Textiles & the TPP: Concerns & Issues for U.S., WesternHemisphere & African Producers

• 29 countries around the globe with trade agreements with the United States in textiles.

• Mexico, Central America, Andean, Africa & Middle East textile and apparel producers

• Global Supply Chain – nearly $30 billion in two'way textile and apparel trade

• Employ nearly two million workers,

• hundreds of thousands in US

www.taa-tpp.com

Same textiles rules for TPP as in past agreements

• Yarn Forward Rule

• Rules that promote private industry investment and job growth

• Do not damage already existing trade

• Means that all the textiles inputs – from yarn to fabric to apparel – must be made in the TPP region.

• Billions of dollars of investment have occurred in U.S., Mexico, CAFTA and the Andean region because of the yarn forward rule

• Created a nearly $30 billion in two way trade between trade preference countries and the U.S.

Trade program Enacted Textile Rule

807A Program for CBI 1988 U.S. Yarn Forward

Mexico Special Regime 1988 U.S. Yarn Forward

Andean Program 1991 U.S. Yarn Forward

NAFTA FTA 1993 Yarn Forward

CBTPA Program 2000 U.S. Yarn forward

Chile FTA 2003 Yarn Forward

Singapore FTA 2003 Yarn Forward

Australia FTA 2004 Yarn Forward

Bahrain FTA 2004 Yarn Forward

DR'CAFTA 2004 Yarn Forward

Morocco FTA 2004 Yarn Forward

Oman FTA 2005 Yarn Forward

Peru FTA 2007 Yarn Forward

Korea FTA 2011 Yarn Forward

Colombia FTA 2011 Yarn Forward

Panama FTA 2011 Yarn Forward

TPP Negotiations: U.S. POSITION 2012 Yarn Forward

U.S. Trade Policy:

25Years of Yarn ForwardRule

� Wants a “Flexible” Rule of Origin

� ONLY the sewing of the garment be required in TPP

� Would allow Vietnam to source subsidized yarns and fabrics from China and still get duty'free access to the U.S.

� RESULT: Vietnam would be the immediate low cost supplier

for 42% of Western Hemisphere/Africa trade

� China would get billions of dollars of orders in textile products that are currently going to U.S. and West Hemisphere producers

Chinese Textile/Apparel Industry

• Textile and Apparel Industry 20 million workers•12th 5 Year Plan for Textiles• Dominated by State'Owned Enterprises

• Chinese exporters get 35'75% advantage from government on every product exported

+ Currency Manipulation – adds 25 to 40% advantage

+ Offers 30 different subsidies to its textile and apparel companies – adds 10% to 35% more

VIETNAM – a “Mini'China”

State Owned, Subsidized Apparel Industry

• Discounts on Loan Rates

• Access to State Capital for Financing

• Free/Discounted Land and Preferential Access to Land

• Preferential Duty'Free imports of arts/accessories/other goods

• Excessive Rebates of Import Duties for Inputs to Goods to be re'exported

• Cotton Subsidies , among others…

• Largest Garment Company in Vietnam & Owned by the Vietnamese government

• 10th Largest Garment Producer in the world; nearly

500,000 workers

• Controls 25% of Vietnam’s Textile and Apparel Export Sales

TPP

•Privately funded companies•Small & medium sized•Private investments•U.S., Western Hemis, Africa trade platform

•State owned conglomerates•State funded &

subsidized industry• Chinese textiles

Two Visions For Textiles in the TPP

� CANAINTEX is the leading mexicanorganization representing textile industry� Yarns

� Woven and knit fabrics

� Non woven

� Trims

� Hosiery, t'shirts, towels, blankets and other final products

� Many CANAINTEX members are verticallyintegrated to apparel production

� Mexico employs 400,000 workers in the textile industry and apparel sector

� These jobs are the support of more than 1.2million indirect workers in Mexico

“Mexico needs jobopportunities as the bestsocial policy againstinmigration and crime”

• Mexico represents 22% of textile and apparel US total exports. In fact, Mexico isthe 1st export market for US fabrics.

• Mexico consumes annually 2 million bales of cotton fiber, mainly from the US.

Category Description Ranking in US total imports

Volume(million SME)

Average Price(Dls/SME)

Mexico Vietnam Mexico Vietnam Mexico Vietnam

347M/B COT. TROUSERS/BREECHES/ SHORTS

1 4 181 67 6.73 4.44

348W/G COTTON TROUSERS/SLACKS/ SHORTS

6 2 52 174 6.45 3.66

Source: OTEXA, 2011

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Vietnam México

Source: Average Unit Price, OTEXA, 2011

$0

$1

$2

$3

$4

$5

$6

$7

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Vietnam México

Source: Average Price, OTEXA, 2011

• Four CAFTA – DR countries are among the Top 15 buyers of US Textile & Apparel products.

