Economic Integration

With the latest round of Trans Pacific Partnership (TPP) trade negotiations scheduled to begin on May 15 in Lima, Peru, the National Cotton Council (NCC) and the National Council of Textile Organizations are pressing members of the US House of Representatives to cosign a letter to Acting US Trade Representative Demetrios Marantis that provides specific guidance to US negotiators on key provisions the two groups say must be included in any TPP agreement sent to Congress for approval.

The House letter to the acting US trade representative details reservations about the Vietnamese government’s position regarding the textile negotiations and the impact it could have on the US textile industry’s suppliers and its export partners, and puts textiles and apparel among the three most difficult negotiating chapters in the TPP deliberations.

“After 16 rounds of negotiations, Vietnam is seeking to replace long standing textile rules that have been included in previous free trade agreements with a new rule that would allow Vietnam to source textiles from China and export garments and finished goods to the United States duty free,” says the letter.  “A recent study concluded that if adopted as part of the TPP, this rule would cost more than 500,000 US textile and related jobs and put more than 1.5 million jobs in the textile and apparel supply chains in the Western Hemisphere and Africa in jeopardy.

“We strongly urge the United States Trade Representative (USTR) to maintain its current position for strong textile rules which include the “yarn forward” rule-of-origin,” which would require all the materials in an item to originate and be assembled in a TPP country in order to receive the preferential treatment. 

“From NAFTA to the recently implemented Korean free trade pact, the yarn-forward rule has been an essential component of every US free trade agreement over the past 25 years. This rule has a proven track record of job creation in the US and our free trade areas, and it is responsible for hundreds of thousands of US manufacturing workers and millions of direct and indirect jobs in countries south of our border and in Africa. Specifically, the yarn-forward rule is responsible for $25 billion of United States two-way trade with Mexico, Haiti, the CAFTA-DR countries and the Andean region.”

The letter to the USTR, along with one to House colleagues enlisting their support, may be found on the NCC’s website at www.cotton.org/issues/2013/nctotpp.cfm. 

Meantime, Japan is the 12th country set to join in the talks.  Governments of the other 11, the United States, Canada, Mexico, Peru, Chile, Vietnam, Malaysia, Singapore, Brunei, Australia and New Zealand, have finished bilateral discussions with Japan, and once various domestic measures have been satisfied in each member country, Japan will take a seat in the negotiations.

Through the TPP, the United States and other Asia-Pacific countries are working to negotiate a comprehensive regional trade agreement.  With Japan, the world's third-largest economy, the final TPP pact would cover nearly 40 percent of global economic output and one-third of all world trade.  

Trade ministers have set an ambitious goal of reaching a final agreement by the end of the year, but a number of issues remain outstanding, including intellectual property, competition/State-owned enterprises, and environment, as well as on the market access packages for goods, services/investment, and government procurement, according to the US Trade Representative’s office.

A proposal by The Hosiery Association (THA) to exclude knit-to-shape, assembly-only socks and hosiery from current yarn-forward rules of origin found in current Trans-Pacific Partnership (TPP) draft language has drawn stiff opposition from a trio of US manufacturing and textile trade associations.

In a letter to US Trade Representative Ron Kirk, immediately following the conclusion of the 14th Round of talks in Leesburg, Virginia, earlier this month, the American Manufacturing Trade Action Coalition (AMTAC), the National Council of Textile Organizations (NCTO) and the American Fiber Manufacturers Association (AMFA), said the idea is counter to the US textile industry’s long-held support for the current yarn-forward rule of origin in free trade agreements (FTA) for textile and apparel, which includes socks and hosiery, and “would be a massive blow to US and other TPP producers.”

“Yarn forward is the long-established rule of origin for our industry, incorporated into US trade and preference agreements dating back to NAFTA (North American Free Trade Agreement),” the associations said. “It encompasses all stages of production from yarn spinning to fabric formation and final garment assembly, all of which must be done either in the United States or in a FTA partner country to qualify for duty-free treatment.”

They insisted that “the rule is logical because the vast majority of the value of a finished textile or apparel product comes from its components, rather than from its final assembly. Allowing the highest value-added elements of the production chain to originate outside the contracting FTA countries transfers its benefits to third countries not party to the agreement and not obligated to contribute market-opening concessions in return.”

Contending that current rules of origin are too restrictive, limiting trade and investment, The Hosiery Association has proposed that hosiery manufacturers be allowed to source their man-made fiber yarns for socks and hosiery from non-TTP countries, except for 100 percent cotton and polyester products.  The Charlotte, North Carolina, trade group also maintains that under the current rules, most trade does not qualify for preferential tariff rates.

