trade policy – FASH455 Global Apparel & Textile Trade and Sourcing

FASH455 Video Discussion: Textiles, Trade & National Security: A Conversation with Parkdale Mills COO Davis Warlick

Discussion questions (for students in FASH455, please answer at least three questions from below)

#1 Use 1-2 examples from the video and explain how CAFTA-DR and USMCA help shape the Western Hemisphere textile and apparel supply chain.
#2 Based on the video, what do you see as the main opportunities for textile and apparel nearshoring or reshoring in the Western Hemisphere? Please also identify 1–2 key bottlenecks (e.g., cost, infrastructure, labor, sustainability, or trade policy) and explain your viewpoint.
#3 The speaker argues for a sectoral trade policy for textiles and apparel rather than broad “free trade.” What is your evaluation? Please make 1-2 specific points and use specific examples from the video to illustrate your viewpoint.
#4 How does the video help deepen your understanding of the complex economic and non-economic factors related to textile and apparel nearshoring and reshoring in the Western Hemisphere? Explain at least one insight that challenges your prior assumptions/views about sourcing and trade.

FASH455 Exclusive Interview with Nicole Bivens Collinson, Managing Principal and Practice Leader of International Trade and Government Relations, Sandler, Travis & Rosenberg, P.A.

About the interview

When learning about apparel sourcing and trade, our students often notice how much they are affected by trade policies and regulations—from tariffs, and something called “de minimis” to UFLPA. These issues are not only critical for fashion companies but can also be quite technical.

We are fortunate to have Nicole Bivens Collinson, Managing Principal and Practice Leader of International Trade and Government Relations of Sandler, Travis & Rosenberg, P.A. (ST&R), a true expert in trade policy and the legal aspects of trade, join us. In the interview, Nicole clarified key U.S. trade rules and provided valuable insights into their apparel sourcing and trade implications, including:

What is a tariff, and why is it a big issue for US fashion brands and retailers?
Why have the so-called IEEPA “reciprocal tariffs” imposed by the Trump administration so far this year raised so many concerns?
What does the term “transshipment” mean in international trade? And why did this issue emerge in the context of higher tariffs this year?
What is the “20% US content” rule and its implications for fashion companies?
What is “tariff engineering”? Is it legal or illegal? How have fashion companies used it to mitigate the tariff impacts, potentially?
What is de minimis? Why was it created, and then became controversial? Since the “de minimis” rule was officially terminated recently, what impacts could we expect now?
What is the Uyghur Forced Labor Prevention Act (UFLPA) and what does it aim to do? How has the implementation of the UFLPA affected U.S. fashion companies’ apparel sourcing?
For fashion students interested in working in trade compliance, trade policy, or the legal aspects of the fashion industry, what steps can they take to get started?

About Nicole Bivens Collinson

Nicole Bivens Collinson is the Managing Principal and Practice Leader of International Trade and Government Relations with Sandler, Travis & Rosenberg, P.A. (ST&R). Nicole is a commentator on trade matters on MSNBC, NPR, and BBC the producer of the Two Minutes in Trade podcast.

Nicole has nearly 40 years of experience in government and public affairs and lobbying. She prepares countries, companies, and associations for negotiations with the United States on free trade agreements, trade and investment agreements, labor disputes, and preferential trade programs.

Prior to joining ST&R, Nicole served as assistant chief negotiator for the Office of the U.S. Trade Representative, responsible for the negotiation of bilateral agreements with Latin America, Eastern Europe, Southeast Asia, the Sub-Continent, and Africa. She also served as a country specialist in the International Trade Administration at the Department of Commerce, where she was responsible for the preparation of negotiations on specific topics between the U.S. and Latin America, Eastern Europe, China, and Hong Kong as well as the administration of complex textile agreements.

Nicole holds a master’s degree in international relations from The George Washington University and a triple bachelor’s degree in political science, European studies, and French from Georgetown College. She also studied at the Université de Caen in France.

Nicole is past chair of the Women in International Trade Charitable Trust, past president of Women in International Trade, an advisory board member of America’s TradePolicy.com, treasurer and board member of the Washington International Trade Association, and a member of the Washington International Trade Association Foundation and Women in Government Relations. She serves on the board of trustees for Georgetown College and is the past executive director for the U.S. Hosiery Manufacturers Coalition, the U.S. Apparel Industry Coalition, and the U.S. Sock Distributors Coalition.

About Katie Yasik (moderator)

Katie Yasik is a master’s student & graduate instructor in Fashion and Apparel Studies (FASH) at the University of Delaware (UD). Katie graduated from UD & FASH with a B.S. in Fashion Design and Product Innovation & Sustainable Apparel minor. Driven by her strong passion for sustainability, she interned with the Worldwide Responsible Accredited Production (WRAP) in Spring 2024.

FASH455 Exclusive Interview with Karin De León, Investment and Promotion Director, Apparel and Textiles Association of Guatemala (VESTEX)

About Karin De León

Karin De León has been working in the textile and apparel sector in Guatemala for more than 25 years, promoting the development of the industrial cluster, participating in the creation of strategies, supporting the strengthening of the supply chain, and attracting investment.

As part of her role at the Apparel and Textile Association of Guatemala (VESTEX), for 10 years she held the position of Executive Director of CECATEC-RD (Central American and Dominican Council of Clothing and Textiles), the entity that integrates textile & apparel industry associations of Central America and the Dominican Republic and which is responsible for coordinating the inter-institutional relationship with public and private entities of the United States of America, Mexico and Colombia mainly.

From 2020 to the beginning of 2022, she served as Chief of Staff of the Ministry of Economy of Guatemala and later became General Coordinator of the National Competitiveness Program (PRONACOM), a government entity responsible for promoting the country and attracting investment.

Karin is currently VESTEX’s investment and promotion director, and representative of Guatemala in CECATEC-RD. She coordinates the inter-institutional relationship with government entities of the United States (such as the United States Trade Representative and the Department of Commerce) as well as private institutions mainly related to the United States, Mexico, and Colombia.

Sheng: Can you provide a brief introduction to VESTEX and a general overview of your member companies?

Karin: VESTEX is the Apparel and Textile Association of Guatemala, a private association representing the Guatemalan textile and apparel export sector. It focuses on promoting the industry’s exports through strategic alliances with public and private institutions at the national and international levels. Its strategic axes are Sectoral Resilience, which seeks to position the industry as a generator of investment and formal employment in the country; Sectoral Sustainability, through the promotion of sustainability as a long-term strategy for industry continuity and compliance, providing companies in the sector with tools that facilitate compliance with the obligations established in the laws and regulations.

VESTEX partners comprise companies that integrate the entire supply chain of the apparel and textile sector, encompassing yarn and fabric manufacturers, apparel producers, as well as firms providing specialized services and accessories to the industry.

Sheng: Studies show that there is consistent interest among U.S. fashion companies in expanding nearshoring from the Western Hemisphere, including Guatemala. What is your observation? What makes Guatemala an attractive destination for apparel sourcing today? What are the unique advantages of sourcing from the country?

Karin:Guatemala has become an increasingly attractive destination for apparel sourcing due to its unique combination of industrial integration, geographic advantages, and strong compliance standards. The country offers a highly integrated apparel cluster that encompasses every stage of the supply chain—from spinning yarn and weaving fabrics to apparel manufacturing, printing, finishing, and packaging. This full-package model not only streamlines operations and enhances traceability but also allows for greater flexibility and product diversity, raising the added value of garments and positioning Guatemala as a competitive supplier for niche and complex products requiring skilled labor and high-quality materials.

Another key differentiator is Guatemala’s strategic location. With access to ports on both the Atlantic and Pacific coasts—separated by only 249 miles—the country can efficiently serve both the East and West coasts of the United States. Guatemala manages the second-largest maritime cargo operation in Central America (after Panama), which is critical for companies seeking to balance and mitigate geopolitical and logistical risks. In addition, proximity to the U.S. substantially reduces environmental impact: sourcing from Guatemala lowers CO₂ emissions from maritime transport by approximately 84% compared to sourcing from Asia. Transit times are also highly competitive, with shipments reaching Miami in as little as three days, enabling U.S. buyers to manage inventories more effectively and respond to market demands with agility.

Equally important, Guatemalan apparel companies operate under a strong framework of labor and environmental compliance. Companies demonstrate a full-spectrum commitment to input traceability, adherence to strict rules of origin, and continuous process improvement to reduce resource consumption. Investments in monitoring and ESG systems underscore their transparency and alignment with global sustainability standards.

Taken together, this integration of cluster capabilities, geographic proximity, and compliance with international norms positions Guatemala as a reliable, sustainable, and strategically advantageous sourcing partner for U.S. fashion companies.

Sheng: How important is the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) in supporting Guatemala’s apparel exports to the U.S. market? What impact do CAFTA-DR’s apparel-specific rules of origin have on garment exporters’ supply chains and export strategies in Guatemala?

Karin:CAFTA-DR has provided certainty by encouraging long-term investments in textile infrastructure and capabilities. CAFTA-DR has been the basis for the development of Guatemala’s apparel industry. The yarn-forward rule established under the agreement has not only fostered integration with the U.S. supply chain but also promoted stronger collaboration among Central American countries. By allowing the accumulation of inputs and processes within the region, CAFTA-DR has significantly strengthened intraregional trade.

This integration has facilitated the specialization of each Central American country. In Guatemala’s case, it has enabled the use of specific yarns and fabrics produced in other countries and manufactured locally, fostering a greater diversification of production.

According to OTEXA figures, in the year ending June 2025, 89.17% of Guatemala’s total apparel exports to the U.S. entered under the Free Trade Agreement preferences. Of this total, 79.69% qualified under the yarn-forward rule—that is, garments made with yarn from the U.S. or yarn produced within one of the Central American countries. CAFTA-DR, and particularly its rules of origin, have been the basis of Guatemala’s strategy in recent years, not only to attract foreign direct investment but also to encourage significant reinvestments.

Sheng: Data shows that an increasing share of yarns and fabrics used by Guatemala garment factories are now locally made in Guatemala and other Central American countries. Could you discuss the recent trends in textile manufacturing capacity building in Guatemala, as well as the industry’s current priorities in building a more vertically integrated regional supply chain?

Karin:Guatemala offers a series of competitive advantages that are reinforcing its role as a regional hub for textile and apparel manufacturing. At the country level, it benefits from a stable macroeconomy, a solid exchange rate, competitive electricity prices within the region, and a reliable energy supply. At the industry level, Guatemala stands out for its robust apparel and textile cluster and highly skilled workforce.

Since the pandemic in 2020, when many global companies accelerated nearshoring strategies, Guatemala has successfully attracted new foreign investment and supported the expansion of companies already established in the country, particularly in the spinning industry. Installed capacity is primarily focused on cotton, although blends are also produced. By the end of 2024, apparel exported to the U.S. consisted of 62.8% cotton, 36.4% synthetics, and 0.8% wool, reflecting the central role of cotton in the country’s production while also showing diversification into other fibers.

Driven by shifting market demand, textile production in Guatemala has been expanding beyond knits, with a modest increase in woven fabrics as well. Investments in innovation and technology have enabled the industry to offer specialized processes, including antimicrobial treatments, absorption, UPF protection, enzymatic washing, softening, and plush finishing, among others. A particularly important advancement has been the investment in elastic knit fabrics, which has opened the door to the production of categories such as sportswear, intimate apparel (seamless), shapewear (technical lingerie and compression fabrics), and medical textiles.

We recognize, however, that there remain challenges and opportunities to broaden the regional textile offering—particularly in the production of yarns and fabrics made from fibers not yet manufactured locally. Expanding capacity in these areas would further strengthen vertical integration and supply chain resilience.

In this context, VESTEX has taken a leading role in supporting and guiding companies interested in exploring these opportunities. In coordination with Guatemala’s foreign direct investment promotion agency, efforts are underway to identify high-demand inputs that are currently unavailable in the region but represent strategic opportunities for local production.

Sheng: Since April 2025, U.S. apparel imports from CAFTA-DR countries, including Guatemala, are subject to a new 10% “reciprocal tariff.” How has this tariff increase and the Trump administration’s trade policy so far impacted Guatemala’s garment industry and exports?

Karin:The main challenge for Guatemala’s apparel industry under the current U.S. trade policy has been the high degree of uncertainty. Markets and buyers demand stability, yet in recent months orders have slowed significantly as companies await clarity on the tariffs that will ultimately apply to each country. This hesitation has already resulted in lost opportunities: seasonal orders cannot be recovered once the selling window has passed.

Traditionally, Guatemala’s apparel sector grows between 3% and 5% annually; however, 2025 projections have been revised downward, and current expectations suggest growth closer to 1–2%. According to the Central Bank of Guatemala, as of June 2025, exports registered a modest 1.36% increase—well below what was anticipated under normal conditions.

Another major impact has been the need for companies to absorb additional costs to maintain contracts with international brands. This has reduced profit margins, limited reinvestment capacity, and increased pressure on already tight production cycles. Buyers face uncertainty as well: they do not know how much a garment ordered today will cost by the time it is delivered six to nine months later, since tariff rates are subject to abrupt changes. The volatility recalls past episodes in China, where tariffs under former President Trump rose as high as 145% before being reduced to 30%, creating unpredictable supply conditions.

That said, Guatemala continues to hold a relative tariff advantage compared with Asian competitors, where rates now reach 15%, 18%, 25%, or even higher. This gap may ultimately favor Guatemala if U.S. buyers reconfigure sourcing strategies to prioritize suppliers who are both geographically closer and more reliable. Indeed, global sourcing is shifting away from a purely low-cost model toward one that values resilience, speed to market, and compliance.

Sheng: The 2025 US Fashion Industry Association Benchmarking Study indicates that U.S. fashion companies are increasingly seeking sourcing destinations that can provide sustainable apparel products, including those made with preferred fibers such as organic, recycled, regenerative, and biodegradable materials. What strategies or recent initiatives has the Guatemalan textile and apparel industry undertaken to meet this demand for sustainability?

Karin: Guatemalan mills already source recycled polyester yarns, organic or regenerative cotton, and biodegradable materials. Brands are actively demanding these products. In fact, mills have obtained various certifications and adhere to practices focused on circular economy, science-based target initiatives, and other sustainability standards.

Traceability is key for the textile and apparel industry, and Guatemala has managed to implement measures such as data management and continuous improvement as a way to demonstrate this.

Adoption of Sustainable Certifications and Standards: Guatemalan manufacturers are obtaining certifications like GOTS (Global Organic Textile Standard), OEKO-TEX, Global Recycled Standard, Recycled Claim Standard, Blue Sign, Higg FEM, among others, ensuring their products meet international sustainability standards.
Investment in Technologies: Many mills are upgrading to water and energy-efficient machinery, as well as more sustainable dyeing and finishing processes.
Training and Capacity Building: Initiatives to train and certify workers and management on sustainable practices and standards are increasing, promoting a culture of sustainability throughout the industry.
Integration of Circular Economy Principles: Some mills are exploring design for recyclability techniques to align with circular economy goals.

