Trade Pacts Will Have Mixed Impact On Textiles

The US trade representative has announced agreement on a free trade agreement with Australia and
plans to negotiate one with Thailand. While the Australian pact would have a limited impact on US
textile manufacturers, textile representatives in Washington have raised major concerns about the
proposed Thailand agreement.

In announcing the Australian agreement US Trade Representative Robert B. Zoellick emphasized
its importance to agriculture trade and the service economies of both nations. It will result in
the eventual elimination of tariffs and other trade barriers between the two nations. More than 99
percent of US manufactured goods exports to Australia will become duty-free upon entry into the
agreement, which still has to be sent to Congress for approval. In view of the fact that the
agreement is not particularly controversial, it could get congressional approval this year. From
the standpoint of textiles, the agreement is not very important, as the volume of trade between the
two nations is relatively small. In 2003, the US imported $32-million worth of textiles and
exported $100 million. What is significant is the fact that the US once again succeeded in
negotiating a yarn-forward rule of origin and there reportedly are no Tariff Preference Levels that
permit use of yarn or fabric from third countries.

Thailand is another story. Last year, textile and apparel imports amounted to more than $2
billion and there was a textile and apparel trade deficit of more than $900 million. Robert Dupree,
government relations vice-president of the American Textile Manufacturers Institute, said, There is
no need for any additional free trade agreements until we get a handle on the ones we already
have.The US currently has free trade agreements with Canada, Mexico, Jordan, Chile and Singapore.
In addition, it has recently concluded a Central American Free Trade Agreement with Costa Rica, El
Salvador, Guatemala, Honduras and Nicaragua, and it is working to complete one with Morocco.
Negotiations are underway with five nations of the Southern African Customs Union, and the US
government has announced plans to negotiate free trade agreements with Panama, Colombia, Peru,
Bolivia and Ecuador.

March 2004