• Taken together, exports to these four CAFTA

countries in 2011 came to $3,289 million, making it the Top Three Market for U.S. Textile & Apparel Exports. Total U.S. Exports (USD,

Millions) 2006 2007 2008 2009 2010 2011

1. Canada 4,485 4,524 4,661 3,956 4,465 4,991

2. México 5,097 4,478 4,262 3,640 4,308 4,898

3. Honduras 1,398 1,489 1,526 1,053 1,455 1,839

4. China 773.6 849 959.7 883.9 1,123 1,285

5. Dominican Republic 1,023 775 675 581 672 818

6. Japan 662.1 562.8 572 516.5 589 642.1

7. El Salvador 582 552 507 378 435 632

14. Guatemala 259.5 305.2 251.7 210.2 248.2 287.7

� Textile & Apparel Sector constitutes approximately one'half of all ES´s exports. Since CAFTA, ES has become much more integrated with U.S. ' due to a yarn'forward rule of origin.

No HTS Main apparel exports - Product Description2011

In Dollars

1 61091000 Cotton T-shirts, knitted or crocheted. 419,939,238

2 61102020 Cotton sweaters, knitted or crocheted. 217,005,831

3 61159590 Cotton stockings, socks, knitted or crocheted. 155,978,771

4 61071100

Cotton men's or boys' underpants and briefs, knitted or

crocheted. 131,167,424

5 61099010 MMF T-shirts, knitted or crocheted. 117,226,638

6 61103030 MMF sweaters, knitted or crocheted. 81,765,617

7 61046220 Cotton women's or girls' trousers, knitted or crocheted. 45,330,208

8 61152100 Synthetic fibers panty hose and tights, knitted or crocheted. 43,037,989

9 61034210

Cotton men's or boys' trousers, breeches and shorts, knitted

or crocheted. 40,412,256

Source: USITC

HTS DescriptionImports from E.S.

Imports from ROW

Market Share

6109100012MEN'S T-SHIRTS EXC UNDERWEAR OF COTTON, KNIT 145971 1426612 10.23%

6110202069M/B PULLOVERS OF COTTON, LT 36% FLAX FIBERS, NESOI 127012 2898416 4.38%

6109100004M/B T-SHIRTS, KNIT COT, CREW/V-NECK, SHORT SLEEVES 98561 599968 16.43%

6107110010MEN'S UNDERPANTS AND BRIEFS, OF COTTON, KNIT 95631 693887 13.78%

6110202079W/G PULLOVERS OF COTTON, LT 36% FLAX FIBERS, NESOI 68322 4888231 1.40%

6110303053M/B PULLOVERS MAN-MADE FIBERS KNIT/CROCHETED NESOI 54748 899441 6.09%

6109100014BOYS' T-SHIRTS EXC UNDERWEAR OF COTTON, KNIT 42852 281705 15.21%

6107110020BOYS' UNDERPANTS AND BRIEFS, OF COTTON, KNIT 37746 146348 25.79%

6102302010WOMEN'S OVERCOAT ETC OF OTHER MANMADE FIBERS, KNIT 33228 394440 8.42%

6109100040

WOMEN'S T-SHIRTS EXCEPT UNDERWEAR OF COTTON, KNIT 28945 786854 3.95%

El Salvador Exports in Terms of Market Share

� ES has adopted a series of strategies in order to become more competitive, not only as an apparel producer but through out the supply chain:

� El Salvador has developed important cotton spinning capabilities based on US cotton fiber.

� Out of all US textile exports to El Salvador, cotton yarn is the biggest product exported, followed by single knit cotton dyed fabrics.

Source: USITC

Description (Schedule B) 2010 2011 YTD 6/12 YE 6/11 YE 6/12

Cotton Yarn 5205 & 5206 $22,661,334 $148,368,866 $45,483,613 $78,231,142 $124,821,390

Manmade Fiber Dyed Knit Fabric $26,285,982 $39,995,404 $11,627,067 $38,911,995 $24,550,510

Single Knit Cotton Dyed Fabrics $72,481,463 $48,742,056 $28,259,120 $63,519,567 $50,242,650

Single knit cotton unbleached or

bleached fabrics.$60,166,184 $62,544,363 $44,032,984 $59,757,562 $75,269,027

Knit looped pile manmade fiber

fabric. $13,016,074 $13,198,366 $98,02,523 $14,364,506 $14,891,287

� Since CAFTA, ES has also diversified productive base – new Synthetics/Man Made Cluster.

