The TPP agreement’s new rules of origin will have a huge impact on the U.S. textile industry

The Trans-Pacific Partnership Agreement (TPP Agreement) is one of the hotly discussed topics in the textile industry recently, and its signing may have a major impact on the US textile industry. The agreement includes the United States and its ten trading partners Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Under the agreement, goods exported to the United States from these countries will enjoy duty-free treatment.
The point that may have the biggest impact on the U.S. textile industry is a new rule of origin proposed by Vietnam. If this new regulation is added to the agreement, the existing “yarn-forward” origin policy of the United States will be invalidated. According to current policies, the entire manufacturing process from yarn to fabric to ready-made garments must be completed in the same country to be recognized as the country of origin of ready-made garments. However, according to the new regulations, clothing produced in Vietnam can use fabrics imported from China and be processed into clothing domestically before entering the U.S. market duty-free. This is not yet allowed in any existing agreements the United States has with other countries. The new rules may also anger members of the Central American Free Trade Agreement, because under the existing agreement, these countries must purchase yarn produced in the United States to comply with the rules of origin.
According to the US “Capitol Hill” newspaper, 167 lawmakers in the House of Representatives recently jointly expressed concerns about the stance taken by the Vietnamese government in negotiations on the textile industry, fearing that this new regulation may have a huge negative impact on the United States and its export partners. . The report also pointed out that Vietnam predicts that its market share in the United States will surge from the existing 7% to 30% under the new regulations. The National Textile Group Association of the United States will continue to support the “starting with yarn” origin policy. Recently, its representatives pointed out the negative impact that the new regulations may have on the U.S. textile industry when testifying before the House Committee.
Judging from the actual situation, if the new rules are implemented, the recovering textile industry in the United States will be greatly impacted. Wal-Mart has just recently pledged to purchase more U.S.-made textiles; the U.S. domestic textile industry has also significantly increased investment and equipment modernization; several trading partners in El Salvador are also targeting high-end sportswear based on man-made yarns in their country. Investing in product supply chain solutions, it takes a lot of courage to invest in such a special industry in a small country like El Salvador, far away from the United States. However, if the new TPP agreement proposed by Vietnam is passed, it is conceivable that the influx of Vietnamese textiles into the US market will have a huge negative impact on these investments.