the maintenance of a warm industrial base of domestic textile, footwear, and apparel firms that supply the U.S. military, including the ability to surge during security situations. The Berry Amendment has been enshrined in the government procurement chapter of all U.S. FTAs and in the multilateral Government Procurement Agreement (GPA). We strongly support continuation of this policy.
Harmonize Regulations on Labeling and Product Safety
We strongly support efforts to harmonize regulations and requirements on product safety and labeling. Last week, we submitted a joint letter with our counterpart organization in Europe, EURATEX, to do just that. Diverse and conflicting regulatory requirements are among the biggest costs our members face. Fortunately, there is a history of cooperation between U.S. and European negotiators (most recently in conjunction with the multilateral trade negotiations under the auspices of the Doha round) to harmonize labeling requirements. We believe there are ample opportunities in this area, as well as in product safety and chemical management, to develop common approaches for commonsense, fact-based regulations. We further believe harmonization opportunities exist among the EU nations and at subnational levels in the United States and Europe as well.
Include Facilitative Customs Provisions
We support the negotiation of a Customs chapter that emphasizes trade facilitation, treats trusted traders as partners, and focuses enforcement activities on traders who are more likely to present risks.
Negotiate A Global Value Chain Agreement
The TTIP presents a strong opportunity to negotiate an agreement with Global Value Chains (GVCs) in mind. We should craft an agreement that understands that American competitiveness, and the competitiveness of many U.S. industries, including the apparel and footwear industries, depends on access to global markets and global suppliers. Yet, despite these global links, the majority of the value of these products is earned and developed in the United States. A recent study of the U.S. apparel industry showed that 70 percent of the retail value of U.S. apparel imports is created in the United States. A similar study commissioned by the European Branded Clothing Alliance (EBCA) showed that 50 to 80 percent of the value of European apparel and footwear imports is created in Europe.
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In conclusion, we strongly support negotiation of the TTIP. We look forward to working with U.S. and EU negotiators and stakeholders to help craft an agreement that creates value for the U.S. apparel and footwear industries.