Apparel and Textile Interests Argue Over USMCA ROO; Metal Producers Diverge on Section 232 Tariffs

The U.S. International Trade Commission, hosting lobbyists on the new NAFTA for a second day Nov. 16, tried to sort out whose perspective was most germane on the trade pact's impact, as producers and customers, manufacturers and importers and even producers and producers disagreed about the policy impact of what the U.S. trade representative did -- or didn't do -- in the negotiations.

United States Fashion Industry Association and American Apparel and Footwear Association executives told the ITC that the addition of pocketing, sewing thread and elastics to the yarn-forward rule make it less likely that brands will source apparel from Mexico.

Julia Hughes, president of USFIA, said some companies don't claim the duty-free status of clothes made in Mexico "simply because the compliance requirements are too expensive," even given the relatively high duties apparel faces. According to World Bank statistics on textile and clothing imports, Mexico is the fifth-highest source of textile and apparel for the U.S.; China sells eight times as much, Vietnam sells twice as much, and India sells 1.5 times as much.

Hughes said if the administration wants buyers to shift away from China, they should make it easier, not harder, to nearshore. She told a commissioner she could not estimate how much of pocketing, sewing thread and elastics used in apparel made in the NAFTA region is from within the region.

Rick Helfenbein, president of AAFA, agreed that the addition of pocketing, elastic strips and sewing thread to the apparel rules of origin may have perverse consequences. But, he said, generally USMCA changes to rules of origin "appear to be largely cosmetic and we are hopeful the industry will be able to quickly adjust to the changes that have been made." He said the group is pleased there are transition periods before the restrictions take effect.

Augustine Tantillo, CEO of the National Council of Textile Organizations, said his group has not yet adopted a formal position on the new NAFTA. He said NCTO is pleased that the textile origin rules were essentially confirmed, and that his group, which covers 550,000 workers, is very pleased about the three additions. He said all three areas have U.S. producers, and most of them are not running at capacity. He praised a change to the procurement chapter, as well, that should bring $34 million in government uniforms back from Mexico to a U.S. producer.

ITC Commissioner Irving Williamson asked the trio what have been the biggest changes to the industry since 1994, when NAFTA took effect. Hughes said Mexico was America's top supplier of apparel at one time, but when the textile quota system went away, that changed everything.

Tantillo said the U.S. probably lost "well over a million jobs in the textile and apparel production chain, with the vast majority being in the final step, which is the cut and sew." He said that NAFTA helped to accelerate the offshoring of apparel factories, but China was the big driver. Tantillo said that while Hughes and Helfenbein say the rules are too restrictive, "China was exploding into global textile markets and running roughshod over competitors. The fact that we were able to save the textile production chain in North America is a tremendous validation on how the yarn forward rule has played out."

The commissioners also tried to make sense of diverging views on the Section 232 tariffs on aluminum and steel. The auto industry, the day before (see 1811150026), said it's critical to get those tariffs lifted without quotas in order for the industry to receive the full benefits of a rewritten NAFTA. Aluminum Association CEO Heidi Brock said that tariffs on aluminum from Canada and Mexico should be lifted, and quotas are not acceptable as a substitute. She said 97 percent of all aluminum jobs are outside primary smelters, and the disruption tariffs have caused hurts that vast majority of the industry. She'd rather see Mexico go to 10-digit HTS codes in aluminum so that her group can track Chinese imports in specific products than to punish the neighbors for China's overcapacity. She said both Canada and Mexico have stepped up trade enforcement, so she doesn't think they should be targets because of transshipment fears.

Meanwhile, testimony from the two steel associations on the agenda was completely silent on the Section 232 tariffs and how they interact with the new requirements in the auto rules of origin for North American steel and aluminum. When pressed, the representatives of steel manufacturers said that Canada and Mexico can get out from under the tariffs the same way countries like Brazil and South Korea did. They said that U.S. steel prices were artificially low before the 25 percent tariff, and that price increases have moderated after an initial spike. The price has fallen from about $1,000 a ton to about $830 a ton for hot-rolled coil, according to Philip Bell, president of the Steel Manufacturers Association.