These initiatives collectively position the Guatemalan textile and apparel sector as a viable sourcing destination for sustainable fashion, aligning with global market trends and buyer preferences for more sustainable products.

Sheng: In addition to the questions discussed earlier, what are the top business and policy issues facing Guatemala’s textile and apparel industry over the next 1–2 years?

Karin:Over the next 1–2 years, Guatemala’s textile and apparel industry will face several pressing business and policy issues that will shape its competitiveness.

1. Infrastructure and logistics.
A key issue remains the need to strengthen national infrastructure, particularly ports, customs processes, and internal transport routes.

2. Limited availability of regional inputs.
The industry continues to face constraints in the local production of certain yarns, fabrics, and specialized fibers. Inputs such as viscose, spandex, and rayon are not yet manufactured in the region at scale, which limits vertical integration and forces reliance on imports from outside the hemisphere. Expanding textile capacity in these areas is a central issue to ensure resilience and broaden the exportable supply.

3. Market visibility and buyer perception.
Despite its high level of integration, many international buyers remain unaware of Guatemala’s strengths in complex products, compliance, and sustainability. A persistent challenge is to raise global awareness of the country’s capabilities in order to capture greater sourcing opportunities.

4. Policy uncertainty and trade volatility.
The recent 10% reciprocal tariff applied to CAFTA-DR countries has introduced significant uncertainty. Buyers hesitate to place long-term orders when tariff levels are unclear, and this volatility affects sourcing decisions. Stability and predictability in trade policy remain critical issues for the sector.

5. Differentiation and specialization under nearshoring.
Another key challenge is sustaining competitiveness through higher-value products. Today, 54.11% of Guatemala’s apparel exports already include advanced finishing processes, and the industry is investing in spinning, woven fabrics, and technical textiles. However, scaling these capabilities requires reinvestment and foreign capital inflows—both of which are being constrained by global uncertainty. Given that Guatemala currently supplies only about 2% of U.S. apparel imports, a major issue ahead is how to convert this untapped potential into tangible growth.

In short, while the country is positioning itself strategically with competitive tariffs, geographic proximity, and an increasingly sophisticated textile base, the top issues over the next two years will be overcoming infrastructure and logistics bottlenecks, reducing dependence on imported inputs, strengthening promotion to buyers, and navigating trade policy volatility. Addressing these challenges will be crucial for Guatemala to capitalize on long-term opportunities in the ongoing global supply chain reconfiguration.

-The End-

FASH455 Video Discussion: Inside the Costs and Challenges of Making Textiles and Apparel in the U.S.

Video 1: How an Oklahoma denim-maker supports creating American-made jeans

Video 2: President Trump’s Tariffs Backfire on US Textile Exporters

Discussion questions (note: for students in FASH455, please respond to at least two questions listed below in your comment)

Based on the videos, what is your evaluation of the opportunities and challenges of making textiles and apparel in the U.S.?
In what ways has international trade influenced the growth, decline, or transformation of U.S. textile and apparel production?
What do you think about the Round House Jeans owner’s strategy of selling imported jeans from Bangladesh at a higher profit margin to “subsidize” its low-margin U.S.-made jeans? Do you think this could be a sustainable business model in the long run?
Based on the videos, why do you think U.S. textile and apparel production experienced even greater losses in the first half of 2025, despite higher tariffs on imports? [Detailed data HERE]
If you were invited to offer policy recommendations to boost U.S. domestic textile and apparel manufacturing, what would you propose, and why?

Additional reading:

2025 USFIA Fashion Industry Benchmarking Study Released

The full report is HERE.

Key findings of this year’s report:

#1 This year, the top business challenges facing U.S. fashion companies center on the Trump Administration’s escalating tariff policy and its wide-ranging impacts on companies’ sourcing and business operations.

100 percent of respondents rated “Protectionist U.S. trade policies and related policy uncertainty, including the impact of the Trump tariffs” as one of their top business challenges in 2025. This included as much as 95 percent of respondents who ranked the issue among their top two concerns.
Respondents also expressed significant concerns about the wide-ranging effects of Trump’s tariff policy, including “Inflation and economic outlook in the U.S. economy” (80 percent), “Increasing production or sourcing cost” (nearly 50 percent), and “Protectionist trade policies and policy uncertainty in foreign countries, including retaliatory measures against the U.S.” (52 percent).
Over 70 percent of surveyed companies reported that the higher tariffs increased sourcing costs, squeezed profit margins, and led to higher consumer prices. Approximately half of the respondents reported a decline in sales, and 22 percent stated that they had to lay off employees due to increased tariffs.

#2 Maintaining a geographically diverse sourcing base has been one of the most popular strategies adopted by U.S. fashion companies to mitigate the impact of rising tariffs and policy uncertainty.

This year, respondents reported sourcing apparel products from 46 countries, similar to the 48 countries reported in 2024 and an increase from 44 countries in 2023. At the firm level, approximately 60 percent of large companies with 1,000+ employees reported sourcing from ten or more countries in 2025, a notable increase from the 45–55 percent range reported in 2022 and 2023 surveys.
- Amid escalating tariffs and rising policy uncertainty, Asia has become an ever more dominant apparel sourcing base for U.S. fashion companies in 2025. Respondents reported increased use of several Asia-based sourcing destinations other than China in 2025 compared to the previous year, including Vietnam (up from 90 percent to 100 percent), Cambodia (up from 75 percent to 94 percent), Bangladesh (up from 86 percent to 88 percent), Indonesia (up from 75 percent to 77 percent), and Sri Lanka (up from 39 percent to 53 percent).As part of their sourcing diversification strategy, U.S. fashion companies are also gradually increasing sourcing from emerging destinations in the Western Hemisphere and beyond, such as Jordan, Peru, and Colombia.
- Most respondents intend to build a more geographically diverse sourcing base and broaden their vendor network over the next two years. Nearly 60 percent of respondents plan to source apparel from more countries, and another 40 percent plan to source from more suppliers or vendors. Reducing sourcing risk, especially to minimize the impact of rising tariffs and tariff uncertainty, is a key driver of companies’ sourcing diversification strategies

#3 U.S. fashion companies remain deeply concerned about the future of the U.S.-China relationship during Trump’s second term and intend to further “reduce China exposure” to mitigate sourcing risks.

While 100 percent of respondents reported sourcing from China this year, a record-high 60 percent of respondents reported sourcing fewer than 10% of their apparel products from China, up from 40 percent in 2024. Approximately 70 percent of respondents no longer used China as their top apparel supplier in 2025, representing a further increase from 60 percent in 2024 and significantly higher than the 25-30 percent range prior to the pandemic.
Despite the announcement of the reaching of a U.S.-China “trade deal” in May 2025, more than 80 percent of respondents plan to further reduce their apparel sourcing from China over the next two years through 2027, hitting a new record high. Many large-scale U.S. fashion companies are already limiting or plan to limit their apparel sourcing from China to a “low single-digit” percentage by 2026 or earlier, mainly due to concerns about the increasing geopolitical and trade policy risks associated with sourcing from the country.
Still, respondents rated China as highly economically competitive as an apparel sourcing base compared to many of its Asian competitors regarding vertical manufacturing capability, low minimum order quantity (MOQ) requirements, flexibility and agility, sourcing costs, and speed to market. However, non-economic factors, particularly the perceived extremely high risks of facing U.S. import restrictions, geopolitical tensions with the U.S., and concerns about forced labor, are driving U.S. fashion companies to continue their de-risking efforts.

#4 No evidence indicates that the Trump Administration’s tariff policy has successfully encouraged U.S. fashion companies to increase domestic sourcing of “Made in the USA” textile and apparel products or to expand sourcing from the Western Hemisphere.

Only about 44 percent of respondents explicitly say that they would expand sourcing from the Western Hemisphere, and even fewer respondents (17 percent) plan to source more textiles and apparel “Made in the USA” amid the tariff increase.
This year, fewer respondents reported sourcing apparel from Mexico and Canada (down from 60 percent in 2024 to 50 percent in 2025) and members of the Dominican Republic-Central America Free Trade Agreement, CAFTA-DR (down from 75 percent in 2024 to 64 percent in 2025).
About half of the respondents plan to expand apparel sourcing from Mexico and CAFTA-DR members over the next two years. Notably, nearly all of these companies also intend to increase sourcing from Asia, indicating that U.S. fashion companies view near-shoring from the Western Hemisphere as a complement, not a replacement, to their broader sourcing diversification strategy.
Respondents consider the most urgent capacity-building needs within CAFTA-DR lie in the production of textile raw materials (e.g., spandex) and accessories (e.g., zippers, threads, and buttons). Meanwhile, USMCA members are considered to have relatively stronger capacities in yarn and fabric production but face more pressing shortages in accessories.

#5 Respondents overall remain highly committed to sustainability, social responsibility, and compliance issues in the sourcing process.

This year, the top sustainability and compliance areas where respondents plan to allocate more resources include “Investing in technology to enhance supply chain traceability or isotopic testing” (53 percent), “Providing sustainability and social compliance training for internal employees” (50 percent) and “Providing sustainability and social compliance training for suppliers” (50 percent).
As part of U.S. fashion companies’ sustainability efforts, all respondents (100 percent) report sourcing clothing made with “sustainable textile fibers” in 2025. Having 11–50% of apparel products containing various “sustainable textile fibers” is the most common (40 percent of respondents), followed by having 1–10% of the total sourcing value or volume(30 percent of respondents).
Moreover, most respondents (over 70 percent) plan to increase their use of various “sustainable fibers” in clothing over the next three years. This trend is especially strong for recycled materials, with 80 percent of respondents indicating they intend to increase their use.
The top three positions with the highest demand among respondents from 2025 through 2030 are “Environmental sustainability-related specialists or managers,” “Trade compliance specialists,” and “Data scientists”—more than 40 percent of respondents plan to increase hiring. There is also strong demand for “Textile raw material specialists” and “Sourcing specialists.”

#6 With the upcoming expiration of the trade preference program this September, respondents again underscore the importance of immediate renewal of the African Growth and Opportunity Act (AGOA) and extending the agreement for at least another ten years.

Due to the upcoming expiration of AGOA and uncertainty about its future, this year, respondents sourced from only six SSA and AGOA members (i.e., Kenya, Ethiopia, Ghana, Madagascar, Mauritius, and Tanzania), fewer than the seven countries in 2024. And none of these countries were used by more than 20 percent of respondents.
Nearly 80 percent of respondents support “renewing AGOA for at least another ten years,” and no one opposes. This shows a consistent and wide base of support for AGOA among U.S. fashion companies.
More than 70 percent of respondents say that securing a long-term renewal of AGOA for at least ten years is essential for expanding apparel sourcing from the region. Similarly, another 60 percent of respondents believe that a long-term renewal of AGOA is necessary for U.S. fashion companies and their supply chain partners to commit to new investments in the region.
Respondents warned that AGOA’s pending renewal has already begun to harm the region’s prospects as an apparel sourcing base. Approximately 30 percent of respondents explicitly stated that they had already reduced sourcing from AGOA members due to the uncertainty surrounding the agreement’s renewal.

About the study

Authored by Dr. Sheng Lu in collaboration with the United States Fashion Industry Association (USFIA), this year’s benchmarking study was based on a survey of executives from 25 leading U.S. fashion companies from April to June 2025. The study incorporated a balanced mix of respondents representing various businesses in the U.S. fashion industry. Approximately 85 percent of respondents were self-identified retailers, 60 percent were self-identified brands, and about 50 percent were importers/wholesalers.

The survey respondents included large U.S. fashion corporations and medium-sized companies. Around 90 percent of respondents reported having over 1,000 employees; the rest (10 percent) represented medium-sized companies with 100-999 employees.

Impacts of Trump’s Escalating Tariffs on Apparel Sourcing: U.S. Fashion Companies’ Perspective

Updated study available: Updated Impact of Increasing Tariffs on U.S. Fashion Companies’ Sourcing and Businesses (October 2025)

(Note: The figure above shows how frequently the term “tariff” was mentioned alongside other key issues in the earnings calls. A higher frequency indicates a more significant impact and a closer connection between tariffs and a specific theme.)

This study aims to examine the impacts of the Trump administration’s escalating tariffs on U.S. fashion companies’ apparel sourcing practices. Based on data availability, transcripts of the latest earnings calls from approximately 25 leading publicly traded U.S. fashion companies were collected. These earnings calls, held between mid-May and June 2025, covered company performance in the first quarter of 2025. A thematic analysis of the transcripts was conducted using MAXQDA.

Overall, the results indicate that the Trump administration’s escalating tariffs and policy uncertainties have financially hurt U.S. fashion companies and disrupted their apparel sourcing practices. To mitigate these impacts, most companies plan to further reduce their “China exposure,” maintain a geographically diversified sourcing base, and prioritize flexibility in sourcing and shipping. However, there is no clear evidence that the current policy environment has successfully incentivized U.S. companies to expand apparel sourcing from the Western Hemisphere, let alone commit to new long-term investments. Meanwhile, U.S. fashion companies have adopted a strategic pricing approach by not passing the entire cost increase to consumers through widespread retail price hikes.

A few key findings:

First, far from surprising, many leading U.S. fashion companies expressed concerns that the Trump administration’s escalating tariffs have resulted in higher sourcing costs and cut companies’ profit margins. For example:

Company G (specialty store): if current tariffs of 30% on most imports from China and 10% on most imports from other countries remain for the balance of the year, we estimate a gross incremental cost of approximately $250 million to $300 million.
Company O (a parent company of several leading apparel brands): We expect that gross margin will contract approximately 200 basis points for the year. This contraction includes $40 million in additional tariff costs.
Company V1 (underwear brand): gross tariff impact of approximately $120 million, which assumes 30% China tariffs and 10% non-China, with tariff mitigation of approximately $70 million for a net impact to fiscal year 2025 of approximately $50 million.

Second, with the hiking tariff rate on U.S. apparel imports from China and increasing strategic competition between the two countries, many leading U.S. fashion companies plan to reduce their apparel sourcing from China to a single-digit, if not move out of the country entirely. For example:

Company A1 (apparel brand): We’re on track to reduce our sourcing exposure to China to under 10% this year with fall and holiday season down to low single digits.
Company A2 (specialty store): For China specifically, we have worked for some time now to relocate the supply resources, and this year’s sourcing volume from China will be in the low single digits.
Company L (apparel brand): Less than 8% of our purchase order dollars last fiscal year were utilized on buys of China.
Company O (a parent company of several leading apparel brands): By the second half of 2026, we currently plan to be substantially out of China.
Company V2 (a parent company of several leading apparel brands): over the past several years we’ve strategically diversified our supply chain and proactively reduced our US finished goods sourced from China to less than 2%.
Company K2 (a parent company of several leading apparel brands): China for us is de minimis.

