Central American Textiles See Big Losses from TPP
June 27, 2014

Central America is increasingly nervous about Vietnam's participation in the Trans-Pacific Partnership (TPP) trade agreement.

Vietnam, an early entrant into the 12-country free trade accord that could be signed this year, wants flexible rules of origin and zero-trade duties as soon as the accord is signed.

Central American and U.S. textile executives claim that would be a problem, contending it would cut exports from the five Central American countries and the Dominican Republic, which make up the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), by 25 percent during TPP's first year.

In 2013, CAFTA-DR exported $7.8 billion worth of apparel to the United States, according to Luis Estrada, general manager of Guatemala's top textiles association Vestex. Based on that figure, if Vietnam enters the TPP under its request for a non-yarn forward rule, export losses could total $1.95 billion a year or nearly $6 billion in the first three years of the TPP, he noted.

CAFTA-DR members have teamed with U.S. textile lobbies, notably the National Council of Textile Organizations (NCTO), to ask the U.S. Congress to pressure Vietnam to accept a yarn-forward rule of origin forcing it to limit sourcing from other nations in the TPP block. The part-ners are also asking that zero tariff benefits would be granted over a number of years. Vietnam should also follow the same short-supply rules as CAFTA-DR members to procure inputs to make clothing.

The American Sheep Industry Association supports NCTO in its efforts to implement a yarn-forward rule in the TPP negotiations.

Reprinted in part from Women's Wear Daily