That assertion is disputed by AMTAC, NCTO and, AFMA, however, with the explanation that 2011‘s trade value of US imports amounted to US$578 million under the Harmonized Tariff System subheading for Panty Hose, Tights, Stockings, Socks and Other Hosiery from the NAFTA and CAFTA-DR (Central American and Dominican Republic free trade agreement) zones. Both regional trade agreements are yarn forward, therefore the qualifying imports incorporate yarns sourced within the FTA region and accounted for almost 98 percent of US imports of these products, said the groups. 

“In short, the THA proposal allows yarns currently made in large quantities in the United States to be sourced from third parties, notably China,” said the letter.  Consequently: “This proposal would be a massive blow to US and other TPP producers who manufacture acrylic, nylon and various other types of man-made fiber yarns. Producers of cotton, wool and blended fiber yarns used in these socks and hosiery would also be hurt.”

The entire letter may be read here.

Negotiators from nine Pacific Rim nations concluded their 14th round of Trans-Pacific Partnership (TPP) talks in Leesburg, Virginia, earlier this month, and although specifics on the deliberations remain scant, the teams dealing with individual chapters ranging from market access, customs and rules of origin, among others, noted continued progress toward a final agreement.

During the 10-day session negotiators from the United States and the other eight TPP countries – Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam – worked toward agreement on the texts of the 29 chapters of the agreement.

The US Trade Representative’s (USTR) office reported delegates “continued to move forward in constructing the tariff and other specific market-opening commitments that each country is making on industrial goods, agriculture, textiles, services and investment, and government procurement. Along with this progress, the nine countries also reported a continued focus on other important issues from intellectual property rights to labor and environment and other topics that address core issues faced by manufacturers, service providers, farmers, ranchers, and workers in the 21st century.”

In the midst of the negotiations, ministers representing TPP member countries issued the following statement to their national leadership:

In the ten months since the nine TPP Leaders met in Honolulu, Hawaii and directed us to dedicate the resources necessary to conclude this landmark agreement as rapidly as possible, we have made encouraging headway toward completion of the agreement based on the broad outlines you approved last November. We have held four negotiating rounds since then and many plurilateral meetings of individual negotiating groups between formal negotiating sessions, as well as numerous bilateral meetings to find paths forward on specific issues. These meetings, extensive preparatory work intersessionally by each of our teams, and the active consultations with our stakeholders that we have conducted domestically to obtain input as we further developed our negotiating positions, have significantly narrowed the gaps between us in a wide range of areas, while continuing work on other issues where progress has been slower.

Your joint commitment to this milestone agreement served to focus our work and we have made significant progress on many of the 29 chapters under negotiation, including customs, cross-border services, government procurement, telecommunications, competition policy, small- and medium-sized enterprises, competitiveness and business facilitation, and cooperation and capacity building. The negotiating groups moved their work ahead substantially on other issues, including rules of origin, investment, financial services, and temporary entry. In addition, we continue to make progress in working through our differences on the other chapters. We are determined to build on the momentum we have achieved to close as many of these chapters as possible this year, recognizing that the agreement is a single undertaking and must result in a balanced package that all TPP countries can embrace.

We are pleased with our progress toward realizing each of the five defining features of this historic agreement, which we expect will set the standard for future trade agreements.

Comprehensive Market Access

We have continued to work to construct a high-standard market access package that provides comprehensive duty-free access to each other’s goods markets and simultaneously lifts restrictions on services, investment, and government procurement. The nine teams continued efforts to develop tariff packages that will open our industrial goods, agricultural, and textiles markets to one another. This work is progressing at varying paces for different countries. At the same time, we are developing packages that will provide access to each other’s services, investment, and government procurement markets. On services and investment, we are negotiating access to each other’s services and investment markets on a “negative list” basis, which assumes access unless countries take an exception. Although we have made sound progress since you met in December, this approach is new to some TPP countries, and we have additional work to do to achieve an ambitious outcome on services and investment consistent with our approach on goods. Some positive steps have been taken on government procurement, another issue that some TPP countries are including in a trade agreement for the first time. It is clear, however, that further work is needed across the market access negotiations to develop high-standard, balanced packages for each country, consistent with your clear vision guiding our negotiations. We now are focused on developing creative solutions so areas of sensitivity will not compromise the ambition set for this agreement, recognizing that only by doing so will we achieve our key goals of maximizing trade and investment among us and supporting the creation and retention of jobs for our citizens.

Regional Agreement

The nine TPP teams have had discussions on steps toward the construction of a single tariff schedule and have made considerable progress in the last ten months on agreeing on common rules of origin, which are among the most important features of this agreement to promote trade among our countries. We are working to develop simple and enforceable rules of origin that will encourage cumulation across the region, which promote production in TPP countries and make it much easier for our businesses, both large and small, to take advantage of the agreement. We also have made solid progress on other commitments throughout the agreement that will support the development of production and supply chains among TPP members, including on such issues as connectivity, services, customs cooperation, and standards. While our nine countries have different approaches to some of these issues, we are working closely and constructively to find compromises so that we can ensure this agreement will promote synergies between our economies and raise living standards for our people.

