Trump, trade and the future of the global textile industry
An interesting live discussion took place in Washington D.C. (USA) on February 9, 2017. Robert Antoshak, Managing Director of Olah Inc. has been joined by panellists Julia K. Hughes, President of the UFIA, the United States Fashion Industry Association, and Augustine Tantillo, President and CEO of NCTO, the National Council of Textile Organziations
TextileFuture followed the discussion for the benefit of its readers. We hoped to gather a sectors insight in what is going on in the new administration and for the sectors you are all interested in
The panellist firstly explained whom they were representing. Julia K. Hughes underlined that also the apparel industry wants to keep jobs in the USA, but apparels are created by trade. Her members design products and have core functions in the U.S. and 70 % of these functions are located in the U.S. Both panellists agree that 41 % of apparels imported into the U.S. stem from China.
On the other hand, Augustine Tantillo stated that the U.S. textile industry invest yearly USD 2 billion in plants and equipment and the output of the industry amounts to USD 64 billion, thereof 30 % is exported, but the infrastructure is in the USA.
The mediator Robert Antoshak raised the question that the new Trump Administration proposes a border tax. Augustine Tantillo said that it was long overdue to start a debate on the U.S. corporate tax system. It is necessary to look at taxes, however this created a lot of panic on part of the players. However, he made clear that the USA is the only nation of the world not having a tax levied at the border. On the other hand that it would be customary that U.S. exports would be tagged with 20 % tax at the destination border. His members would like to take part in a discussion to eliminate disadvantages. He also stressed the fact that trade deficits exist since 1965.
Antoshak posed also the question on what it would mean for the two industrial sectors if NAFTA would cease or be changed. Julia K. Hughes made clear that NAFTA exists for 20 years and that it was created under completely different market conditions. Her members object to an import tax for Mexico and will not accept that NAFTA is ceasing but they would participate in a discussion of an improvement of NAFTA. The members would also be defensive on the supply chain existing particularly with Mexico and to some extent with Canada.
Tantillo described NAFTA as a partnership. His fibre and fabric industry members export to Mexico and in parts to Canada, thus his organisation supports NAFTA, but it probably has to be renewed and upgraded for the benefit of his industry and the USA. Since he was at the time in the US government, when NAFTA was paragraphed, he stated that NAFTA is a great success because it was replicated in all other US trade agreements. He pleaded to keep a base line concept and to re-negotiate NAFTA to close certain loop wholes for the benefits of the signatory states. His members will however object that China becomes a beneficiary, using Mexico for value added operations and then export the goods duty free into the U.S.
Hughes underlined that the apparel sector is a global industry with an international supply chain. And if a material the industry would like is not available in the U.S. then we have to source it where it is available. In case of re-negotiation of NAFTA she pleaded for more flexibility.
The next question asked was on the position of China. Hughes stated that China is important to the apparel industry, even when imports were lower in 2016. She added “we do business with China and we continue to do business with China, and an import duty at the U.S. border would be bad and would hit the U.S. consumer and the retailers.”
Tantillo argued that China should be more generous and respect the strong production chain in this hemisphere. U.S. Yarn and fabric imports in the order of 30 to 40 % are a problem, particularly because of unfair conditions, because Chinese suppliers receive subsidies and China has a undervalued currency and production techniques that are not acceptable in the West. He pleaded for a more balanced situation and relationship.
The next question was on TTO, Tantillo made clear that TTP is not dead. “We could fare on bilateral agreements since we have already such agreements with most of the countries of TTP.
Hughes stated that “”TTP is not dead, it will probably have other names and there will be bilateral discussions, but it is a basic deal and the U.S. needs to be engaged, because the United States is a global country for our industry.”
She recommends to her members “to stay calm – however the members think of realigning their sourcing strategy – do not jump, wait and see. The basic point is that the U.S. economy remains strong.”
It is planned to have further live discussions when the new government will give a clearer view on its guidelines.
TextileFuture’s short comment: We take from this discussion that not even people in Washington D.C. do know what the new administration will be doing on behalf of the U.S. apparel and textile industry. The only thing they can undertake is trying to make their positions clear and “We will cross that bridge when we come to it”, as everywhere in the world!