NAFTA Renegotiation and Textile-Specific Rules of Origin in Free Trade Agreements: Discussion Questions from FASH455

DMMuskKXUAErJbO

(Photo credit: Steve Lamar, AAFA)

#1 The US textile industry and the fashion retailers/brands/importers have very different priorities regarding modernizing and updating NAFTA. Do you believe that a compromise acceptable to both sides can be found? If so, what do you believe that compromise can be?

#2 Overall, why or why not do you think the U.S. textile and apparel industry is a beneficiary of NAFTA over the past decade? From the perspective of the U.S. textile and apparel industry, should or should not reducing the U.S. trade deficit be a prioritized objective in the NAFTA renegotiation?

#3 What will happen to the U.S. textile and apparel industry if NAFTA is gone? How should U.S.-based textile and apparel companies respond to NAFTA’s termination?

#4 In your view, why or why not the “yarn-forward” rules of origin are outdated in today’s global-based textile and apparel supply chain?

#5 Why do you think the “yarn-forward” rules of origin vary from free trade agreement (FTA) to FTA? Do you think there’s a way to make a universal “yarn-forward” rule for all U.S. FTAs?

#6 Why are the textile-specific rules of origin under free trade agreements so complex? What potential issues do you think can arise because of the complexity of these rules?

(Please feel free to join our online discussion. In your comment, please mention the question #)

Author: Sheng Lu

Professor @ University of Delaware

27 thoughts on “NAFTA Renegotiation and Textile-Specific Rules of Origin in Free Trade Agreements: Discussion Questions from FASH455”

  1. #3. I just recently read an article about what would happen if NAFTA was completely abolished. The main points that were talked about in this article were; there would be higher tariffs, broken supply chains, more expensive goods and ultimately, estranged neighbors. I strongly agree with the points made in this article. The higher tariffs would cause about a 7.5% increase on American goods, whereas the NAFTA has reduced the tariffs between the three countries to zero. This will have a major impact on North American trade. American’s should expect to pay more for Mexican goods because right now since there are no tariffs, this allows us to be able to pay a lower price for goods, abolishing NAFTA would change this. Getting rid of NAFTA could also hurt the relationships we have with the signing countries, because this agreement has made everyone more willing to work together due to the economic partnership. As for American textile and apparel companies, this would cause prices to go up ultimately cutting into the profits of the companies. I believe that these American companies need to take a stand so that NAFTA does not go away for good. It wouldn’t be good for anyone.

  2. #4 In my opinion, I think that the “yarn-forward” rules of origin are outdated in today’s global-based textile and apparel supply chain. The industry is so globalized today, so I think that it is kind of impossible for products to be made within certain regions from start to finish, or from fiber to garment. All countries around the world rely on each other for different resources and I think that the yarn-forward rules of origin in a way restrict countries from trading amongst each other and relying on one another for the manufacturing of different textiles and apparels.

  3. #3 What will happen to the U.S. textile and apparel industry if NAFTA is gone? How should U.S.-based textile and apparel companies respond to NAFTA’s termination?

    As Cameron discussed in her blog post, I completely agree that the termination of NAFTA would cause a slew of issues in both our local and global economy. I think it has been a great aid in connecting our global markets to one another so we can benefit from each others resources and labor. Also, I don’t think there is any perfect system or agreement, especially on a global scale. There will always be some issues. I definitely recognize some refinements that need to be revisited, such as cleaning up regulations surrounding TPL’s and making sure no country is cheating the system through “back door entry” into the US market, but overall NAFTA has been key to our trade negotiations. If the US cuts ties with NAFTA, I think the US would be left in the dark, scrambling on how to fix the holes in some of their supply chains. An agreement should be such that every partner benefits equally, if the US doesn’t think they the are getting equal benefits, they should focus on why that is…because with the proper attention to fix those issues, NAFTA can work more seamlessly for all parties involved.

  4. This article shined a light of comprehension on the subject of NAFTA. In combination with our discussions in class as well as latest essay assignment the debate of the agreement is clearer to me. To my understanding, a small percentage would say that NAFTA has been, for the most part, positive. I however, would have to disagree only due to the fact that the goals were to eliminate the barriers and promote trade. Since NAFTA has accomplished exactly that and shown benefits to many countries and citizens alike, I believe this aspect proves the trade ideals to be some what constructive. However, these changes have mostly been seen in the key six players, lacking both the necessary and promised attention of other nations. This has a great deal to do with yarn forward rules. Not only are these standards impossible in todays manufacturing but feeding into this unfair situation. NAFTA can be successful but only if changes are made to assist all those involved. Likewise, elimination of this rule would cause good results for all markets, not just ours.

  5. #3 What will happen to the U.S. textile and apparel industry if NAFTA is gone? How should U.S.-based textile and apparel companies respond to NAFTA’s termination?

