Utilization of US Trade Preference Programs–Why Fashion Companies Make the Sourcing Decisions They Do? (Video recording)

2022 WTO Aid for Trade Conference

Part 1 – Exporting countries and utilization of US Trade Preference Programs: An Overview

Part 2. Case Studies: Why companies make the sourcing decisions they do?

  • Patrick Fox, Senior Director, Customs and Trade Strategy, VF Corporation
  • Cen Williams, Hub Leader for Africa and Middle East region, PVH
  • Greg Poole, Chief Sourcing Officer, The Children’s Place

Background:

Trade preference programs provide duty-free US market access to selected exports of eligible developing countries. Unlike free trade agreements, all preference programs are unilateral, meaning they do not require reciprocal trade concessions.

There are five major trade preference programs enacted in the United States, including:

  • Generalized System of Preferences (GSP), which applies to developing countries as a whole. However, the US GSP program excludes most textile and apparel products due to import competition concerns.  GSP expired on December 31, 2020 and Congress is working with stakeholders to renew the program.
  • Four trade preference programs that target specific regions, including the Andean Trade Preference Act (APTA), the Caribbean Basin Economic Recovery Act (CBERA), the Caribbean Basin Trade Partnership Act (CBTPA), the African Growth and Opportunity Act (AGOA), and the Haitian Opportunity through Partnership Encouragement (HOPE) Act. In 2021, about 2% of US apparel imports came from trade preference partners.
  • US trade preferences reflect both economic development and foreign policy goals. In addition to the economic benefits, eligibility criteria create incentives for beneficiary countries to support objectives such as adopting and enforcing internationally recognized worker rights, reducing barriers to investment, and enforcing intellectual property rights.
  • However, the trade preference program is not without controversies. For example, it is debatable whether the trade preference program effectively enhances the genuine export competitiveness of developing countries. Also, despite preferential duty benefits, US fashion companies often hesitate to source more from trade preference partners due to concerns about a lack of critical infrastructure, limited production capacity, and political instability.

Author: Sheng Lu

Professor @ University of Delaware

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