TPP Yarn-Forward Rule: Opposing Views Presented In Letters To Obama, USTR

The controversy over inclusion of a strong yarn-forward rule of origin in the Trans-Pacific
Partnership (TPP) agreement that is currently being negotiated is evident in two letters sent last
week – one from a bipartisan group of House members to U.S. Trade Representative (USTR) Ambassador
Ron Kirk and one from a bipartisan group of Senators to President Barack Obama — urging opposing
positions on the rule. In their wake, textile, apparel and retail groups have released statements
supporting one or the other of the two positions.

The letters were sent out in anticipation of the round of TPP negotiations that began today
in Dallas and will conclude May 18. The current U.S. position supports a strong yarn-forward rule
of origin.

In the House, 76 congressmen — led by Trey Gowdy, R-S.C., and Larry Kissell, D-N.C., and
including 35 Republicans and 41 Democrats — sent a letter to Ambassador Kirk urging that strong
textile rules be included in the TPP agreement in order to “stimulate private investment, exports
and job growth within free trade partnering countries, including the United States. To date, we are
pleased at the strong position the United States has taken regarding Rule of Origin issues and we
urge USTR to likewise take a strong stance in support of other key textile and apparel negotiating
objectives regarding market access and customs enforcement.” The letter lists three objectives on
which to focus: the yarn-forward rule of origin; market access rules; and customs enforcement

In the Senate, 15 senators — led by Mark Warner, D-Va., and including seven Democrats and
eight Republicans — sent a letter to President Obama urging more flexible textile and apparel rules
and “meaningful market access.” The letter calls the current U.S. position “an overly broad
approach” and urges instead “a new approach which reflects the significant value created by
American retailers, apparel brands, manufacturers, and importers as well as domestic textile
producers. Such an approach should include a flexible general rule of origin for apparel that
maximizes the incentive to grow U.S. exports, value and jobs in the TPP.” The letter goes on to
say, “For specific products for which there is significant U.S. production, we suggest that you
work with industry to develop criteria to determine when it would be appropriate to include rules
of origin that require more U.S. or TPP content.”

The Textile and Apparel Alliance for the TPP (TAAT) — a coalition comprising fiber, textile
and apparel organizations representing 30 countries in the Americas and Africa; and including U.S.
organizations the American Fiber Manufacturers Association, American Manufacturing Trade Action
Coalition, National Cotton Council, National Council of Textile Organizations, National Textile
Association and United States Industrial Fabrics Institute — strongly supports the position taken
in the House letter sent to Ambassador Kirk. TAAT was formed in February 2012 after TPP participant
Vietnam proposed textile and apparel country of origin rules that would enable its state-owned
enterprises to use subsidized inputs produced in China and export the finished goods duty-free to
other TPP participants. The coalition notes that allowing inputs from China in Vietnamese goods
would provide China with new, unrestricted access to the U.S. market. It supports textile rules
that are based on rules in free trade agreements (FTAs) the United States has negotiated over the
last 25 years.

On the other side, the TPP Apparel Coalition — a coalition of American retailers, apparel
brands, apparel manufacturers and importers; and including U.S. organizations the American Apparel
& Footwear Association, National Retail Federation, Outdoor Industry Association, The Retail
Industry Leaders Association, and The United States Association of Importers of Textiles and
Apparel — strongly supports the position taken in the Senate letter sent to President Obama.
Coalition members have long opposed the yarn-forward rule in its current iteration, which they say
is not viable in current global value chains and has not led to new U.S. exports or new apparel
trade with TPP countries with which the United States has had FTAs.

May 8, 2012