Third, maintaining a geographically diverse sourcing base remains a popular strategy for U.S. fashion companies to mitigate the impacts of increasing tariffs and ongoing policy uncertainties. Companies particularly intend to avoid “putting too many eggs in one basket” and limiting the reliance on any single supplying country. For example:

Company K1 (retailer): our talented and experienced global sourcing team has done an incredible job diversifying our countries of production to ensure that we are not overly reliant on any one country. Although tariffs remain a fluid and uncertain situation, the teams continue to work to reduce our exposure to high tariff countries by leveraging our diverse factory network to move production, adjusting orders based on pricing elasticity analysis.
Company G (specialty store): Most other countries represent less than 10%, Vietnam and Indonesia represented 27%, and 19% of our sourcing last year, respectively, and our goal is for no country to account for more than 25% by the end of 2026.
Company R (apparel brand): While tariffs will primarily impact our gross margins… we have a proven toolkit to manage cost inflation headwinds. This includes first, significant supply chain diversification…No single country accounts for more than 20% of our production volumes, with most countries representing a single-digit percentage.
Company U (retailer): The remaining third is strategically diversified across a number of other countries, each representing a low to mid-single-digit percentage. This deliberate diversification creates a well-balanced portfolio, reducing reliance on any single market and enhancing our ability to navigate geopolitical, costs and supply chain complexities from a position of strength.

Notably, while a limited few companies specifically mentioned the possibility of expanding sourcing from the Western Hemisphere amid the current business environment, most did not. For example:

Company L (apparel brand): We intentionally drove significant change in our supply chain as we accelerated production in the Western Hemisphere, giving us both speed and additional avenues to mitigate tariffs and provide resiliency.
Company G (specialty store): Diversification also means near-shoring as well as domestic investment.

Fourth, U.S. fashion companies have leveraged shipping timing, piled up inventory, and delayed or cancelled existing orders to mitigate the tariff impacts as much as possible. For example:

Company C (sportswear): For products that are impacted by the reciprocal tariffs, we are accelerating shipments to the extent possible in order to receive products during the 90-day tariff.
Company K1 (retailer): Inventory was up 1.7% compared to last year, driven by inventory strategies implemented to navigate the tariff pressure, including the pull forward of receipts and pack in holding seasonal inventory to be sold in the back half of the year.
Company B (off-price retailer): Our reserve inventory was 48% of our total inventory versus 40% of our inventory last year. In dollar terms, our reserve inventory was up 31% compared to last year, reflecting the great deals we were able to make to get ahead of tariffs.
Company M (retailer): With the recent announcement of these tariffs, we’ve renegotiated orders with suppliers, and we’ve canceled or delayed orders where the value proposition is just not where it needs to be.

It should be noted, however, that adjusting shipping and inventory could incur additional costs. For example:

Company V1 (underwear brand): More than half of the gross margin rate pressure in the quarter was due to a combination of elevated and expected airfreight rates, some tariff-related order adjustments…

Fifth, despite higher sourcing costs and increasing financial pressures, many U.S. fashion companies have avoided widespread price hikes but have implemented selective increases in less price-sensitive apparel categories. For example:

Company V1 (underwear brand): [price increase driven by higher tariffs] And so we are going to sort of play in the middle where we see value. So and it won’t be across all categories. As we think about our business, it’s really that strategic case by case, category by category look that we’re taking.
Company U (retailer): gently and sparingly raising some prices. Please note that any price increases will be very strategic, protecting opening price points and only targeting areas where we believe we could raise prices without affecting the overall customer experience.
Company A2 (specialty store): we are not planning broad-based ticket increases. As we’ve done season after season, our goal is to deliver high-quality product and align inventory and promotions with our customers’ value perception.
Company P (a parent company of several leading apparel brands): We will evaluate strategic discounts to mitigate the potential tariff impact. While we are focused on delivering price value for the consumer, we are also ready to take calibrated targeted pricing actions where we have pricing power.

by Sheng Lu

Additional reading: Tariffs Upend Fashion Sourcing and Disrupt Cash Flow Amid Widening Trade Gap (Sourcing Journal, June 27, 2025)

Exploring the “Pink Tariff”

Begin at 36 minutes; Students are expected to form their own independent assessments of the topic.

Additional readings:

‘Pink tariffs’ cost women more than $2 billion a year (CNN, April 2025)
‘Financial microaggressions’: why ‘pink tariffs’ hurt women more than men (Guardian, March 2025)
PPI study on pink tariff (December 2023)
Gender and income inequality in United States tariff burden (US International Trade Commission, 2018)

Discussion questions:

What do you think about the pink tariff? How does the pink tariff affect different stakeholders, including consumers and fashion companies?
How can fashion companies respond to or navigate pink tariffs in their global sourcing, particularly considering the tariff escalation in 2025?
What role can governments and international trade organizations play in addressing pink tariffs, and what policy changes could help eliminate the disparities? What are the challenges?

Textile and Apparel Industry Stakeholders Comment on Trump’s “Reciprocal Tariffs”

Background: Pursuant to the America First Trade Policy Presidential Memorandum and the Presidential Memorandum on Reciprocal Trade and Tariffs, the Office of the U.S. Trade Representative (USTR) solicited public comments on the proposed “Reciprocal Tariffs” from February to March 2025. Below is a summary of comments submitted by stakeholders in the textile and apparel industry.

The United States Fashion Industry Association (USFIA), whose members include many leading U.S. fashion brands and retailers, opposes raising tariffs and argues for lowering tariffs on textile and apparel products where the U.S. imposes a higher tariff rate than its trading partners. According to USFIA, higher tariffs on apparel and textiles would disproportionately impact lower-income U.S. consumers:

“A true ‘reciprocal’ trade policy would lower tariffs on the products of trading partners that maintain lower tariffs than the United States.”
“We recommend that the most successful policy to achieve trade reciprocity would be for the United States to lower the tariff rates of products for which our trading partners apply lower tariff rates. For consumer products such as textiles and apparel, this would help combat inflation and assist consumers who struggle to afford basic necessities.”

The American Apparel and Footwear Association (AAFA), representing U.S.-based “apparel, footwear and other sewn products companies”, opposes broad tariffs on apparel, footwear, and textiles. It is of concern to AAFA that the apparel and footwear sector already faces some of the highest tariffs in the U.S., and tariffs are a “hidden, regressive tax that falls harder on lower-income Americans.” Even worse, AAFA worries that higher tariffs would benefit “Illicit traders” and tariff threats would undermine the regional textile and apparel supply chain in the Western Hemisphere:

“Illicit traders are better positioned to escape paying proper duties or any duties at all. Higher tariffs end up maximizing the profit and market access they can gain at the expense of legitimate shippers.”
“Recent tariff threats particularly on our neighbors, Canada and Mexico, are especially concerning as the U.S.-Mexico-Canada Agreement (USMCA) review is about to begin. Canada is a key export market for U.S. made apparel and footwear while Mexico is a major source of a wide variety of apparel, including denim imports. Not only does the threat of tariffs cast uncertainty but it also undermines future investment and nearshoring opportunities.”

National Council of Textile Organizations (NCTO), representing U.S. textile mills, supports targeted tariffs against “unfair trade” but opposes penalties on Western Hemisphere trading partners:

“We strongly recommend that the Trump administration take a targeted approach to raise tariffs on specific countries that disrupt markets through the use of blatantly unfair and often illegal trade practices, while simultaneously operating in home markets that remain mostly closed to our products.”
“We must preserve and strengthen existing trade relationships with U.S. free trade agreement (FTA) countries in the Western Hemisphere that offer valuable markets for U.S.-made textiles.”
“We strongly believe that reciprocity should not mean a race to the bottom with lower tariffs on imports from other countries into our market. Rather, reciprocity should hold bad actors accountable for systemic unfair trade practices that have hurt domestic manufacturers.”
“We urge the Trump administration to take several actions immediately to make textile and apparel trade more reciprocal and to support the domestic industry…Aggressively raise tariffs on imports of textile and apparel products from China and other trade predators in Asia…Close the de minimis loophole for all countries…”

SMART (Secondary Materials and Recycled Textiles Association), representing businesses engaged in the collection, reuse, conversion, and recycling of textiles and other secondary materials, advocates for addressing trade barriers that affect U.S. secondhand clothing exports. SMART also opposes CAFTA-DR members using the “yarn-forward” rules of origin for imports of secondhand clothing (HTS 6309) from the U.S. under the agreement.

National Retail Federation (NRF), generally representing all types of U.S. retailers, opposes broad-based tariffs, arguing that they increase consumer costs, disrupt supply chains, and hurt retailers. NRF supports targeted measures against unfair trade practices but warns against policies that could lead to unnecessary retaliation from U.S. trading partners.

“We believe that high, across-the-board tariffs will undermine the economic growth signaled by the other features of the president’s agenda and have lasting negative consequences for consumers and workers. If the goal of reciprocal tariffs is to enter into negotiations to remove barriers to trade, this will unlock economic growth and reduce prices for consumers. However, if the goal is primarily to raise tariffs, then the opposite is true.”
“There are plenty of areas where U.S. tariffs are actually much higher than our trading partners, for example, especially when you look at U.S. tariffs on low value apparel and footwear. These regressive tariffs hurt low- and middle-income consumers the most.”
“The administration should also consider the potential for retaliation from our trading partners on any reciprocal tariffs that are established. We are already witnessing our trading partners respond to strong tariff actions by the administration. This will further impact our farmers and manufacturers who are looking to gain access to those foreign markets.”
“We need to focus on key high-priority sectors where it makes sense to return manufacturing home or areas where there is strategic competition. High tariffs on everyday household goods, which could raise consumer prices, should not be the focus of such a policy.”

Parkdale Mills, a leading producer of spun yarns based in North Carolina, expressed concerns about “unfair trade practices” from its Asian competitors. Parkadel also calls for closing the “De minimis” loophole.

“Each week millions of pounds of product move through our free trade agreement partner countries illegally causing significant damage to the domestic textile industry. Non qualifying goods are shipped using false HTS codes, False Certificates of Origin, and illegal inputs to circumvent the required duty for US entry.”
“Section 321 De Minimis (imports)…are shipped into the US each day without inspection or any type of customs enforcement causing millions in lost revenue and again, thousands of lost jobs. This loophole must be closed.”

Apparel Import Tariff Rates around the World (updated March 2025)

Apparel products are often subject to high tariffs for various reasons. In developed countries such as the United States, apparel has long been considered an “import-sensitive” sector, with relatively high tariff rates imposed primarily to “protect” specific domestic interest groups with political influences.

However, as importers, not exporters, pay the tariffs, heavy import duties have been a significant concern for US fashion companies for decades. According to data from the US International Trade Commission (USITC), in 2024, apparel (HS chapters 61 and 62) accounted for about 2.5 percent of total US imports but contributed approximately 15.6 percent of total tariff duties. Likewise, US fashion companies paid $11.9 billion in tariffs on apparel imports in 2024, an increase from $11.6 billion in 2023. The average applied tariff rate for apparel items reached 14.6% in 2024, a notable increase from 13.7% before the imposition of Section 301 tariffs on Chinese products. Additionally, due to retail markups, every $1 in tariffs could result in a $1.50 to $2 increase in the final retail price.

Meanwhile, developing countries, especially those least developed, also often impose high tariffs on apparel—either to protect their nascent domestic industries from import competition or to generate government revenues. For example, in Africa, the apparel import tariff rate commonly exceeds 35% as of 2023 (the latest data available).

In February 2025, President Trump announced the imposition of a so-called “reciprocal tariff,” aiming to “match” the tariff rates that other countries impose on US exports, thereby promoting “fairer trade practices.” However, the details of the “reciprocal tariff” idea remain highly uncertain.

In theory, if strict “tariff matching” is required on a product-by-product basis, US apparel imports from most leading sourcing destinations—particularly those in Asia without a free trade agreement with the US–would face a significant increase in tariffs. Similarly, beneficiary countries under the African Growth and Opportunity Act (AGOA) could face a similar issue, as AGOA is a trade preference program that does not provide duty-free market access for US products in Africa. If apparel exports from AGOA-member countries to the US were subjected to the same 35%+ tariff rates that US products currently face in their markets, it would be a devastating scenario.

By Sheng Lu

(note: this post is not open for comment/discussion)

Outlook 2025–Key Issues to Shape Apparel Sourcing and Trade

In December 2024, Just-Style consulted a panel of industry experts and scholars in its Shape of apparel sourcing in 2025 briefing. Below is my contribution to the report. Welcome any comments and suggestions!

What’s next for apparel sourcing

Although the world economy is predicted to grow at a similar pace in 2025 from 2024, the slowing US and Chinese economies could impose new challenges to apparel sourcing, from weakened demand to intensified price competition.

Regarding the macroeconomic environment in 2025, which “sets the tone” for apparel sourcing, the International Monetary Fund (IMF) and the World Bank estimated that the world economy would grow by approximately 2.7-3.2 percent in 2025, with almost no change from the previous year. Similarly, the World Trade Organization (WTO) projected that world merchandise trade would increase by 3.3 percent in 2025, slightly higher than 2.6 percent in 2024.

Despite this incremental improvement, the world’s two largest economies–the US (with 2.2 percent GDP growth in 2025, down from 2.8 in 2024 and 2.9 in 2023) and China (with 4.5 percent GDP growth in 2025, down from 4.8 in 2024 and 5.2 in 2023) are expected to experience slower economic growth in the new year ahead. This slowdown means that apparel producers around the world, particularly those developing countries making large-volume basic items, will likely continue to struggle with a shortage of souring orders in 2025 due to overall weak import demand.

Even more concerning, as China grapples with declining domestic sales, the world clothing market could see an additional influx of low-cost Chinese products, especially through new e-commerce channels. Notably, less than half of China’s clothing production is exported, indicating its significant untapped export capacity. Furthermore, while China’s wage levels are higher than those in many other Asian apparel-producing countries, the unit price of U.S. apparel imports from China measured in dollar per square meter equivalent ($/SME) dropped by more than 21% between 2018 and 2024 (up to October). In contrast, U.S. apparel import prices from the rest of the world increased by 7.8% over the same period. Related to this, what is often overlooked is that even Shein, the “ultra-fast fashion” retailer known for its exceptionally competitive pricing, deliberately opted out of the vast Chinese market due to concerns about the intense price competition there. In other words, disregarding the new Trump tariff, 2025 could see an escalation of trade tensions targeting Chinese products in the US market and beyond.

Meanwhile, due to concerns about rising geopolitical tensions worldwide and trade policy uncertainty during Trump’s second term, fashion companies will likely continue to leverage sourcing diversification to mitigate risks. However, the “reducing China exposure” and sourcing diversification movement has yet to substantially benefit near-shoring or emerging sourcing destinations such as the Western Hemisphere and Sub-Saharan Africa (SSA). This result was mainly because fashion companies utilized China to source a wide range of various products, whereas Western Hemisphere and SSA suppliers can only produce a few basic categories.

For example, my latest studies show that in the first nine months of 2024, even excluding major platforms like Shein, Amazon, and Temu, US fashion companies sourced more than 60K Stock Keeping Units (SKUs) of clothing items from China. In comparison, India and Vietnam each supplied approximately 15K SKUs, Cambodia and Bangladesh each contributed 3,000 SKUs, Mexico provided only 2K SKUs, and CAFTA-DR and AGOA member countries supplied around 200 SKUs each. Therefore, even if fashion companies report sourcing from more countries, they are likely to stay sourcing from more Asian countries with closer export capacity and structure to China. Meanwhile, the total value or volume of trade may not fully capture the whole picture of sourcing diversification. This trend may persist in 2025, even with new tariff escalations.

