NAFTA TPLs an Outlier among US FTAs

Among the more contentious topics in the NAFTA re-negotiation has been the topic of Tariff Preference Level ("TPL"), the provisions for a limited quantity of textile products to received the NAFTA duty-free benefit even though they fail to satisfy the NAFTA rules. The are separate TPLs depending on the type of fiber and which international border is being crossed.

Yarn TPL

Cotton and MMF spun yarn:
Canada to U.S., 11.7 million kgs.
U.S. to Canada, 1 million kgs.
Canada to Mexico, 1 million kgs.
Mexico to Canada, 1 million kgs.
Mexico to U.S., 1 million kgs.
U.S. to Mexico, 1 million kgs.

Cotton and MMF Fabric/Made-ups:

Canada to U.S., 35 miilion sme knit and 35 million sme woven.
U.S. to Canada 2 million sme knit.
Canada to Mexico 7 million sme knit or woven.
Mexico to Canada 7 million sme knit or woven.
Mexico to U.S. 18 million sme knit.
Mexico to U.S. 6 million sme woven.
U.S. to Mexico 2 million sme knit or woven.

Apparel TPL, Cotton and MMF

Canada to U.S. 80 million sme.
U.S. to Can. 9 million sme.
Canada to Mexico 6 million sme.
Mexico to Canada 6 million sme.
Mexico to U.S. 45 million sme.
U.S. to Mexico 12 million sme.

Wool

Canada to U.S. 5.1 million sme.
U.S. to Canada 0.9 million sme.
Canada to Mexico 0.3 million sme.
Mexico to Canada 0.3 million sme.
Mexico to U.S. 1.5 milion sme.
U.S. to Mexico 1 million sme.

The U.S. has 14 FTAs with 20 nations. NAFTA is the only one of these agreements with permanent unchanging TPLs.

Half of the U.S. FTAs, those with seven nations, Australia, Colombia, Israel, Jordon, Korea, Panama, and Peru, were, from implementation, without TPLs.

An arguments can be made that TPLs should not be permanent. They may be justified in the short term as addressing lack of regional supply, but the point of a free trade agreement is to build up regional capacity. The following five FTAs contain TPLs that expire:

• The Singapore FTA went into effect in 2004 with a 25 million sme TPL for cotton and MMF apparel, which was phased out over 8 years.

• The Morocco FTA went into effect in 2006 with a 30 million sme TPL that was phased out over ten years.

• DR-CAFTA went into effect with a 100 million sme TPL for Nicaragua and a 1 million sme TPL for Costa Rica, both of which have expired per the agreement.

• The Bahrain FTA went into effect in 2006 with a 65 million sme TPL, which expired in the middle of last year per the agreement.

• The Oman FTA went into effect in 2009 with 50 million sme TPL, which is scheduled to expire ten years after implementation.

In addition to NAFTA, only the Chile FTA, which went into effect in 2004, has a permanent TPL for cotton and MMF fabric of 1 million sme. However, the TPL for cotton and MMF apparel, which started at 2 million sme, was reduced to 1 million sme after ten years.