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Washington Outlook Archive
James A. Morrissey, Washington Correspondent

Vietnam Pact Doesn't Please Importers, Manufacturers

James A. Morrissey, Washington Correspondent

F ollowing the longest face-to-face negotiation in the history of the US government’s textile trade program, the United States and Vietnam have reached a textile and apparel bilateral agreement that in the end doesn’t really please anyone. The pact was sharply criticized by the American Textile Manufacturers Institute (ATMI) and the National Textile Association (NTA) as an abandonment of the Bush administration’s pledge to protect the interests of the US textile industry and its employees.

Retailers and other textile and apparel importers were strongly opposed to any quotas on Vietnam, as they view that area as a “viable alternative” to becoming too dependent on trade with China and other Asian nations. In spite of that, however, the National Retail Federation (NRF) said the agreement certainly was better than the unilateral quotas that would have been imposed if a bilateral agreement could not be reached.

Importers said Vietnamese apparel imports will displace other Asian trade and should not have any impact on US textile trade with Mexico and the Caribbean.

The agreement runs until December 31, 2004, and will automatically roll over annually until Vietnam becomes a member of the World Trade Organization (WTO), at which time all quotas will be removed.

As the negotiations neared their final stage, 35 of the nation’s largest retailers, including JCPenney, Sears, Target and Gap, descended on Washington in a massive lobbying effort to voice their concerns about restricting a major source of products, which could result in shortages and higher consumer prices.

On the other side of the battlefield, members of the Congressional Textile Caucus weighed in heavily and accused US negotiators of offering quotas that were far in excess of what was offered in the opening round of talks. They said US government officials were “actually rewarding Vietnam for refusing to bargain in good faith during earlier negotiations.” In addition, ATMI, NTA and members of the caucus charged that the new quota levels “include significant levels of fraud” resulting from illegal transshipments of Chinese goods through Vietnam.

The agreement covers 38 product categories and initially will permit $1.65 billion worth of imports, including 14 million dozens of knit shirts, and 1 million pairs of men’s and women’s trousers — two categories that were of particular concern to the textile industry during the negotiations. Quotas will be permitted to grow 7 percent per year for all products except wool, which will grow at 2 percent.

With respect to market access, Vietnam agreed to bind its tariffs at 7 percent for yarn, 12 percent for fabric, and 20 percent for apparel. It also agreed to refrain from utilizing non-tariff barriers.

ATMI Chairman Willis C. Moore III said he was “deeply dismayed” by the agreement, adding that “by granting Vietnam the largest quotas in history for the most sensitive products made by our industry, negotiators have ensured that more textile jobs will be lost in this deeply distressed industry.”

United States, Singapore Sign Historic Trade Pact

The United States and Singapore have signed a historic free trade agreement that for the first time will permit duty- and quota-free access to the US market for textiles and other products made in an Asian nation. And, as has been the case with other recent trade agreements, the pact does not satisfy either textile manufacturers or importers.

The importers are upset because the agreement has a yarn-forward rule of origin that requires apparel products eligible for the special treatment to be made of yarn and fabric made in the participating countries. They say such a rule will sharply restrict their ability to do business with Singapore.

Textile manufacturers don’t like the agreement because it says 25 million square meters of apparel in the first year can be made with yarn and fabric from countries other than the US and Singapore. Those imports, known as Tariff Preference Levels, will be reduced each year until they are phased out in five years. Since Singapore has limited textile manufacturing capacity, the industry fears it will become a source for illegal transshipments from other Asian nations.

The agreement is historic in another sense in that President Bush personally signed it, saying it “breaks significant new ground” and could become a model for future trade agreements with other Asian nations. That sends shock waves throughout the US textile industry.

Under the agreement, Singapore agrees to eliminate all of its duties on US products immediately and further agrees not to reimpose them.

The United States will phase out its duties over 10 years, with duties on the least sensitive products dropped first.

The agreement still has to be approved by Congress, but apart from some high-powered rhetoric from textile state lawmakers, it is not likely to run into any difficulties.

WTO Rejects Indian Textile Rules Of Origin Challenge

In a ruling that strengthens the legal status of the textile rules of origin contained in a number of textile trade agreements, the WTO has rejected a challenge of the rules by India. US rules of origin were part of the legislation implemented by the Uruguay Round of trade negotiations in 1994. The rules went unchallenged until 2002, when India filed a complaint with the WTO and a dispute panel conducted an investigation.

In connection with the investigation, ATMI filed a statement saying India had no valid claim to a WTO dispute settlement unless it could be demonstrated that trade with the United States was being impaired. The WTO apparently agreed with that argument and rejected the complaint.

June 2003




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