Overview

Textiles are a sensitive sector in the Trans-Pacific Partnership (TPP), an agreement that would establish a free-trade zone across the Pacific if it is approved by Congress and foreign governments. Because the TPP includes Vietnam, a major apparel producer that now mainly sources yarns and fabrics from China and other Asian nations, the agreement could shift global trading patterns for textiles and demand for U.S. textile exports. Canada and Mexico, both significant regional textile markets for the United States, and Japan, a major manufacturer of high-end textiles and industrial fabrics, are also TPP members. U.S. textile manufacturers produce yarn, thread, and fabric for apparel, home furnishings, and various industrial applications. In 2015, the U.S. textile industry generated some $55 billion in shipments and directly employed about 232,000 Americans, accounting for approximately 2% of all U.S. factory jobs. More than a third of U.S. textile production is exported, with the bulk of the exports going to Western Hemisphere nations that are members of the North American Free Trade Agreement (NAFTA), the Dominican Republic-Central America Free Trade Agreement (CAFTADR), and the Caribbean Basin Initiative (CBI). These free-trade agreements provide that certain exports from member countries may enter the U.S. market duty-free only if they are made from textiles produced in the region. This has encouraged manufacturers in Mexico and Central America to use U.S.-made yarns and fabrics in apparel, home furnishings, and other products. Exports to the NAFTA and CAFTA-DR countries contributed to a U.S. trade surplus of $1.6 billion in yarns and fabrics in 2015. The proposed TPP would eliminate some tariffs on textiles and apparel immediately, and phase out others over a decade or more. The agreement has the potential to affect U.S. textile exporters in at least three ways: 1. It could enable some Asian apparel producers, principally Vietnam, to export clothing to the United States duty-free. This would eliminate much of the advantage now enjoyed by Western Hemisphere apparel producers in the U.S. market, and, because Vietnamese manufacturers make little use of U.S.-made textiles, could reduce demand for U.S. textile exports. 2. The TPP would allow Western Hemisphere apparel manufacturers to use yarn and fabric made anywhere in the TPP region and still enjoy preferential access to the U.S. market. Thus, an enlarged Vietnamese textile industry could, at some future time, compete with U.S. exporters in Mexico and Central America. 3. The U.S. manufacturers of industrial textiles may experience more direct competition from Japan, also a leading producer of industrial textiles. On the upside, U.S. exports of these products could increase because the agreement would eliminate tariffs on industrial fabrics that are currently as high as 20% in some TPP countries. Responding to concerns from domestic textile manufacturers, the proposed TPP agreement includes a yarn-forward rule of origin that would allow a garment to enter the United States duty-free only if yarn production, fabric production, and cutting and sewing of the finished garment all occur within the TPP region. However, nearly 190 fibers, yarns, and fabrics in short supply in TPP-member countries could be sourced from outside the region, including China. This provision was a concession to U.S. retailers and apparel brands that wanted maximum flexibility to source yarns and fabrics from non-TPP countries.

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