Apparel industry challenges and opportunities

Today’s fashion business is highly global and relies heavily on the frequent movement of goods and services across borders. Thus, the uncertain and protectionist nature of U.S. trade policy during Trump’s second term could present significant challenges to the fashion industry in 2025. Of particular concern is that Trump’s new tariff actions would raise fashion companies’ sourcing costs, create additional inflationary pressure, reduce US consumers’ purchasing power on clothing, and trigger retaliatory trade measures from U.S. trading partners, ultimately hurting the U.S. economy. Notably, when the 7.5% Section 301 tariff was imposed on selected Chinese clothing products in 2018, the U.S. Consumer Price Index (CPI) growth was relatively low at 1.9%. However, imposing a 20% global tariff, a 60% tariff on Chinese products, and the existing 15%-30% regular tariff on clothing when the CPI is historically high is like “adding fuel to the fire.”

Besides tariffs, in 2025, if not sooner, U.S. fashion companies and many e-commerce suppliers worldwide will closely watch how Congress and the new Trump administration reform the de minimis rule, which currently exempts small-value shipments under $800 from tariffs and most customs procedures. With Trump’s new tariffs looming, some argue that closing the de minimis “loophole” has become even more urgent, as it creates more financial incentives to use the rule to bypass the tariff increase. Meanwhile, proposals under consideration suggest removing textile and apparel products entirely from de minimis, a move that could be an “earthquake” for those fashion companies utilizing the rule heavily.

Trump’s approach and philosophy toward conventional trade agreements and trade preference programs in 2025 also deserve attention. During his first term, Trump launched a few bilateral trade negotiations, from the one with the United Kingdom and Japan to Kenya. Back then, Trump saw a bilateral agreement would give the U.S. more leverage for a better “deal.” Specifically related to apparel sourcing and trade, two flagship U.S. trade preference programs–the African Growth and Opportunity Act (AGOA) and the Haiti HOPE/HELP Act, will expire in September 2025. It remains uncertain whether the new Trump administration will support the early renewal of these two trade preference programs with minimal changes or prefer to renegotiate them and add new bilateral elements.

Additionally, even though the new Trump administration may not prioritize addressing climate change, it is an irreversible trend for fashion companies to allocate more resources to comply with upcoming or newly implemented sustainability and environmental-related legislation, whether from the EU or the US state level. Unlike in the past, when being more sustainable only meant adding operational costs or paying a “one-time fee,” today’s new generation of sustainability-focused regulations—such as Extended Producer Responsibility (EPR)—requires companies to shift their mindset and demonstrate continuous improvement. Interestingly, my recent study tracking apparel products’ sustainability claims shows that vague terms like “sustainable” and “eco-friendly” are gradually being replaced by more neutral, fact-based keywords such as “regenerative,” “textile waste,” and “low impact.”

Meanwhile, offering “sustainable” apparel products and those using “preferred sustainable fibers” could provide fashion companies new opportunities to diversify their sourcing base and expand their vendor networks. For example, studies show that in the U.S. market, China and many other Asian countries are not necessarily the top suppliers of clothing made with recycled materials. Instead, Europe and countries in the Western Hemisphere or even Africa present unique sourcing advantages and capacities due to the unique nature of such products. Therefore, in 2025, we can expect an ever-closer collaboration between design, product development, merchandising, sourcing, and legal teams within fashion companies, working together to meet the growing demand for sustainable apparel and ensure compliance with evolving regulations.

by Sheng Lu

Interview with the National Committee on U.S.-China Relations: The Geopolitics of Fast Fashion–U.S.-China & the World

About the interview: Fashion is possible because of international trade. Each year, the global fashion industry generates more than $4 trillion USD and provides families with affordable clothing options. However, as fast fashion continues to grow, so does awareness of pressing issues such as labor standards and environmental sustainability. How are the United States and China involved in the global fashion industry? How can they collaborate on the issues facing the global fast fashion industry, from production to consumption?

Sheng Lu joins the National Committee to discuss how fast fashion is a global phenomenon and how the United States and China can address common areas of concern.

Learn more about the National Committee on U.S.-China Relations (NCUSCR)

New Study: How Has the Uyghur Forced Labor Prevention Act (UFLPA) Affected U.S. Apparel Import?

Implemented in June 2022, the Uyghur Forced Labor Prevention Act (UFLPA) prohibits U.S. companies from importing apparel wholly or in part produced in China’s Xinjiang region. UFLPA could significantly alter U.S. apparel import patterns as fashion companies have begun or anticipate adjusting their sourcing base to comply with the law and mitigate the forced labor risks in the supply chain.

This study quantitatively evaluated the impacts of the UFLPA on U.S. apparel imports nearly two years after the law’s implementation. Unlike existing studies primarily focusing on UFLPA’s political or legal aspects, this study’s findings would enhance our understanding of the economic and trade implications of the new law.

A panel regression model was adopted to evaluate the quantitative impact of UFLPA on U.S. apparel imports based on data collected from OTEXA (2024) and USITC (2024), the most authentic government data source. Four countries in three categories were included in the study: 1) China; 2) Vietnam and Bangladesh representing top Asian apparel exporting countries other than China; 3) member countries of the Central America Free Trade Agreement (CAFTA-DR) representing near-shoring sourcing destinations. The annual trade activities of these four countries from 2010 to 2023 (the latest available) were used for the analysis.

The panel regression model suggests several interesting findings*:

Firstly, the results showed that holding other factors constant, U.S. cotton apparel imports from China decreased significantly by approximately 350 million square meter equivalent (SME) annually following UFLPA’s implementation. In other words, the result confirmed that UFLPA had negatively affected U.S. cotton apparel imports from China. This result is far from surprising as Xinjiang accounted for nearly 90% of China’s cotton production, causing significant forced labor risks associated with importing cotton apparel from China.

Secondly, holding other factors constant, U.S. cotton apparel imports from Vietnam and Bangladesh and CAFTA-DR also respectively decreased by approximately 81 million SME, 51 million SME, and 20 million SME annually after UFLPA’s implementation in 2022. The results revealed U.S. fashion companies’ concerns about UFLPA compliance risks associated with sourcing from countries other than China, particularly Asia, due to their heavy reliance on cotton yarns and fabrics from China through a highly integrated regional supply chain.

Thirdly, the results revealed a more significant positive relationship between U.S. cotton exports to China, Vietnam, Bangladesh, and CAFTA-DR countries and U.S. cotton apparel imports from these countries after UFLPA’s implementation. Related, trade data also showed a declining ratio of U.S. cotton apparel imports from China, Vietnam, Bangladesh, and CAFTA-DR countries relative to these countries’ cotton imports from the U.S. This pattern implies a closer alignment in the trade flow of raw cotton from the U.S. to these countries and the return of finished cotton apparel to the U.S. It could be the case that leading apparel exporting countries increasingly used US cotton after UFLPA to mitigate the forced labor risks.

Additionally, there was a negative relationship between U.S. cotton apparel imports from China, Vietnam, Bangladesh, and CAFTA-DR members and U.S. MMF apparel imports from these countries. In other words, cotton apparel and MMF apparel appear to compete within the total U.S. apparel import market. However, UFLPA’s implementation has not significantly impacted the relationship. Nonetheless, MMF apparel has accounted for a growing share of China’s total apparel exports to the United States after UFLPA’s implementation (down from 46% in 2010 to only 19% in 2023).

The study’s findings revealed a broad trade impact of UFLPA’s implementation that goes far beyond China. Notably, cotton apparel exporters from other Asian countries and those in the Western Hemisphere also appeared to be negatively affected by the new law. Also, unlike theoretical prediction, no clear evidence shows that UFLPA has significantly expanded the near-shoring of U.S. cotton apparel imports from the Western Hemisphere, such as CAFTA-DR members.

Meanwhile, the results call for further investigation of the net impact of UFLPA on U.S. cotton exports. While UFLPA may help U.S. cotton gain more shares in the global marketplace, the reduced U.S. import demand for cotton apparel due to forced labor risk concerns may also unexpectedly “shrink the pie size.”

*:The fixed effects (FE) model was selected for the study based on the likelihood ratio test results (p<.01). The result of the F-test suggests the FE model is statistically significant at the 99% confidence level (p<.01). The value of R2 exceeds 0.90, indicating an overall high goodness-of-fit of the panel regression. All the independent variables were statistically significant at the 99% confidence level (p<.01).

By Sheng Lu and Emilie Delaye

Note: The study will be presented at the 2024 International Textile and Apparel Association (ITAA) annual conference in November 2024.

[This blog post is not open for comment]

2024 USFIA Fashion Industry Benchmarking Study Released

The full report is HERE

Key findings of this year’s report:

#1 Respondents reported growing sourcing risks of various kinds in 2024, from navigating an uncertain U.S. economy, managing forced labor risks, and responding to shipping and supply chain disruptions to facing rising geopolitical tensions and trade protectionism.

Over half of the respondents ranked “Inflation and economic outlook in the U.S.” and “Managing the forced labor risks in the supply chain” as their top business challenges in 2024.
The issues of “Shipping delays and supply chain disruptions” and “Managing geopolitics and other political instability related to sourcing” have newly emerged among respondents’ top five concerns in 2024.
About 45 percent of respondents rated “Protectionist trade policy agenda in the United States” as a top five business challenge this year, a jump from only 15 percent in 2023.

#2 U.S. fashion companies leverage sourcing diversification to respond to the growing sourcing risks and market uncertainty in 2024.

Nearly 70 percent of large-sized companies with 1,000+ employees reported sourcing from ten or more countries, significantly higher than the 45-55 percent range in the past few years. It also has become more common for medium to small-sized companies with fewer than 1,000 employees to source apparel from six or more countries in 2024 than in the past.
Nearly 80 percent of respondents plan to source from the same number of countries or even more countries through 2026, aiming to mitigate sourcing risks more effectively. However, their approaches differ at the firm level—some U.S. fashion companies plan to work with fewer vendors, while others intend to source from more.

#3 Managing the risk of forced labor in the supply chain continues to be a top priority for U.S. fashion companies in 2024.

U.S. fashion companies have adopted a comprehensive approach to comply with UFLPA and mitigate forced labor risks. On average, each surveyed company has implemented approximately six distinct practices across various aspects of their business operations this year, up from an average of five in 2023.
More than 90 percent of respondents say they are “Making more efforts to map and understand our supply chain, including the sources of fibers and yarns contained in finished products.” Notably, nearly 90 percent of respondents report mapping their entire apparel supply chains from Tier 1 to Tier 3 in 2024, a significant increase from about 40 percent in the past few years.
More than 80 percent of respondents say they “intentionally reduce sourcing from high-risk countries” in response to the UFLPA’s implementation. Another 75 percent of respondents explicitly state that their company has “banned the use of Chinese cotton in the apparel products” they carry.
About 45 percent of respondents have been actively “exploring sourcing destinations beyond Asia to mitigate forced labor risks.” However, this year, fewer respondents (i.e., under 10 percent) plan to cut apparel sourcing from Asian countries other than China directly, implying a more targeted and balanced approach to mitigating risks and meeting sourcing needs.
Based on field experience, respondents call for greater transparency in U.S. Customs and Border Protection (CBP)’s UFLPA enforcement, specifically in shipment detention and release decisions and in targeted entities and commodities information. Respondents also suggested that CBP reduce repeated detentions, focus on “bad actors” only, clarify enforcement on recycled cotton, and continue to partner with U.S. fashion companies on UFLPA enforcement.

#4 U.S. fashion companies remain deeply concerned about the deteriorating U.S.-China bilateral relationship and plan to further “reduce China exposure” to mitigate risks.

A record 43 percent of respondents sourced less than 10 percent of their apparel products from China this year, compared to only 18 percent in 2018. Likewise, nearly 60 percent of respondents no longer use China as their top apparel supplier in 2024, much higher than the 25-30 percent range before the pandemic.
Respondents rated China as economically competitive as an apparel sourcing base compared to many of its Asian competitors regarding vertical manufacturing capability, relatively low minimum order quantity (MOQ) requirements, flexibility and agility, sourcing costs, and speed to market. However, non-economic factors, particularly the perceived high risks of forced labor and geopolitical tensions, are driving U.S. fashion companies to move sourcing out of China. This trend applies to surveyed U.S. fashion companies selling products in China.
Nearly 80 percent of respondents plan to reduce their apparel sourcing from China further over the next two years through 2026. Consistent with last year’s results, large-size U.S. fashion companies with 1,000+ employees currently sourcing more than 10 percent of their apparel products from China are among the most eager to “de-risk.”

#5 U.S. fashion companies are actively exploring new sourcing opportunities, with a particular focus on emerging destinations in Asia and the Western Hemisphere.

This year, more respondents reported sourcing from India (89 percent utilization rate) than from Bangladesh (86 percent utilization rate) for the first time since we began the survey. Also, nearly 60 percent of respondents plan to expand apparel sourcing from India over the next two years, exceeding the planned expansion from any other Asian country.
For the second year in a row, three non-Asian countries made it to the top ten most utilized apparel sourcing destination list in 2024, including Guatemala (ranked 7th), Mexico (ranked 7th), and Egypt (ranked 10th). All three countries also witnessed an improved utilization rate in 2024 compared to last year’s survey results.
This year, a new record 52 percent of respondents plan to expand apparel sourcing from members of the Dominican Republic-Central American Free Trade Agreement (CAFTA-DR), over the next two years, up from 40 percent in 2023. However, most U.S. fashion companies consider expanding near-shoring from the Western Hemisphere as part of their overall sourcing diversification strategy. For example, nearly ALL companies that plan to increase sourcing from CAFTA-DR over the next two years also plan to increase sourcing from Asia.
75 percent of respondents identified the “lack of sufficient access to textile raw materials” as the main bottleneck preventing them from sourcing more apparel from CAFTA-DR members. Respondents say the local manufacturing capability for yarns and fabrics using fiber types other than cotton and polyester, such as spandex, nylon, viscose, rayon, and wool, was modest or low in the CAFTA-DR region, even when including the United States.
The U.S.-Mexico-Canada Trade Agreement (USMCA) entered into force on July 1, 2020, replacing the North American Free Trade Agreement (NAFTA). Within the context of expanding nearing-shoring from the Western Hemisphere, in 2024, about 65 percent of respondents reported sourcing from Mexico and Canada (or USMCA members), a noticeable increase from about 40 percent in 2019-2020. About 36 percent of respondents say their companies “expanded apparel sourcing from USMCA members because of the agreement.”

#6 Respondents underscore the importance of immediate renewal of AGOA before its expiration in September 2025 and extending the agreement for at least another ten years.