    If NAFTA is gone, the U.S. textile and apparel industry will cause a great amount of issues in both our local and global economy. I believe that NAFTA has been very successful in connecting our global markets to each other which has been extremely beneficial. With NAFTA we are able to gain access to resources and labor that we do not have. There is always going to be issues with agreements, but the way we react and work to fix these issues will affect the success of our textile and apparel companies. Every partner of an agreement should benefit equally, but if a member feels as though they are not than they must do something to change that. If the U.S. focused on fixing the issues, NAFTA can still be a working and developing agreement. Many can benefit from NAFTA and all that it includes.

    1. In my view, NAFTA is more about the regional economic integration. Why do you think “NAFTA has been very successful in connecting our global markets to each other which has been extremely beneficial.” Can you explain more? You also mentioned that “If the U.S. focused on fixing the issues, NAFTA can still be a working and developing agreement.” But just like a business contract, a done deal is a done deal. Will it create unnecessary uncertainties for companies if we make NAFTA a “working and developing agreement”–meaning the rules will always keep changing?

  6. 4. In my opinion, I feel as though the “yarn-forward” rules of origin are especially outdated in today’s global textile and apparel industry. The yarn-forward rule states that each step of apparel production, from the spinning of the yarn, must take place in one of the FTA regions. In today’s textile and apparel industry, America relies on other countries to help create apparel. I don’t think that it’s possible for the production of a garment to be limited to one specific country because each region possesses its own set of skills and labor.

    6. In regards to my previous comment, I think that the textile-rules of origin are so complex because of the fact that America relies on other countries in order to manufacture apparel. There can’t be a law enforcing production within one country. The lack of labor and production will in turn lead to the downfall of the textile and apparel industry. I think that the complexity of the rules will cause disputes between other countries because it directly affects their work force and economy.

    1. very interesting thinking! for question #4, how about the interests of the US textile exporters? In their view, if free trade agreement is a club, then the benefits should be enjoyed by its members only (i.e. only those products using regional made inputs can be qualified for the preferential duty treatment).

      regarding question #6, can you explain more why ” complexity of the rules will cause disputes between other countries because it directly affects their work force and economy”?

  7. #4 In your view, why or why not the “yarn-forward” rules of origin are outdated in today’s global-based textile and apparel supply chain?

    In my opinion, I do believe that the “yarn-forward” rules of origin is outdated and does need to be updated. The textile and apparel industry is mainly based off of globalization and would make it almost impossible for it not to be. Both developed and developing countries all use each other to get different resources and the “yarn-forward” rules of origin does clash with how globalization does work today.

  8. #4 In your view, why or why not the “yarn-forward” rules of origin are outdated in today’s global-based textile and apparel supply chain?

    I feel that the “yarn-forward” rules of origin are outdated in today’s global-based textile and apparel supply chain. These rules state that every step of the supply chain must take place in an FTA region. Today, many materials are hard or expensive to make or find in these regions, and need to be sourced from other places outside of the FTA region.

  9. #4 In your view, why or why not the “yarn-forward” rules of origin are outdated in today’s global-based textile and apparel supply chain?

    In my opinion, I do feel that the “yarn-forward” rules of origin are outdated in todays global-based textile and apparel supply chain. My reasoning for this is because since these rules were made, fashion has changed drastically and the rules do not coincide with the new ways of the industry. Another issue is that countries rely on more than just the members of that specific FTA region to help produce and supply apparel and textiles. Countries differ in skills and labor and that makes it difficult to only utilize whats within your trade agreement region to produce apparel and textiles. The “yarn-forward” rules of origin need to be discussed and altered to support supply within the industry.

    1. I agree totally that the apparel supply chain is global-based today. If yarn-forward rules of origin is “outdated”, how to update it? Fabric-forward, cut and sew rule (i.e. only requiring cut and sew to happen in the FTA regardless of the origin of even fabrics), or no rules of origin at all?

  10. #1 I do not believe that there is a compromise that would make each party equally happy. As we have learned this semester through discussing case studies regarding negotiations of trade agreements, each party is fairly determined to achieve what they want. For example, yarn-forward rules of origin only benefit the US textile industry and can hurt fashion retailers and brands. To make one side happy, the other side has to suffer a loss. However, I believe this is the nature of trade agreements. Each side ultimately walks away with some benefits and some losses. When both parties enter an agreement with goals that oppose one another, it is virtually impossible to satisfy both completely.

    1. I agree! One more comment: sometimes, breaking the deal can also be a bargaining chip–just like NAFTA, even though US fashion brands and retailers do not like yarn-forward, they know it would be worse if NAFTA itself no longer exists…

  11. #4 I think that the yarn-forward rule should be updated because our apparel and textile industry has moved in a different direction since it was created. There are countries with different skill sets and resources to offer. Some of these yarns are harder to produce within the NAFTA regions and also may be cheaper from other countries. The yarn-forward rules of origin re outdated and need to be updated to still benefit NAFTA but also give room for movement.

