ITC Issues Report on Likely Impact of TPP

On May 18, 2016, the U.S. International Trade Commission ("USITC") released the report Trans-Pacific Partnership Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors.. With regard for textiles, apparel, and footwear, the report concluded:

Textiles and Apparel

The Commission’s model results estimate that U.S. imports of apparel would be 1.4 percent higher ($1.9 billion) as a result of TPP, compared with the 2032 baseline. These results reflect a 35.2 percent ($7.3 billion) increase in U.S. imports from new FTA partners compared with baseline estimates, which is partially offset by lower imports from non-TPP countries, including China. Vietnam in particular is expected to be the largest beneficiary in terms of increased U.S. apparel imports. Vietnam is already a competitive, major supplier of apparel to the U.S. market, ranking second after China. Nevertheless, initial growth in U.S. imports from Vietnam under TPP preferences would likely be moderated by Vietnam’s limited ability to meet the TPP's yarn forward rules of origin, coupled with long duty phaseouts for certain key products. For textiles, the Commission’s model results estimate that U.S. imports under TPP would be 1.6 percent higher ($869 million) compared with the 2032 baseline. U.S. imports of textiles and apparel from TPP countries totaled $19.9 billion in 2015, accounting for 17 percent of total U.S. textile and apparel imports from the world ($118.5 billion).

The Commission’s model results estimate that U.S. exports of textiles under TPP would be 1.3 percent higher ($257 million) than baseline economic growth, and U.S. exports of apparel would be 0.3 percent higher ($10 million) compared with the 2032 baseline. Certain textile subsectors would likely benefit more than others under TPP. According to industry sources, there may be some opportunities to increase U.S. exports of certain textiles on a limited scale to new FTA partner countries, including technical textiles and cotton and specialty yarns. U.S. exports of textiles and apparel to TPP countries totaled $7.9 billion in 2015, accounting for 54 percent of total U.S. textile and apparel exports to the world ($14.7 billion).

The largest changes in textiles and apparel trade from TPP would likely occur in U.S. imports of apparel. The Commission’s model projects that U.S. demand for both imported and domestically produced apparel would increase over the 2032 baseline. The modeling results estimate that TPP would result in a 1.4 percent ($1.9 billion) increase in U.S. imports of apparel over the 2032 baseline (i.e., expected level of imports in 2032 without TPP), and a 0.3 percent ($10 million) increase in U.S. exports. Imports of apparel would be expected to grow most significantly from Vietnam, the second-largest supplier to the United States, while those from China, the largest U.S. apparel supplier, would be expected to decline. The Commission’s model results indicate that U.S. output and employment in the apparel sector also would increase slightly (by 1.0 percent and 0.9 percent, respectively), over the 2032 projected baseline. High-end, niche products, replenishment or quick turnaround products, and other items that generally do not compete with imports are among the types of products being produced domestically. Examples of such products include those that require customized, often smaller orders, such as sports team uniforms, test market products or reorders, and fastfashion items.

The Commission’s model results for textiles (non-apparel) estimate that TPP would result in U.S exports that are 1.3 percent ($257 million) higher than the baseline estimate, and imports that are 1.6 percent ($869 million) higher, compared with the 2032 baseline. The model estimates that output and employment in the textiles sector would be slightly lower compared with the 2032 baseline (by 0.4 percent each).

Footwear

TPP would likely result in an increase in U.S. footwear trade. U.S. imports of footwear from all countries would be $1.1 billion higher (2.7 percent) than 2032 baseline growth estimates. U.S. imports of footwear from the TPP countries would be $1.6 billion higher (23.4 percent) than the baseline; most of this increase would be accounted for by imports of footwear from Vietnam. The growth in U.S. footwear imports from TPP countries is expected to occur at the expense of China and other non-TPP footwear suppliers to the U.S. market. U.S. imports from China would fall by $400 million (1.3 percent) under TPP, compared with the non-TPP baseline. TPP’s impact on U.S. footwear exports is expected to be small in absolute terms, with total U.S. footwear exports expected to be $138 million higher (12.2 percent). Most of these exports would be of footwear parts to Vietnam, to be used to assemble footwear for the U.S. market.