This year, respondents reported sourcing from seven AGOA members or countries in Sub-Saharan Africa (SSA), including Lesotho, Ethiopia (note: lost AGOA eligibility in 2022), Kenya, Madagascar, Mauritius, Tanzania, and Ghana, an increase from four countries in 2023, and six countries in 2022. Most respondents sourcing from AGOA in 2024 are typically large-scale U.S. fashion brands or retailers with 1,000+ employees. Generally, these companies treat AGOA as part of their extensive global sourcing network.
Over 86 percent of respondents support renewing AGOA for at least another ten years, and none object to the proposal. This reveals U.S. fashion companies’ strong support for the trade preference program and the non-controversial nature of continuing this agreement.
Over 70 percent of respondents say another 10-year renewal of AGOA is essential for their company to expand sourcing from the region.
About 30 percent of respondents reported that they had already held back sourcing from AGOA members due to the pending renewal of the agreement and associated policy uncertainty. This figure could increase to half of the respondents if AGOA is not renewed by the end of 2024.
Another 30 percent of respondents indicate that keeping the flexible rules of origin in AGOA, such as the “third country fabric provision” for least-developed members, is essential for their company to source from the region.

Other topics the report covered include:

5-year outlook for the U.S. fashion industry, including companies’ hiring plan by key positions
The competitiveness of major apparel sourcing destinations in 2024 regarding sourcing cost, speed to market, flexibility & agility, minimum order quantity (MOQ), vertical integration and local textile manufacturing capability, social and environmental compliance risks and geopolitical risks (assessed by respondents)
Respondents’ detailed sourcing portfolio in 2024 for garments and textile materials (i.e., yarns, fabrics and accessories)
Respondents’ latest strategies to mitigate forced labor risks in the supply chain and fashion companies’ suggestions for CBP’s UFLPA enforcement based on field experience
U.S. fashion companies’ latest social responsibility and sustainability practices related to sourcing
U.S. fashion companies’ trade policy priorities in 2024

About the study

This year’s benchmarking study was based on a survey of executives from 30 leading U.S. fashion companies from April to June 2024. The study incorporated a balanced mix of respondents representing various businesses in the U.S. fashion industry. Approximately 80 percent of respondents were self-identified retailers, 60 percent were self-identified brands, 41 percent were importers/wholesalers, and 3 percent were manufacturers.

The survey respondents included large U.S. fashion corporations and medium-sized companies. Around 80 percent of respondents reported having over 1,000 employees; the rest (20 percent) represented medium-sized companies with 100-999 employees.

Event Recap: Biden 2.0 or Trump 2.0? What We Might Expect on Trade Policy in a Second Term (April 2024)

The event was hosted by the Washington International Trade Association (WITA)

Key takeaways from the panel discussion:

The new punitive tariffs on Chinese steel and aluminum: The overcapacity problem in the steel industry globally could raise national security concerns. While the Biden Administration is more focused on outreach to allies and partners to address the issue collectively, the Trump Administration took a different approach with the Section 232 tariffs specifically targeting China. However, the impact of China-targeted measures could be muted due to the limited amount of US steel imported from China today. The next administration is expected to face the challenge of addressing global overcapacity in various industries. Like it or not, tariffs seem to be one of the few tools available to the US government to tackle these issues directly.

Currency debate: “Currency manipulation” refers to the deliberate actions taken by a country’s government or central bank to artificially influence the value of its currency in the foreign exchange market. When a foreign government deliberately lowers the value of its currency, it could result in more US imports from that country and hurt the price competitiveness of US exports. While currency manipulation has not been a significant concern in recent years, the recent strength of the US dollar against other currencies, such as the Japanese yen, Chinese yuan, and Vietnamese dong, may reignite debate over the issue. The Biden Administration struggles to fight high inflation using high-interest rates, making it extremely challenging to “devalue the US dollar” in a macro sense. In comparison, the second Trump administration could designate countries of concern as currency manipulators, followed by new retaliatory measures, including tariffs or other trade barriers.

Industrial policy and subsidy: The Biden administration has packaged industrial policy as a core pillar of “Bidenomics,” which has pledged more than $805 billion in new subsidies for semiconductor manufacturing and research, climate and energy investments, and infrastructure spending. In comparison, the Republicans would be more inclined to let market forces determine the outcome of these policies rather than funding them through the government. It is also likely that the second Trump administration will tighten certain rules related to foreign entities taking advantage of US tax credits. However, there could be coordinated investments and supply chain resilience efforts in Biden and Trump’s second term, such as tactical coordination to prevent global subsidy races and disruptions in supply chains.

Trade policy as a tool for other issues: Reviving the Trans-Pacific Partnership (TPP) or similar mid-2010s era trade agreements was slim during the Biden administration. Instead, the Biden administration prioritizes a climate and trade agenda, as evidenced by the launch of a new White House Climate and Trade Task Force. Biden administration will continue to prioritize investments in domestic production capacity while looking outward to use trade to support other non-trade objectives.

In comparison, the Trump administration was more aggressive in pushing back against protectionist trade measures against US products but also less optimistic about the willingness of other countries to engage in good-faith negotiations with the US. Further, Trump 2.0 will likely return to trade policies similar to his first term, including potential tariffs of up to 60% on Chinese imports and an across-the-board tariff of 10% on all imports. Further, there is bipartisan support for increasing tariffs on Chinese goods, considering the deteriorating bilateral relationship. However, a 10% global tariff on imports from countries like Switzerland and Ireland could be more controversial due to potential consumer price impacts and damage to US alliances.

Discussion questions:

Any of the aforementioned issues could potentially impact fashion apparel companies? Why?
In your view, is it preferable for the textile and apparel industry not to be a focus of US trade policy? Why?
What are your top 1-2 takeaways from the panel discussion?

Conversation with Katherine Tai, US Trade Representative, on International Trade and US Trade Policy (February 2024)

Speaker: Katherine Tai (U.S. Trade Representative, Office of the U.S. Trade Representative)
Presider: Michael Froman (President, Council on Foreign Relations; Former U.S. Trade Representative, 2013-17)

Excerpt from the conversation

Worker-Centric US trade policy

Question from FROMAN: “Back in the old days, there was a notion that since the U.S. market is relatively open—we don’t have that much protection here, the average applied tariff is about 3 ½ percent—that if we were able to reduce barriers to other countries disproportionately we could export more made by U.S. workers, and that export-related jobs paid more than non-export related jobs, and that we could use access to our market as a way of getting other countries to reform their labor practices and raise their standards, which would create a more level playing field. That theory is sort of out of vogue at the moment. But, tell me, can you envisage what an agreement that is worker-centric looks like that reduces barriers or increases trade?”

Response from TAI: “The percentage of (U.S.) exports to GDP is around 10 percent—maybe 11 or 12 percent. So it’s not very high. Some of our—some of our trading partners have very, very high exports as a proportion of GDP (e.g., 25 percent)…So you just have to put that (trade liberalization) into context. I think you also have to think about the fact of the balance of exports and imports…”

“We’re trying to create and maintain jobs, and good jobs, at home… so then the question becomes not what do I have to pay you to do X, Y, or Z, but how can we put the forces of our cooperation together? What does the deal look like where we are building our middle classes together? And I think that the worker pieces then come in, along with the environment pieces, as something that I shouldn’t have to pay you to do, but as something that you should want to do…”

“Traditionally we’ve kept our scorecard by, you know, how many trade agreements you finished and how many you’ve gotten across the finish line… Our progress lies very much in how the conversation has fundamentally shifted. That the conversation now is very much focused on supply chain resilience, on equity, and how not to leave those within our economies behind further, how not to leave those developing countries behind further.”

Digital trade

Question from FROMAN: “For a long time, the U.S. had a position around the free flow of data across borders, not taxing digital products across borders… given the fact that the U.S. economy is probably—certainly the leader in all things digital, what does it mean for us to move away from defending these principles that have been so core to what we’ve tried to do before?”

Response from TAI: “So in early 2000s that we’re negotiating (digital trade)… It’s called the e-commerce chapter. And it’s the e-commerce chapter in several iterations of FTAs (free trade agreements)…And I think that that makes sense if you think about what the digital economy looked like in the early 2000s. It really was about e-commerce…At the time—thought about e-commerce digital trade provisions as largely facilitative provisions. The flow of data was there, and we wanted to safeguard the flow of data to facilitate traditional trade transactions, the movement of goods across borders, the analogy to services we used also in digital.”

“In 2024, one of the things that you realize is that the flow of data, the decisions around where data needs to be stored, how it needs to be handled, has—on much, much different dimensions because over this period of time, in fact, in the digital economy the data is no longer just about facilitating traditional types of transactions. The data has become the commodity in and of itself. The data is now what has value. The ability to accumulate that data and for vast amounts of data then to be combined with computing power to create things like generative AI and large language models, it starts to give you a sense, just as a normal trade negotiator, that there are much, much bigger equities at stake in what we might be doing in our trade negotiations…It’s not just about facilitating trade, but around how we regulate data and how we regulate the companies that accumulate, harvest, and trade in this data is something that we need to resolve and advance before we can thoughtfully and responsibly engage in trade negotiations to figure out what the limits are in terms of what we should be doing, and what the goals are for what we should be doing with our trading partners… what underlies the digital economy and our digital existences, and just thinking about what the rules should be for how that data is handled, who has rights to that data, and then the international components around trade and prosperity but also trade and national security.”

Tradeoffs in trade policy

Question from FROMAN: “Trade is a great area to talk about tradeoffs. We hate being overly dependent on China for basic goods. We also hate inflation and higher cost of living. The actions taken to deal with the first one will likely exacerbate the second one… How do you talk about that tradeoff with communities around the country? And do you make explicit that, yes, you’re going to pay more at Walmart for this for that, but we’re going to become less dependent on China as a result?”

Response from TAI: “That today, we know that we have critical dependencies and vulnerabilities that are actually bad from a national security and just a geopolitical standpoint. For every sector where we feel that we are critically vulnerable to another country and, say, China in particular, I think that it creates a sense of angst and insecurity that is destabilizing for the world economy and, frankly, for the world… if you look at it from a more holistic, medium-term perspective, supply chain diversity and supply chain resilience is actually a management tool for inflation… “

“For as long as there are concentrated pockets for production and supply—and this is internationally, but this is also the logic behind taking on dominant players in our economy—for as long as you have that kind of dominance, you’re going to have in the hands of certain players the ability to distort the market and to take advantage of that dominance by jacking up prices, whether it’s shrinkflation, or greedflation, or in the international context economic coercion… if you think about the tradeoff as between today and tomorrow, it’s not zero-sum at all. And in fact, these changes are ones that we need to be able to manage, not being faced with the same risks over and over and over again.”

US trading partners

Comment from TAI: “when you talk about some evolution in our (trade policy) approach, I just want to be clear, the evolution in our approach is about what should be in those things, what should be in those agreements, what should be in the exercises and the cooperation that we undertake with our partners. This is not a walking away from those partners, at all…You’ll see how much time I spend in Brussels, how much time I’ve spent in Asia, and the Indo-Pacific over the course of the last three years. And you’ll see that the prioritization of our like-minded partners, our traditional partners if you will, is still very much there.”

Tariffs

Comment from TAI: “What is really important to appreciate about tariffs is that they’re a tool. They’re a tool that can be used in constructive ways… They’re a tool, at least for us, in trade remedies… They are a tool for remedying unfair trade. I actually kind of like the way the Europeans describe these types of tools—dumping, countervail. They call them trade defense instruments.”

“What I also want to reflect is that trade policy and economic policy isn’t just tariffs… we have kept a lot of the tariffs, because we see strategic value in those tariffs in this exercise of building up the middle class and reinvigorating American manufacturing and the American economy… it needs to take the tariffs as a tool, the investments as another tool to help reinforce, policies that support and empower all workers, and to encourage our partners to be supporting and empowering their workers, and then also promoting economic vitality, opportunity through the enforcement of our competition laws…”

Textile industry strategic or not?

Comment from TAI: “You know, there are things that are more strategic, things that maybe we feel like are less strategic or not strategic. But, you know, I think that is actually a really, really important question. And it’s a hard one—what’s strategic and what isn’t? We clearly did not think that surgical masks—surgical, you know, medical-grade gloves and ventilators were that strategic. And so we let that go wherever it was going to go. And in the early days of the pandemic, boy, did that hurt us a lot. So, you know, one of the—one of the stories that came out of the pandemic was all of our—all of our textile manufacturers, you know, were told your industry is not that strategic. They’d been told it for a long time. And yet, we know that it is important. It’s politically important. And USTR has for a very long time had a textiles office and textiles negotiator…it was that textiles industry, what we still have, that was able to repurpose their capabilities and to step up, and to actually start producing some of these things that we were really deficient in during the pandemic, and to save us. So I think that where you draw the lines on strategic and nonstrategic… It’s not necessarily obvious.”

Video discussion questions [For students in FASH455, please address at least two of the following questions in your response]

#1: Tai emphasizes the importance of creating and maintaining good jobs at home and building middle classes together with trading partners. How can the textile and apparel trade contribute to the goal?

#2: Reflecting on the textile industry’s response during the pandemic, Tai raises questions about what industries are considered strategic and the implications of such categorizations. How should policymakers determine which industries are strategic, and what criteria should be used in making these decisions?

#3: How has the role of data evolved in trade discussions, and what are the potential challenges in regulating data in international trade agreements? What are the implications of digital trade governance on today’s fashion business?

#4: Tai discusses the strategic importance of supply chain diversity and resilience. How might diversifying supply chains contribute to national security and economic stability, and what are the challenges in achieving this diversification? Please use the textile and apparel sector as an example.

#5: Any other reflections, thoughts, or feedback on the conversation?

[discussion is closed]

FASH455 Exclusive Interview with Beth Hughes, Vice President of the American Apparel and Footwear Association (AAFA), about US apparel sourcing from Central America

About Beth Hughes

Beth Hughes serves as the Vice President of the American Apparel and Footwear Association (AAFA), responsible for supporting the association’s efforts on international trade and customs issues. Beth oversees AAFA’s Trade Policy Committee, as well as AAFA’s Customs Group. Beth is also the spokesperson of the Coalition for Economic Partnership in the Americas (CEPA), a group of prominent American companies, and manufacturers committed to advancing regional trade and employment opportunities in the Western Hemisphere.

Before joining AAFA, Beth served for six years as senior director of international affairs at the International Dairy Foods Association. Beth earned a Bachelor of Arts degree in political science at George Washington University and received a Master of Arts in international affairs from Florida State University.

The interview was conducted by Leah Marsh, a graduate student in the Department of Fashion and Apparel Studies at the University of Delaware. Leah’s research focused on exploring EU retailers’ sourcing strategies for clothing made from recycled textile materials and fashion companies’ supply chain and sourcing strategies.

The interview is part of the 2023 Cotton in the Curriculum program, supported by Cotton Incorporated, to develop open educational resources (OER) for global apparel sourcing classes.