  12. #1
    Unfortunately, I do not think a compromise can be met between both parties because they both want such drastically different things. Issues such as the reorganization or abolishment of the yarn-forward rule would only benefit textile manufacturers.

  13. #3 I think it’s interesting to concept of NAFTA being eliminated completely. The elimination of NAFTA has two perspectives. I think the first one is from the perspective of domestic manufacturers in the United States, Canada, and Mexico. If there is to be stricter domestic regulations, and companies instead choose to pay the duty and import out of NAFTA, it could cause serious damages to domestic companies. For instance, as the article mentions, If auto manufacturers were to import more passenger cars from outside the NAFTA region and pay the 2.5% U.S. import duty rather than complying with stricter domestic content requirements, automotive demand for U.S.-made technical textiles could be adversely affected. Yet from another perspective, there is little evidence that the loss of jobs in the U.S apparel manufacturing sector is at result of NAFTA.

  14. #3
    The idea of NAFTA being eliminated brings to light lots of perspectives and questions. NAFTA has been doing its job allowing for trade to flow nicely between the countries involved in the agreement. With threats for this to be gone, multiple ideas arise. Trade with the countries involved will now be more expensive, and strict domestic regulations will cause serious issues for Canada, Mexico, and the United States. I also think that there is always going to be parts of every agreement that are not always pleasing to every party, however I believe that NAFTA should stay, and that it has been very beneficial to the US.

  15. #1 The US textile industry and the fashion retailers/brands/importers have very different priorities regarding modernizing and updating NAFTA.

    I do not believe a compromise can be found for the textile industry and the fashion retailers. This is because both parties want different things. Each issues can negatively effect the other party. Because of this I do not think one party will back down and allow the other to have what they want. Through the videos we have watched, regarding NAFTA, both are unsatisfied and they both are seeking changes. Ultimately I believe when the final decision is made, it will most likely leave one party unsatisfied.

  16. #3
    If NAFTA is gone essentially so will the U.S. Textile and apparel industry as well. NAFTA and the U.S. textile and apparel industry currently almost go hand in hand, due to NAFTA companies are choosing to produce their goods in the U.S. to benefit from the elimination of tariffs on those goods. With NAFTA gone those companies are now going to look to produce elsewhere, and since the cost to produce in the U.S. is substantially higher than other countries outside of the NAFTA region, companies are going to opt for the lower cost method thus eliminating the U.S. textile and apparel industry. U.S.- based textile and apparel companies should respond to NAFTA’s termination in way that they should be able to create contracts that would allow them to reduce tariffs for companies, since for many they would have gone from not factoring in tariffs to tariffs could ruin their entire business is the U.S.

  17. In regards to question number 4, fashion has advanced drastically over the years and because of this, I believe that the “yarn-forward” rules of origin need to be updated. Today, the textile and apparel industry is completely globalized. Countries around the world all rely on each other as they all have different resources to give. Because of this and where we are in the industry today, it is nearly impossible to produce products in one place from start to finish. If the rules were updated, it would expand and encourage trade between more countries in order to efficiently produce textile and apparel products to the standards of today.

  18. In Response to questions #4 I do think yarn forward rules of origin are outdated in today’s global supply chain. While they are in place to help protect workers in the United States textile manufacturing sector, the do more harm to an even bigger industry in America which is the apparel retail sector. Yarn forward rules of origin do promote sourcing from outside of the western hemisphere supply chain, but they allow companies more flexibility in how to source their garments. At a time where competition in the T&A industry, flexibility on factors such as price and lead time are invaluable at ensuring these products remain competitive in the global market. I think there is some merit to yarn forward Roo’s because they do protect American workers, but I also believe they are outdated in today’s global supply chain

  19. #3
    While there are a few disadvantages claimed by the current administration that NAFTA sent many manufacturing jobs overseas – without NAFTA, the U.S. textile and apparel industry will suffer significantly from increased cost of resources by its own region. There are many alternative suppliers out in the world that can exist without NAFTA. For instance, the Asian textile and apparel industry suppliers can easily provide the same products for even cheaper, with both the less developed countries and its intensive labor process and the more developed countries and its capitalized process. Asian countries are working together vertically while the U.S. is fighting the globalization trend, this seems to be backtracking in comparison to the rest of the world. Our U.S. buyers will source products from other regions rather than struggling to find a factory here in the U.S. or invest millions of dollars into building its own factory. I think that the U.S. textile and apparel companies should speak up because even though there are so many alternatives out there, without NAFTA – the sourcing process will be more complicated. These can include longer lead times, poor communications, less transparency, and many more. The U.S. textile industry will also lose Mexico as its largest export market.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s