[This post is updated on July 1, 2016]
Please also read:TPP tariff phase-out can steer Vietnam sourcing plans
The United States includes as many as 38 different types of phaseout schedule in TPP and 8 of them apply to the textile and apparel (T&A) sector.
In general, T&A products with lower base tariff rate seem to be given more generous phaseout treatment than T&A that are subject to higher base tariff rate. For example, although T&A products under category EIF can immediately enjoy duty-free treatment once TPP takes into force, their base tariff rate is also the lowest (7.9% on average). In comparison, whereas T&A products under category US6, US7, US8 and US9 are subject to the highest base tariff rate, they are given the least generous tariff cut (i.e. 35%) once TPP takes into effect. This will makes average tariff rate applied to these products remain the highest almost throughout the whole phaseout period. It should be noted that even though US11 apparently seems to be the most restrictive phaseout category (i.e. 50% cut on day 1 and the resulting rate will remain unchanged until the end of year 12), its average tariff rate actually will be lower than phaseout category US6, US7, US8 and US9.
In the following table, the U.S. phaseout schedule for T&A in the released TPP text based on the 8-digit Harmonized System (HS) code is matched with the Office of Textiles and Apparel (OTEXA) product category. Results show that products equivalent to around 37.5% of the value of U.S. textile and apparel imports from Vietnam in 2015 will enjoy immediate duty-free treatment once TPP takes into force (i.e. EIF), approximately 4% will be subject to medium-level protection (i.e. EIF+B5) and 58.6% are under high (i.e. EIF+ any of the followings: US6, US7, US8, US9, US10, US11) or very high level of protection (i.e. any of the followings: US6, US7, US8, US9, US10, US11).
Note: “Level of protection” in the above table is defined as the following: 1) Low level of protection: EIF only; 2) Medium level of protection: EIF+B5; 3) High level of protection: EIF+any of the followings: US6, US7, US8, US9, US10, US11; 4) Very high level of protection: any of the followings: US6, US7, US8, US9, US10, US11 only.
9 thoughts on “US Tariff Phaseout Schedule for Textile and Apparel in TPP by OTEXA Code”
I don’t like how a more generous phaseout treatment is applied to some tariffs and not others. Since T&A products with lower base tariff rates have a more generous phaseout treatment, wouldn’t it seem that the tariffs almost disappear? If they are low to begin with, wouldn’t a greater phaseout treatment make them almost nonexistent? The T&A products that have a higher base tariff rate have a less generous phaseout treatment, so its almost as if TPP does nothing for the people who pay them, because the tariff still remains high. In other words, what good is TPP doing, if it is still just keeping the low tariffs low and the high tariffs high?
You raised a good question-why keeping the low tariffs low and the high tariffs high? My personal view: high tariffs imply a strong desire for trade protection. Therefore tariff cut for these “import sensitive” products is also limited. Vice versa, low tariffs imply the product is of less import sensitivity, therefore they are given more generous tariff cut. Welcome for any follow up comments.
But I thought that all the purpose of trade agreements was to encourage free trade? Wouldn’t that require that all products are treated equally, so that they all can move across boarders smoothly?
To jeannettemarie1727: great comments and questions. In an ideal world, maybe all products shall be treated the same. But in a real world, just like people pay different rate of taxes, there are many product-specific trade regulations. Textiles and apparel are often treated differently from other sectors because it is more sensitive politically and have much broader social and economic ramifications. Another point I would like to make is all trade regulations are not naturally born but negotiated. Like all business deals, it involves concession and tactics.
From looking at the chart I agree that those items with high protectionism were slower to have the tariffs phased out. I find it very interesting however that despite having a high level of protectionism they are still being planned to be phased out. Only the very high protectionism categories won’t be fully phased out with this plan. I don’t think this would make many protectionists happy because it just seems to delay the process but not actually protect them.
“despite having a high level of protectionism they are still being planned to be phased out.” this is what trade negotiation is all about–you have to give up something in order to gain something else
It does not make a lot of sense to start the phaseout with the lowest level tariffs. It only makes a small impact, and it leaves the highest level tariffs still gaining as much as they had before the TPP. This provides less of a benefit to the U.S. and its T&A industry but more of a benefit to the countries that we would import from. If the U.S. wants to be less protectionist with its tariffs then it only makes sense that they receive the low tariffs on the products they are importing as well as exporting.
HS code list of Vietnam at http://www.exportgenius.in/hs-code/vietnam