FASH455 Exclusive Interview with Julia Hughes, President of the United States Fashion Industry Association about the Latest US Apparel Sourcing Trends

About Julia K. Hughes

Julia K. Hughes is President of the United States Fashion Industry Association (USFIA), which represents brands, retailers, importers, and wholesalers based in the United States and doing business globally. She represents the industry in front of the U.S. government as well as international governments and stakeholders, explaining how fashion companies create high quality jobs in the United States and economic opportunities around the world.

An expert on textile and apparel trade issues, Julie has testified before Congress and the Executive Branch. She frequently speaks at international conferences including the China & Asia Textile Forum, Fashion Institute of Technology (FIT), Harvard University’s Bangladesh Development Conference, MAGIC, Prime Source Forum, Vietnam Textile Summit, and others.

Julie served as the first President and is one of the founders of the Washington Chapter of Women in International Trade (WIIT) and is one of the founders of the WIIT Charitable Trust. She also was the first President of the Organization of Women in International Trade (OWIT). In 1992, she received the Outstanding Woman in International Trade award and in 2008, the WIIT Lifetime Achievement Award. She also is a member of the International Women’s Forum.

Julia has an M.A. in International Studies from the Johns Hopkins School of Advanced International Studies and a B.S. in Foreign Service from Georgetown University.

The interview is part of the 2023 Cotton in the Curriculum program, supported by Cotton Incorporated, to develop open educational resources (OER) for global apparel sourcing classes.

Why the Developing World and All of Us Need Trade and the WTO (Panel Discussion)

CSIS event on Sep 22, 2023

Below are selected comments by US Trade Representative Katharine Tai (Tai) and WTO (World Trade Organization) Director-General Dr. Ngozi Okonjo-Iweala (Ngozi).

What kind of global trade do we want today?

“For decades, the United States has been proud to champion the international rules-based order and the multilateral trading system…But the functioning and fairness of this order are now in question and that is why all of us need to adapt to a more challenging era marked by rapid technological change, increasing extreme climate events, vulnerable supply chains, intensifying geopolitical friction, widening inequality” (Tai)

“The United States is writing a new story on trade. We are pursuing fair competition, addressing the climate crisis, promoting our national security, and ensuring the rules-based system helps all economies, not just the biggest ones.” (Tai)

“how can we harness the effectiveness of our trade tools to be promoting not just efficiency and liberalization, but using those tools to promote what we consider certainly today to be higher goals. And those goals are resilience for our economy and the word economy, sustainability, again, for our economy in the world economy, and inclusivity… we started to see where the concentrations in supply and production started to impact this and spike this economic insecurity on a macro level and also for individuals” (Tai)

Trade and climate change

“trade is necessary to disseminate green technologies and through competition and scale efficiencies to drive down the cost of decarbonization. Another reason is that trade amplifies the impact of environmental policy action. Recent research at the WTO demonstrate that just as countries can reap economic gains by focusing on what they are relatively good at, the world can reap environmental gains if countries focus on what they are relatively green at” (Ngozi)

Is trade diversification the future?

“A fragmented world economy would not just be bad for already-squeezed household budgets. Without trade, it would become harder, even impossible, to meet the big challenges of our time – resilience, socioeconomic inclusion, and climate change… The problems we encountered in the trading system were less about trade per se and more about excessive concentration for some products and supply relationships. The smart response is to deepen, diverse, and deconcentrate production so there are fewer potential bottlenecks” (Ngozi)

“we believe we can solve the problem by diversifying the supply chains not just to ourselves or to friends but to all over the world where the opportunity exists. Business should look at the possibility of not just doing China+1. It means China plus Vietnam or Indonesia. But they can do Bangladesh. They can do Laos. They can do Rwanda. They can do Senegal. They can do Nigeria. I’m just – Morocco” (Ngozi)

Debate the impact of trade

“Technology was generally a big culprit in job losses…U.S. manufacturing output, the volume of products produced here, is about as high as it has ever been. But the sector employs more machines and fewer people than it used to. Nevertheless, import competition was a significant factor and an easier focus, I think, for political anger.” (Ngozi)

“…between 1995 and 2011, while increased goods import from China did eliminate 2 million jobs in the United States, increased exports to China and elsewhere added 6.6 million jobs to the U.S. economy, 4 million of them from higher-services exports…These numbers illustrate the power of trade for job creation. But as we know, those new jobs were not created in the same places. Neither did they go to the same people. That a backlash would result from those left out was perhaps predictable, but it was not inevitable. There are countries that use domestic-policy levers to translate gains from trade into broadly shared growth by providing people security against income loss and support to seize new opportunities.” (Ngozi)

Renew or update the African Growth and Opportunity Act?

“The world is really different from when AGOA was first created…So I think copy-paste is to really lose an important opportunity…we should be practical. Also, we’re on a timeline…The AfCFTA, the African Continental Free Trade Area, that has been concluded, that has that has been brought into being by the countries on the continent. And those continental integration aspirations should absolutely be reflected in our offer to Africa, and something we should try to figure out how to incorporate” (Tai)

“African countries appreciate AGOA. They would like to see an agreement that is, you know, at least a decade out so that they have some predictability. What they’re hearing from investors is that with this up in the air, they can’t make up their minds whether to invest or not because they don’t know what will happen. So I think if we can reform and get it done, and people can have a predictable time horizon for AGOA, it would really help” (Ngozi)

How to reform the World Trade Organization?

“The United States wants a WTO where dispute settlement is fair and effective, and supports a healthy balance of sovereignty, democracy, and economic integration where all members embrace transparency, where we have better rules and tools to tackle non-market policies and practices, and to confront the climate crisis and other pressing issues.” (Tai)

“We must recognize the diversity of developing members. We should have flexibilities in the rules that reflect actual needs. But we cannot have economic and manufacturing powerhouses gaming the system by claiming the same development status and flexibilities intended for less-advantaged members.” (Tai)

“people ask me all the time, oh, are you worried because there are so many [Free trade agreement, FTA]? I’m not. Like I said, 75 percent of trade still goes on WTO terms [MFN tariff rates]. And we can learn from them.” (Ngozi)

“I don’t have enough time and money to waste resources in Geneva on a process that we don’t actually believe in…When President Biden talks about it from the floor of the United Nations General Assembly, if we still have trading partners who want to question our seriousness, then I think the problem is those partners and it’s not us” (Tai) [note: this comment was mentioned by Politico]

–END–

U.S. Trade Policy Recap: 2021-2023

Related readings:

USTR Fiscal Year 2024 Goals and Objectives—Textiles and Apparel

In March 2023, the Office of the United States Trade Representative (USTR) released its 2024 Fiscal Year Budget report, outlining six major goals and objectives for FY2024. USTR’s FY2024 goals and objectives for textile and apparel are similar to FY2023, but keywords such as “near-shoring” are newly emphasized.

Goal 1: Open Foreign Markets and Combat Unfair Trade

Provide policy guidance and support for international negotiations or initiatives affecting the textile and apparel sector to ensure that the interests of U.S. industry and workers are taken into account and, where possible, to provide new or enhanced export opportunities for U.S. industry. (Note: no change from FY2023)
Conduct reviews of commercial availability petitions regarding textile and apparel products and negotiate corresponding FTA rules of origin changes, where appropriate, in a manner that takes into account market conditions while preserving export opportunities for U.S. producers and employment opportunities for U.S. workers. (Note: no change from FY2023)
Engage relevant trade partners to address regulatory issues potentially affecting the U.S. textile and apparel industry’s market access opportunities. (Note: no change from FY2023)
Continue to engage with CAFTA-DR partner countries to address trade-related issues to optimize inclusive economic opportunities; strengthen trade rules and transparency and address non-tariff trade impediments; provide capacity building in areas such as textile and apparel trade-related regulation and practice on customs, border and market access issues, including agricultural and sanitary and phytosanitary regulations, to avoid barriers to trade. (note: newly mentioned “transparency”)
Continue to engage CAFTA-DR partners and stakeholders to identify and develop means to increase two-way trade in textiles and apparel and strengthen the North American supply chain and near-shoring to enhance formal job creation. (note: newly emphasized “Near-shoring”)
Provide policy guidance and support for international negotiations or initiatives affecting the textile and apparel sector to ensure that the interests of U.S. industry and workers are taken into account and, where possible, to provide new or enhanced export opportunities for U.S. industry. (Note: no change from FY2023)
Conduct reviews of commercial availability petitions regarding textile and apparel products and negotiate corresponding FTA rules of origin changes, where appropriate, in a manner that takes into account market conditions while preserving export opportunities for U.S. producers and employment opportunities for U.S. workers (note: no change from FY2023)
Engage relevant trade partners to address regulatory issues potentially affecting the U.S. textile and apparel industry’s market access opportunities. (note: no change from FY2023)

Goal 2: Fully Enforce U.S. Trade Laws, Monitor Compliance with Agreements, and Use All Available Tools to Hold Other Countries Accountable

Closely collaborate with industry and other offices and Departments to monitor trade actions taken by partner countries on textiles and apparel to ensure that such actions are consistent with trade agreement obligations and do not impede U.S. export opportunities. (note: no change from FY2023)
Research and monitor policy support measures for the textile sector, in particular in the PRC, India, and other large textile producing and exporting countries, to ensure compliance with international agreements. (note: no change from FY2023)
Continue to work with the U.S. textile and apparel industry to promote exports and other opportunities under our free trade agreements and preference programs, by actively engaging with stakeholders and industry associations and participating, as appropriate, in industry trade shows. (note: no change from FY2023)

Goal 4: Develop Equitable Trade Policy Through Inclusive Processes

Take the lead in providing policy advice and assistance in support of any Congressional initiatives to reform or re-examine preference programs that have an impact on the textile and apparel sector. (note: no change from FY2023)

Other Priorities for USTR in FY2024:

#1 “Advancing a Worker-Centered Trade Policy.” For example, given “communities of color and lower socio-economic backgrounds were more negatively affected by free trade policies that have reduced tariffs and distributed supply chains across the globe,” USTR will develop “a new strategic approach to trade relationships that is not built on traditional free trade agreements…USTR is embarking on trade engagements with allies and like-minded economies, like Taiwan and Kenya and [through] multinational economic frameworks that focus on clean energy and supply chains rather than tariffs.”

#2 Address forced labor. For example, USTR developed the first-ever focused trade strategy to combat forced labor. Paired with the implementation of the Uyghur Forced Labor Prevention Act, and the Memorandum of Cooperation (MOC) launching of a Task Force on the Promotion of Human Rights and International Labor Standards in Supply Chains under the U.S.-Japan Partnership on Trade. And USTR will “use every tool available to block the importation of goods made partially or entirely with forced labor.”

#3 Re-Aligning the U.S. – Beijing Trade Relationship. “USTR continues to keep the door open to conversations with the PRC, including on its Phase One commitments. However, USTR acknowledges the Agreement’s limitations. USTR’s strategy is expand beyond only pressing Beijing for change and includes vigorously defending our values and economic interests from the negative impacts of the PRC’s unfair economic policies and practices.”

#4 Strengthen enforcement of US trade policy. For example, USTR sees enforcement “a key component of our worker-centered trade policy.” USTR is “upholding the eligibility requirements in preference programs,” such as the African Growth and Opportunity Act (AGOA). As many enforcement tools were “were crafted decades ago,” USTR will be “reviewing our existing trade tools and working with Congress to develop new tools as needed.”

(This blog post is not open for comment)

Outlook 2023– Key Issues to Shape Apparel Sourcing and Trade

In December 2022, Just-Style consulted a panel of industry experts and scholars in its Outlook 2023–what’s next for apparel sourcing briefing. Below is my contribution to the report. All comments and suggestions are more than welcome!

2023 is likely another year full of challenges and opportunities for the global apparel industry.

First, the apparel industry may face a slowed world economy and weakened consumer demand in 2023. Apparel is a buyer-driven industry, meaning the sector’s volume of trade and production is highly sensitive to the macroeconomic environment. Amid hiking inflation, high energy costs, and retrenchment of global supply chains, leading international economic agencies, from the World Bank to the International Monetary Fund (IMF), unanimously predict a slowing economy worldwide in the new year. Likewise, the World Trade Organization (WTO) forecasts that the world merchandise trade will grow at around 1% in 2023, much lower than 3.5% in 2022. As estimated, the world apparel trade may marginally increase between 0.8% and 1.5% in the new year, the lowest since 2021. On the other hand, the falling demand may somewhat help reduce the rising sourcing cost pressure facing fashion companies in the new year.

Second, fashion brands and retailers will likely continue leveraging sourcing diversification and strengthening relationships with key vendors in response to the turbulent market environment. According to the 2022 fashion industry benchmarking study I conducted in collaboration with the US Fashion Industry Association (USFIA), nearly 40 percent of surveyed US fashion companies plan to “source from more countries and work with more suppliers” through 2024. Notably, “improving flexibility and reducing resourcing risks,” “reducing sourcing from China,” and “exploring near-sourcing opportunities” were among the top driving forces of fashion companies’ sourcing diversification strategies. Meanwhile, it is not common to see fashion companies optimize their supplier base and work with “fewer vendors.” For example, fashion companies increasingly prefer working with the so-called “super-vendors,” i.e., those suppliers with multiple-country manufacturing capability or can make textiles and apparel vertically, to achieve sourcing flexibility and agility. Hopefully, we could also see a more balanced supplier-importer relationship in the new year as more fashion companies recognize the value of “putting suppliers at the core.”

Third, improving sourcing sustainability and sourcing apparel products using sustainable textile materials will gain momentum in the new year. On the one hand, with growing expectations from stakeholders and pushed by new regulations, fashion companies will make additional efforts to develop a more sustainable, socially responsible, and transparent apparel supply chain. For example, more and more fashion brands and retailers have voluntarily begun releasing their supplier information to the public, such as factory names, locations, production functions, and compliance records. Also, new traceability technologies and closer collaboration with vendors enable fashion companies to understand their raw material suppliers much better than in the past. Notably, the rich supplier data will be new opportunities for fashion companies to optimize their existing supply chains and improve operational efficiency.

On the other hand, with consumers’ increasing interest in fashion sustainability and reducing the environmental impact of textile waste, fashion companies increasingly carry clothing made from recycled textile materials. My latest studies show that sourcing clothing made from recycled textile materials may help fashion companies achieve business benefits beyond the positive environmental impacts. For example, given the unique supply chain composition and production requirements, China appeared to play a less dominant role as a supplier of clothing made from recycled textile materials. Instead, in the US retail market, a substantial portion of such products was “Made in the USA” or came from emerging sourcing destinations in America (e.g., El Salvador, Nicaragua) and Africa (e.g., Tunisia and Morocco). In other words, sourcing clothing made from recycled textile materials could help fashion companies with several goals they have been trying to achieve, such as reducing dependence on sourcing from China, expanding near sourcing, and diversifying their sourcing base. Related, we are likely to see more public dialogue regarding how trade policy tools, such as preferential tariffs, may support fashion companies’ efforts to source more clothing using recycled or other eco-friendly textile materials.