� New spinning capabilities, which are capital intensive.

� During 2010 and 2011, more than 50% of polyester staple fiber shipped to CAFTA –DR Region was exported to ES.

Description (Schedule B) 2010 2011 YTD 6/11 YTD 6/12

5503200000 $2,407,611 $4,002,484 $2,507,915 $2,339,427

Description (Schedule B) 2010 2011 YTD 6/11 YTD 6/12

5503200000 $4,451,887 $7,276,699 $3,747,897 $3,292,497

Exports of Polyester Staple Fiber to El Salvador

Exports of Polyester Staple Fiber to CAFTA – DR Region

Source: USITC

� What´s at Stake without a Yarn Forward Rule of

Origin and long duty phase'outs? Exports and jobs.

Source: US Department of Commerce

2006 2007 2008 2009 2010 2011

Total U.S. Exports (USD, Million)

582 552 507 378 435 632

% Change '7.0 '5.2 '8.1 '25.4 14.9 45.3

Top U.S. Export Categories in 2010: Spun Yarns & Threads, Knit & Knit Pile Fabrics, Hosiery, Woven Fabrics, and Specialty & Industrial Fabrics

• Conceived 2003 post ATPDEA

• $45 million invested

• Joint venture between Parkdale and Grupo Crystal

• 40% of production exported to US in garment form

• Consumes US grown cotton

Grupo CrystalVertical from bale to retail

9 plants in Colombia, 2 in Costa Rica

DC’s in Miami, Mexico city, Costa Rica, Venezuela

130 retail stores in Colombia, Venezuela, Costa Rica, D.R.

Employs 10,000 people in 5 countries

'100,000

0

100,000

200,000

300,000

400,000

500,000

600,000

Note huge immediate impact of duty elimination with FTA. If bad textile rules in TPP result, Vietnam will mirror this with duty elimination/reduction at the

expense of existing FTA’s and US jobs.

Pounds of Yarn

FTA Enacted

Average Imported Price Comparison YTD 2012

Impact of Duty Reduction with current Vietnam/China supply chain.

Product

AVE

Vietnam

Price/Doz Duty %

Duty

Amount

Total

Price

Ave

Colombia

Price/DZ

Differenc

e

M/B Cotton

Underwear/T'shirts 14.645$ 16.5% 2.42$ 17.06$ 25.248$ 8.19$

Mens Cotton Briefs 12.844$ 7.4% 0.95$ 13.79$ 19.954$ 6.16$

M/B MMF Other

Outerwear Knitted

Shirt 48.531$ 32.0% 15.53$ 64.06$ 79.618$ 15.56$

Cotton Socks 8.947$ 13.5% 1.21$ 10.15$ 13.793$ 3.64$

MMF Socks 8.625$ 14.6% 1.26$ 9.88$ 10.143$ 0.26$

• Criminal Code Reform• Stiff prison penalties for obstruction of employee right to organize

• Elimination of Workers Cooperatives• Audit process with fines/imprisonment

• Illegal to offer Anti Collective Bargaining Incentives

• Increased Emphasis on Crimes Against Union Leaders

• Colombian Government Signed Agreement with ILO (Industrial Labor Organization) to Protect and Preserve Colombian Workers Human Rights

VIETNAM MUST BE HELD TO THE SAME STANDARDS

Apparel Exports to

U.S.

Current Vietnam/China Supply Chain

Cost Advantage

% of Total

Apparel Exports

Africa + MidEast

$1,442 $950 66%CAFTA $7,929 $1,719 22%Colombia $224 $213 95%Mexico $3,963 $2,762 70%TOTAL: WestHem/Africa

$13,558 $5,644 42%

Total Apparel Supply Chain* Analysis: Average Unit Prices

Source: USITC, 2011*Textiles not included. Vietnam is already a large textile exporter.

State of Play: Deadlock

• 14th Round – Leesburg: U.S. Holding Firm Thus Far.

• BUT Vietnam Blocking Progress on all chapters until it gets textile demands met: labor, state'owned enterprises, market access, agriculture, etc

• Additional Complication: U.S. has own national security interests regarding Vietnam

Key Textile Decisions are Expected to be Made

in 2013

• As negotiations heat up, U.S. government needs to hear from you to stay strong against Vietnam’s demands.

• Billions of dollars in export trade could be crippled if U.S. gives in to Vietnam.

• Would reward state capitalism and state owned companies in China and Vietnam

• Two million jobs in U.S./Western Hemisphere & Africa are threatened.

• Request: Ambassadors to meet with Kirk/Marantis & Top State Dept Officials