Additionally, the debates on fashion companies’ China sourcing strategy and how to meaningfully expand near-sourcing could intensify in 2023. Regarding China, fashion companies’ top concerns and related public policy debates next year may include:

How to fully comply with the Uyghur Forced Labor Prevention Act (UFLPA) and reduce the forced labor risks in the supply chain?
What to do with Section 301 tariff actions against imports from China, including the tariff exclusion process?
How to reduce “China exposure” further in sourcing, especially regarding textile raw materials?
How should fashion companies respond and mitigate the business impacts of China’s shifting COVID policy and a new wave of COVID surge?
What contingency plan will be should the geopolitical tensions in the Asia-Pacific region directly affect shipping from the region?

Meanwhile, driven by various economic and non-economic factors, fashion companies will likely further explore ways to “bring the supply chain closer to home” in 2023. However, the near-shoring discussion will become ever more technical and detailed. For example, to expand near-shoring from the Western Hemisphere, more attention will be given to the impact of existing free trade agreements and their specific mechanisms (e.g., short supply in CAFTA-DR) on fashion companies’ sourcing practices. Even though we may not see many conventional free trade agreements newly launched, 2023 will be another busy year for textile and apparel trade policy deliberation, especially behind the scene and on exciting new topics.

By Sheng Lu

Discussion question: As we approach the middle of the year, why do you agree or disagree with any predictions in the outlook? Please share your thoughts.

Video Discussion: Textile Manufacturing in America, post-globalisation

Discussion questions:

#1. Are classic trade theories (e.g., comparative advantage) still relevant or outdated in the 21^st century? Why? Please share your thoughts based on the video and the figures.

#2. Based on the video and the figures above, is the US textile manufacturing sector a winner or loser of globalization and international trade? Why?

#3. Take the following poll (anonymous) and share your reflections.

#4. Should the government’s trade policy consider non-economic factors such as national security and geopolitics? What should be the line between promoting “fair trade” and “trade protectionism”? What’s your view?

#5. Is there anything else you find interesting/intriguing/thought-provoking in the video? Why?

(Welcome to our online discussion. For students in FASH455, please address at least two questions and mention the question number (#) in your reply)

2022 WTO Public Forum: Resilient and Sustainable Fashion Apparel Supply Chain: Trade and Trade Policy

Event audio recording

About the Session:

Apparel is a $2.5 trillion global business, involving over 120 million workers worldwide and playing a uniquely critical role in the post-COVID economic recovery. The session intends to facilitate constructive dialogue regarding the progress, challenges, and opportunities of building a more resilient and sustainable fashion apparel supply chain in the Post-COVID world, which matters significantly to ALL stakeholders, from fashion brands, garment workers, and policymakers to ordinary consumers. The session will explore: 1) Why does building a more resilient and sustainable fashion apparel supply chain matter in the post-COVID world? What role can trade and trade policy play? 2) What significant progress has made the apparel supply chain more resilient and sustainable? What key challenges remain and why? 3) What needs to be done further to make the apparel supply chain more resilient and sustainable, particularly in the post-COVID world?

Panelists:

Dr. Arianna Rossi, Senior Research and Policy Specialist, International Labour Organization (ILO)
Ralph Kamphöner, Head of EU Office, Confederation of the German Textile and Fashion Industry
Dr. Sheng Lu, Associate Professor of Fashion and Apparel Studies, University of Delaware
Kekeli Ahiable, Advisor, Tony Blair Institute
Laura Husband, Just Style, Managing Editor (Moderator)

About the 2022 World Trade Organization (WTO) Public Forum

The 2022 WTO Public Forum, held from Sep 27 to 30, in Geneva, Switzerland) looked at how trade can contribute to post-pandemic economic recovery. The Forum examined, in particular, how trade rules can be strengthened, and government policies improved to create a more resilient, sustainable, and inclusive trading system. The Forum included three subthemes: Leveraging technology for an inclusive recovery, Delivering a trade agenda for a sustainable future, Framing the future of trade.

New Study: Expand U.S. Apparel Sourcing from CAFTA-DR Members and Solve the Root Causes of Migration: Perspectives from U.S. Apparel Companies

The full study is available HERE.

Executive Summary:

This study offers valuable input and practical policy recommendations from U.S. apparel companies’ perspectives regarding expanding U.S. apparel sourcing from CAFTA-DR members. For the study, we consulted executives at 27 leading U.S.-based apparel companies (note: 85% report having annual revenues exceeding $500 million; over 95% have been sourcing apparel from the CAFTA-DR region for more than ten years).

The results confirm that expanding U.S. apparel sourcing from CAFTA-DR could be the best chance to effectively create more jobs in Central America and solve the root causes of migration there. To achieve this goal, we need to focus on four areas:

First, improve CAFTA-DR’s apparel production capacity and diversify its product offers.

As many as 92 percent of respondents report currently sourcing apparel from CAFTA-DR members.
Highly consistent with the macro trade statistics, the vast majority of respondents (i.e., 60 percent) place less than 10 percent of their company’s total sourcing orders with CAFTA-DR members.
Whereas respondents rate CAFTA-DR members overall competitive in terms of “speed to market,” they express concerns about CAFTA-DR countries’ limited production capacity in making various products. As a result, U.S. companies primarily source basic fashion items like T-shirts and sweaters from the region. These products also face growing price competition with many alternative sourcing destinations.
Improving CAFTA-DR’s production capacity and diversifying product offers would encourage U.S. apparel companies to move more sourcing orders from Asia to the region permanently.

Second, practically solve the bottleneck of limited textile raw material supply within CAFTA-DR and do NOT worsen the problem.

The limited textile raw material supply within CAFTA-DR is a primary contributing factor behind the region’s stagnated apparel export volume and a lack of product diversification.
Notably, respondents say for their apparel imports from CAFTA-DR members, only 42.9% of fabrics, 40.0% of sewing threads, and 23.8% of accessories (such as trims and labels) can be sourced from within the CAFTA-DR area (including the United States). CAFTA-DR’s textile raw material supply problem could worsen as the U.S. textile industry switches to making more technical textiles and less so for apparel-related fabrics and textile accessories.
Maintaining the status quo or simply calling for making the CAFTA-DR apparel supply chain more “vertical” will NOT automatically increase the sourcing volume. Instead, allowing CAFTA-DR garment producers to access needed textile raw materials at a competitive price will be essential to encourage more U.S. apparel sourcing from the region.

Third, encourage more utilization of CAFTA-DR for apparel sourcing.

CAFTA-DR plays a critical role in promoting U.S. apparel sourcing from the region. Nearly 90 percent of respondents say the duty-free benefits provided by CAFTA-DR encourage their apparel sourcing from the region.
The limited textile supply within CAFTA-DR, especially fabrics and textile accessories, often makes it impossible for U.S. companies to source apparel from the region while fully complying with the strict “yarn-forward” rules of origin. As a result, consistent with the official trade statistics, around 31 percent of respondents say they sometimes have to forgo the CAFTA-DR duty-free benefits when sourcing from the region.
Respondents say the exceptions to the “yarn-forward” rules of origin, including “short supply,” “cumulation,” and “cut and assemble” rules, provide necessary flexibilities supporting respondents’ apparel sourcing from CAFTA-DR members. Around one-third of respondents utilize at least one of these three exceptions when sourcing from CAFTA-DR members when the products are short of meeting the strict “yarn-forward” rules of origin. It is misleading to call these exceptions “loopholes.”

Fourth, leverage expanded apparel sourcing to incentivize more investments in the CAFTA-DR region’s production and infrastructure.

U.S. apparel companies are interested in investing in CAFTA-DR to strengthen the region’s sourcing and production capacity. Nearly half of respondents explicitly say they will make investments, including “building factories or expanding sourcing or manufacturing capacities” in the CAFTA-DR region through 2026.
CAFTA-DR will be better positioned to attract long-term investments in its textile and apparel industry with a sound and expanded apparel sourcing volume.

Additional resources:

Coalition for Economic Partnerships in the Americas (CEPA)
CAFTA-DR key textiles and apparel provisions (OTEXA)
CAFTA-DR short supply list (OTEXA)
CAFTA-DR full text (USTR)

2022 USFIA Fashion Industry Benchmarking Study Released

[The 2023 USFIA Benchmarking Study is now available]

Report release webinar (July 18, 2022)

The full report is available HERE

Key findings of this year’s report:

U.S. fashion companies report significant challenges coming from the macro-economy in 2022, particularly inflation and rising cost pressures. However, most respondents still feel optimistic about the next five years.

Respondents rated “increasing production or sourcing costs” and “inflation and outlook of the U.S. economy” as their 1^st and 3^rd top business challenges in 2022.
As a new record, 100 percent of respondents expect their sourcing costs to increase in 2022, including nearly 40 percent expecting a substantial cost increase from a year ago. Further, almost everything has become more expensive this year, from textile raw materials, shipping, and labor to the costs associated with compliance with trade regulations.
Over 90 percent of respondents expect their sourcing value or volume to grow in 2022, but more modest than last year.
Despite the short-term challenges, most respondents (77 percent) feel optimistic or somewhat optimistic about the next five years. Reflecting companies’ confidence in their businesses, nearly ALL respondents (97 percent) plan to increase hiring over the next five years.

U.S. fashion companies adopt a more diverse sourcing base in response to supply chain disruptions and the need to mitigate growing sourcing risks.

Asia remains the dominant sourcing base for U.S. fashion companies—eight of the top ten most utilized sourcing destinations are Asia-based, led by China, Vietnam, Bangladesh, and India.
More than half of respondents (53 percent) report sourcing apparel from over ten countries in 2022, compared with only 37 percent in 2021.
Reducing “China exposure” is one crucial driver of U.S. fashion companies’ sourcing diversification strategy. One-third of respondents report sourcing less than 10% of their apparel products from China this year. In addition, a new record of 50 percent of respondents sources MORE from Vietnam than China in 2022.
Nearly 40 percent of respondents plan to “source from more countries and work with more suppliers” over the next two years, up from only 17 percent last year.

Managing the risk of forced labor in the supply chain is a top priority for U.S. fashion companies in 2022, especially with the new implementation of the Uyghur Forced Labor Prevention Act (UFLPA).

Over 95 percent of respondents expect UFLPA’s implementation to affect their company’s sourcing. Notably, more than 85 percent of respondents plan to cut their cotton-apparel imports from China, and another 45 percent to further reduce non-cotton apparel imports from the country.
Most respondents (over 92 percent) do NOT plan to reduce apparel sourcing from Asian countries other than China. However, nearly 60 percent of respondents also would “explore new sourcing destinations outside Asia” in response to UFLPA.
Mapping and understanding the supply chain is a critical strategy adopted by U.S. fashion companies to address the forced labor risks in the supply chain. Almost all respondents currently track Tier 1 and 2 suppliers. With the help of new traceability technologies, 53 percent of respondents have started tracking Tier 3 suppliers this year (i.e., those manufacturing yarn, threads, and trimmings), a substantial increase from 25-36 percent in the past.

There is considerable new excitement about increasing apparel sourcing from members of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). Respondents also call for more textile raw sourcing flexibility to encourage apparel sourcing from the CAFTA-DR region.

CAFTA-DR plays a more significant role as a sourcing base. About 20 percent of respondents place more than 10% of their sourcing orders from the region, doubling from 2021.
Over the next two years, more than 60 percent of respondents plan to increase apparel sourcing from CAFTA-DR members as part of their sourcing diversification strategy.
CAFTA-DR is critical in promoting U.S. apparel sourcing from the region. Around 80 percent of respondents took advantage of the agreement’s duty-free benefits when sourcing apparel from the region this year, up from 50—60 percent in the past.
Respondents say the exceptions to the “yarn-forward” rules of origin, such as the “short supply” and “cumulation” mechanisms, provide essential flexibility that encourages more apparel sourcing from CAFTA-DR members.
Respondents say improving textile raw material supply is critical to encouraging more U.S. apparel sourcing from CAFTA-DR members. Particularly, “allowing more flexibility in souring fabrics from outside CAFTA-DR” and “improving yarn production capacity and variety within CAFTA-DR” are the top two priorities.

U.S. fashion companies strongly support another ten-year renewal of the African Growth and Opportunity Act (AGOA). Meanwhile, Ethiopia’s loss of AGOA eligibility discourages U.S. apparel sourcing from the ENTIRE AGOA region.

As much as 75 percent of respondents say another ten-year AGOA renewal will encourage more apparel sourcing from the region and making investment commitments.
However, despite the tariff benefits and the liberal rules of origin, respondents express explicit concerns about the region’s lack of competitiveness in speed to market, political instability, and having an integrated regional supply chain.
Ethiopia’s loss of AGOA benefits had a notable negative impact on sourcing from the country AND the entire AGOA region. Notably, no respondent plans to move sourcing orders from Ethiopia to other AGOA beneficiaries.

Summary of CRS Reports in 2022: Selected Key Trade Issues for US Congress

US-China Phase One Trade Deal

Congress might assess the U.S. experience with the Phase One process as it debates the merits of the deal and how to leverage it, the effects of the tariffs, and options to advance U.S. economic interests and counter China’s persistent statist economic practices. Specifically:

In light of how difficult it was to secure China’s acknowledgment of its practices of concern and limited commitments in these areas, to what extent may the U.S. reasonably expect talks with Beijing to achieve outcomes that further U.S. policy objectives, when measured against the U.S. resources and efforts required? Does focusing on talks with China take U.S. focus and resources away from efforts to deploy or develop U.S. trade tools and joint approaches with other countries that might be required to protect and advance U.S. economic interests?
Is the executive branch fully using its authorities to address its concerns about China? Are other approaches and measures needed in addition to or separate from tariffs, and if so, what are they? Should the USTR use Section 301 to address other concerns, such as subsidies? What approaches could be pursued, such as prior efforts with Europe and Japan to address non-market economic distortions and subsidies?
Should Congress require the USTR to enforce the Phase One provisions and actively use the Phase One dispute process? Should the USTR challenge China’s industrial policies that appear to violate commitments not to require technology transfer, and its efforts to set global technology licensing and pricing terms, such as through its courts?
How might Congress weigh the tariffs’ effects on U.S. firms and consumers against issues of economic competitiveness? To what extent are tariffs inflationary compared to drivers such as food, energy, housing, labor and supply chain shortages, and monetary policy?
Could tariffs help diversify China-based supply chains and counter China’s subsidies by raising costs vis-à-vis U.S. and third-market products? Could tariffs on goods tied to China’s industrial policies help level the playing field, or would this violate U.S. trade commitments and encourage others to follow suit? USTR proposed but never enacted tariffs on consumer electronics. Could these tariffs counter China’s efforts to deepen technology supply chains in China?

Section 301 Exclusions on US Imports from China

Congress could engage with the Administration to develop and implement guidelines for when and how to grant and extend exclusions. This could potentially promote transparency, consistency, and proper application of standards in reviewing requests, thereby helping to ensure that the USTR carries out Section 301 objectives as prescribed by Congress

Indo-Pacific Economic Framework (IPEF)

What role should Congress play in the negotiation and consideration of an IPEF and other regional trade initiatives? What regional and other multilateral trade commitments would best serve U.S. economic and strategic interests in the region?
What types of enforcement mechanisms would an IPEF include and how would its commitments and enforceability compare to CPTPP and U.S. free trade agreements? What are the tradeoffs of these approaches and should they be pursued in tandem?
How does the expiration of U.S. Trade Promotion Authority (TPA) affect the Administration’s approach to scoping, negotiating, and enacting an IPEF and trade agreements?

Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

What are the costs and benefits of different approaches to regional economic engagement (CPTPP, IPEF, RCEP)? Should other approaches be considered?
What scope exists for changes to CPTPP if the United States were to consider joining, and what are the implications of China’s potential membership?

African Growth and Opportunity Act (AGOA)

AGOA reauthorization. AGOA is authorized through September 2025. US Trade Representative Katherine Tai has urged consideration of improvements to encourage investment, and help small and women-owned businesses and more countries make use of the program. Congress may consider whether and when to reauthorize AGOA and if reforms are needed.
Free trade agreement (FTA) negotiations. An FTA with an AGOA-eligible country would have implications for AGOA and U.S. trade relations in the region. As the Administration, in consultation with Congress, determines whether to pursue trade negotiations in the region, including with Kenya, key considerations include: (1) what flexibilities from typical U.S. FTA commitments are appropriate; (2) potential effects on broader AGOA utilization; and (3) potential effects on regional initiatives like the African Continental Free Trade Area(AfCFTA).
Increased U.S. tariffs. The Trump administration imposed tariff increases (Section 232) on steel and aluminum imports. Congress may examine the tariffs’ effects on AGOA participants.
Third-party agreements. Reciprocal agreements between AGOA beneficiaries and third parties (e.g., EU-South Africa) may disadvantage U.S. exporters. Congress may examine possible U.S. responses.

US-Kenya Free Trade Agreement Negotiation

Congress may consider and advise the Administration on how to prioritize free trade agreement (FTA) talks with Kenya among other U.S. trade policy objectives; whether and in what form to seek renewal of the Trade Promotion Authority (TPA); the scope and extent of potential U.S.-Kenya FTA commitments to pursue; how to ensure an FTA with Kenya and its rules of origin support regional integration efforts and U.S. economic interests; and the potential types of support (e.g., trade capacity building funds) and flexibilities (e.g., phasing in of commitments) to include as appropriate to Kenya’s level of development)

U.S.-UK Trade Relations

Congress may continue to monitor U.S. trade and economic interests at stake in the UK-EU Trade and Cooperation Agreement (TCA)’s implementation. It may consider whether to press the Administration to continue to prioritize resolving specific trade issues and/or renew broader U.S-UK free trade agreement negotiations. In doing so, Congress may examine the potential benefits and costs of further U.S.-UK trade liberalization (or its absence) for the firms and workers in their districts and states.

Many in Congress and in the U.S. industry support a U.S.-UK FTA. Many Members tie their support to ensuring that Brexit outcomes do not undermine the Northern Ireland peace process. A potential TPA renewal debate could heighten these issues. If FTA talks proceed, Congress may monitor and shape them, and consider implementing legislation for a final agreement. Additionally, Members may examine other ways to engage further on bilateral and global trade issues of shared concern, e.g., sectoral regulatory cooperation or dialogues.

Generalized System of Preferences (GSP) Reauthorization and Reform

The GSP program expired on December 31, 2020. Congress is considering several bills to reauthorize and introduce new eligibility criteria to the program. Some of the proposed eligibility criteria include provisions on human rights, environmental laws, and good governance. Supporters of the proposed eligibility criteria consider it a modernization of the GSP program to address modern-day issues. Others raise concerns that adding new criteria may make the costs of complying with the program outweigh the benefits and discourage beneficiary developing countries’ participation. They may also undermine the core objectives of the program, which is to promote economic development through trade.

Other possible options for GSP include:

Support reciprocal tariff and market access benefit through free trade agreements (FTAs). Some U.S. policymakers have suggested that developing countries might benefit more through WTO multilateral negotiations, FTAs, or some form of agreement that could also provide reciprocal trade benefits and improved market access for the United States.
Authorize GSP only for Least-Developed Countries (LDCs). Narrowing the scope of eligibility could benefit the LDC that remains in the program by reducing competition in the U.S. market from more advanced developing countries. Assuming that many LDCs would continue to receive the GSP preference under AGOA, other LDCs that might benefit from an LDC-only GSP program are Afghanistan, Bhutan, Burma, Burundi, Cambodia, Congo (Kinshasa), Haiti, Kiribati, Mauritania, Nepal, Samoa, Somalia, South Sudan, the Solomon Islands, Timor-Leste,Tuvalu, and Vanuat.
Expand the application of GSP. For example, allow some import-sensitive products to receive preferential access (such as apparel). Increase the flexibility of rules of origin (ROO) requirements. For example, allow more GSP beneficiaries to cumulate inputs with other beneficiaries to meet the 35% domestic content requirement or lower the domestic content requirement. Eliminate competitive need limitations or raise the thresholds. Reauthorize GSP for longer terms or make the program permanent.
Restrict Application of Preferences. For example: Consider mandatory graduation for “middle income.” Strengthen provision that allows graduation of individual industry sectors within beneficiary countries. Reform eligibility criteria to strengthen provisions on worker rights as well as introduce new criteria, such as good governance, gender equality, and environmental law and regulation.

U.S.-EU Trade and Technology Council (TTC)

Congress may examine and weigh in on the TTC’s structure, priorities and scope, and prospects for “success.”

TTC’s anticipated prioritization of more recent or urgent issues (such as joint responses to Russia’s aggression in Ukraine), compared to other bilateral trade and technology issues (such as digital inclusion) that were priorities at the time of the TTC launch. Congress may explore potential trade-offs in priorities and/or opportunities to expand the TTC, such as by creating additional working groups or structures to sustain intensified cooperation on major bilateral trade issues. This may include a review of whether to modify the scope of the TTC’s working groups to address bilateral tariffs and other market access issues. Congress also may explore opportunities through the TTC to intensify U.S.-EU cooperation to remove regulatory barriers.
Congress may examine the TTC’s prospects for success and its ability to produce concrete outcomes, and also seek to establish the metrics by which to gauge the TTC’s effectiveness.

Congress may examine whether to pursue potential market opening opportunities through the TTC for future formal US-EU FTA talks, or pursue such talks separately. On one hand, potential FTA negotiations that develop out of the TTC could benefit from the intensified cooperation and renewed trust that the TTC may foster. On the other hand, such talks may be limited if they do not address bilateral tariffs or other market access issues.

Appendix: List of CRS reports on trade issues

USTR Fiscal Year 2023 Goals and Objectives—Textile and Apparel

In April 2022, the Office of the United States Trade Representative (USTR) released its 2023 Fiscal Year Budget report, outlining five goals and objectives for 2023. Notably, textile and apparel is a key sector USTR plans to focus on in the coming year:

Goal 1: Open Foreign Markets and Combat Unfair Trade

Provide policy guidance and support for international negotiations or initiatives affecting the textile and apparel sector to ensure that the interests of U.S. industry and workers are taken into account and, where possible, to provide new or enhanced export opportunities for U.S. industry.
Conduct reviews of commercial availability petitions regarding textile and apparel products and negotiate corresponding FTA rules of origin changes, where appropriate, in a manner that takes into account market conditions while preserving export opportunities for U.S. producers and employment opportunities for U.S. workers.
Engage relevant trade partners to address regulatory issues potentially affecting the U.S. textile and apparel industry’s market access opportunities.
Continue to engage under CAFTA-DR working groups and committees to optimize inclusive economic opportunities; strengthen the agreement and address non-tariff trade impediments; provide capacity building in textile and apparel trade-related regulation and practice on customs, border and market access issues, including agriculture and sanitary and phytosanitary regulation, to avoid barriers to trade.
Continue to engage CAFTA-DR partners and stakeholders to identify and develop means to increase two-way trade in textiles and apparel and strengthen the North American supply chain to enhance formal job creation.

Goal 2: Fully Enforce U.S. Trade Laws, Monitor Compliance with Agreements, and Use All Available Tools to Hold Other Countries Accountable

Closely collaborate with industry and other offices and Departments to monitor trade actions taken by partner countries on textiles and apparel to ensure that such actions are consistent with trade agreement obligations and do not impede U.S. export opportunities.
Research and monitor policy support measures for the textile sector, in particular in China, India, and other large textile producing and exporting countries, to ensure compliance with international agreements.
Continue to work with the U.S. textile and apparel industry to promote exports and other opportunities under our free trade agreements and preference programs, by actively engaging with stakeholders and industry associations and participating, as appropriate, in industry trade shows.

Goal 4: Develop Equitable Trade Policy Through Inclusive Processes

Take the lead in providing policy advice and assistance in support of any Congressional initiatives to reform or re-examine preference programs that have an impact on the textile and apparel sector.

[This blog post is not open for comment]

Sourcing Apparel from the CAFTA-DR Region—The Modern Cotton Story Podcast

Discussion questions:

What are the advantages and disadvantages of CAFTA-DR as an apparel-sourcing base for US fashion companies?
What are the key bottlenecks that prevent more apparel sourcing from CAFTA-DR members?
Do you support liberalizing the rules of origin or keeping the strict “yarn-forward” rules of origin in CAFTA-DR, and why?

Barcelona Fashion Summit 2022 Exclusive Interview: Apparel Sourcing, Trade, and Globalization

Regional Comprehensive Economic Partnership (RCEP) and Textiles and Apparel (Updated November 2021)

What is RCEP?

The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement between ten member states of the Association of Southeast Asian Nations (ASEAN)* and five other large economies in the Asia-Pacific region (China, Japan, South Korea, New Zealand, and Australia). RCEP was reached on November 15, 2020, after nearly eight years of tough negotiation. (Note: ASEAN members include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. India was an original RCEP member but decided to quit in late 2019 due to concerns about competing with Chinese products, including textiles and apparel.)

So far, RCEP is the world’s largest trading bloc. As of 2019, RCEP members accounted for nearly 26.2% of world GDP, 29.5% of world merchandise exports, and 25.9% of world merchandise imports.

As of November 1, 2021, Lao, Burnei, Cambodia, Singapore and Thailand (ASEAN members), as well as China, Japan, New Zealand and Australia have ratified the agreement. This has met the minimum criteria for RCEP to enter into force (i.e., six members, including at least three ASEAN members and three non-ASEAN members).

As announced by Australia on November 2, 2021, RCEP will enter into force on January 1, 2022

Why RCEP matters to the textile and apparel industry?

RCEP matters significantly for the textile and apparel (T&A) sector. According to statistics from the United Nations, in 2019, the fifteen RCEP members altogether exported US$374 billion worth of T&A (or 50% of the world share) and imported US$139 billion (or 20% of the world share).

In particular, RCEP members serve as critical apparel-sourcing bases for many US and EU fashion brands. For example, in 2019, close to 60% of US apparel imports came from RCEP members, up from 45% in 2005. Likewise, in 2019, 32% of EU apparel imports also came from RCEP members, up from 28.1% in 2005.

Notably, RCEP members have been developing and forming a regional textile and apparel supply chain. More economically advanced RCEP members (such as Japan, South Korea, and China) supply textile raw materials to the less economically developed countries in the region within this regional supply chain. Based on relatively lower wages, the less developed countries typically undertake the most labor-intensive processes of apparel manufacturing and then export finished apparel to major consumption markets worldwide.

As a reflection of an ever more integrated regional supply chain, in 2019, as much as 72.8% of RCEP members’ textile imports came from other RCEP members, a substantial increase from only 57.6% in 2005. Nearly 40% of RCEP members’ textile exports also went to other RCEP members in 2019, up from 31.9% in 2005.

What are the key provisions in RCEP related to textiles and apparel?

First, RCEP members have committed to reducing the tariff rates to zero for most textile and apparel traded between RCEP members on day one after the agreement enters into force. That being said, the detailed tariff phaseout schedule for textile and apparel products under RCEP is very complicated. Each RCEP member sets their own tariff phaseout schedule, which can last more than 20 years (for example, 34 years for South Korea and 21 years for Japan.) Also, different from U.S. or EU-based free trade agreements, the RCEP phaseout schedule is country-specific. For example, South Korea sets different tariff phaseout schedules for textile and apparel products from ASEAN, China, Australia, Japan, and New Zealand. Japan’s tariff cut for apparel products is more generous toward ASEAN members and less so for China and South Korea (see the graph above). Companies interested in taking advantage of the duty-free benefits under RCEP need to study the “rules of the game” in detail.

Second, in general, RCEP adopts very liberal rules of origin for apparel products. It only requires that all non-originating materials used in the production of the good have undergone a tariff shift at the 2-digit HS code level (say a change from any chapters from chapters 50-60 to chapter 61). In other words, RCEP members are allowed to source yarns and fabrics from anywhere in the world, and the finished garments will still qualify for duty-free benefits. Most garment factories in RCEP member countries can immediately enjoy the RCEP benefits without adjusting their current supply chains.

What are the potential economic impacts of RCEP on the textile and apparel sector?

On the one hand, the implementation of RCEP is likely to further strengthen the regional textile and apparel supply chain among RCEP members. Particularly, RCEP will likely strengthen Japan, South Korea, and China as the primary textile suppliers for the regional T&A supply chain. Meanwhile, RCEP will also enlarge the role of ASEAN as the leading apparel producer in the region.

On the other hand, as a trading bloc, RCEP could make it even harder for non-RCEP members to get involved in the regional textile and apparel supply chain formed by RCEP members. Because an entire regional textile and apparel supply chain already exists among RCEP members, plus the factor of speed to market, few incentives are out there for RCEP members to partner with suppliers from outside the region in textile and apparel production. The tariff elimination under the RCEP will put textile and apparel producers that are not members of the agreement at a more significant disadvantage in the competition. Not surprisingly, according to a recent study, measured by value, only around 21.5% of RCEP members’ textile imports will come from outside the area after the implementation of the agreement, down from the base-year level of 29.9% in 2015.

Further, the reaching of RCEP could accelerate the negotiation of other trade agreements in the Asia-Pacific region, such as the China-South Korea-Japan Free Trade Agreement. We might also see growing pressures on the Biden administration to join the Comprehensive and Progressive Agreement of the Trans-Pacific Partnership (CPTPP) to strengthen the US economic ties with countries in the Asia-Pacific region. The economic competition between the United States and China in the area could also intensify as the combined effects of RCEP and CPTPP begin to shape new supply chains and test the impacts of the two countries on the regional trade patterns.

By Sheng Lu

Further reading

Regional Comprehensive Economic Partnership (RCEP): What Does it Mean for US Apparel Sourcing from Asia? (2021 TexworldUSA webinar)
Lu, S. (2021). Why Why does the Regional Comprehensive Economic Partnership matter to apparel?. Just-Style
Lu, S. (2019). Regional Comprehensive Economic Partnership (RCEP): Impact on the integration of textile and apparel supply chain in the Asia-Pacific region. In Shen, B., Gu, QL., Yang, YX (Eds), Fashion Supply Chain Management in Asia: Concepts, Models and Cases. Springer.

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