Cross-Cutting Trade Issues

We are moving toward conclusion of each of the four dynamic cross-cutting issues we are including in the TPP, and our efforts have been greatly facilitated by the significant APEC work already done in these areas. In the past ten months, we have made promising movement forward toward agreement on the chapters that address: (1) regulatory and other non-tariffs barriers, including related to goods, industrial and agricultural standards that increasingly are the major barriers that companies face in gaining access to foreign markets, and we have significantly narrowed the gaps between us on new ways to improve regulatory practices, eliminate unnecessary barriers, reduce regional divergence in standards, promote transparency, and conduct our regulatory processes in a more trade-facilitative manner, as well as to cooperate on specific regulatory issues covering certain sectors of interest to the nine countries; (2) competitiveness and business facilitation, including focusing holistically on ensuring that we are developing the production and supply chains that will enhance our competitiveness and maintain jobs in our markets; (3) ways to expand the participation of small- and medium-sized enterprises in regional trade, including through enhancing their access to specific relevant and user-friendly information and resources about the TPP; and (4) capacity building and cooperation to help those TPP countries that need it to implement the high ambition of the agreement and thus fully realize its benefits, as well as additional commitments on development that would contribute to each of our economic development priorities, building on development work in other fora, input from stakeholders, and new proposals from TPP members.

New Trade Issues

Since you last met in November, we have continued to consider carefully how best to address new issues that have emerged in global trade. We have spent considerable time discussing, for example, developments in information technology, and commitments that can help harness the new digital economy to enhance our competitiveness, promote trade, and support our small- and medium-sized businesses link to the global economy. We also have been considering ways to advance our common interests in capturing the benefits of green growth and new technologies. In addition, we continue to weigh appropriate approaches to ensuring a transparent and pro-competitive business environment. These, and other issues under discussion, are new and complex issues, but we are pleased by the commitment of the nine countries to engage seriously and seek outcomes that will promote trade and investment in these areas, and benefit all of our businesses and peoples.

Living Agreement

We are pleased by the interest of Mexico and Canada to join the TPP negotiations and warmly welcome their participation, which will add to the strength of our initiative and help us to advance our goal of enabling the TPP to serve as a possible platform for economic integration throughout the Asia Pacific. We continue to discuss with other countries their interest in potentially joining the negotiations in the future. At the same time, we have made significant progress in reaching agreement on establishing a structure, institutions, and processes that will make the TPP a living agreement, and allow it to evolve as appropriate in response to future developments in trade, technology or other emerging issues and challenges. We also are considering the most productive and efficient approach for future joint work in areas of common interest.

Next Steps

We recognize the priority that the Leaders of our nine countries accord to concluding this agreement. Having made significant progress across the agreement, we are now working to address the remaining issues, which include many complex, new, and sensitive areas on which careful consideration and thorough consultation is needed. We will continue to commit the resources necessary to do so, as you have directed us, and also to integrate Mexico and Canada into the negotiations efficiently so that we can bring this negotiation to a successful conclusion as soon as possible.

The 15th round of TPP negotiations will be held in Auckland, New Zealand, December 3-12.

Mexico and Canada will join the TPP negotiations in early October when the nine current members are expected to conclude their domestic procedures.

The 13th and latest round of negotiations between the nine countries forming the Trans Pacific Partnership (TPP) concluded earlier this month in San Diego, California.  The following is taken from a statement issued by the US Trade Representative’s office with the conclusion of the round.

The United States and its eight TPP partners made important progress toward conclusion of the more than 20 chapters under negotiation between the United States, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam. The TPP Agreement is an important trade initiative by the Obama Administration, which is aimed at: 

•  supporting jobs for American workers by boosting US exports to the rapidly  developing Asia-Pacific region, 
•  promoting manufacturing, innovation, and entrepreneurship, and 
•  settling on an agreement that safeguards worker rights and the environment.

This week’s talks made further substantial progress across the chapters, reflecting significant preparatory work done by each of the TPP countries since the previous negotiating round in Dallas in May. Negotiating groups made particularly significant progress in a number of chapters, including customs, cross-border services, telecommunications, government procurement, competition policy, and cooperation and capacity building. In addition, the negotiating groups moved their work ahead substantially on other issues, including rules of origin, investment, financial services, temporary entry, and other issues. 

The nine countries also continued intensive discussions on the ambitious tariff packages they are seeking to conclude that will provide access to each other’s industrial goods, agriculture, and textiles markets. They also advanced their discussions of how to promote regional supply chains to further augment the benefits of the agreement. 

Meantime, congressional Democrats and organized labor have criticized the talks, claiming a lack of transparency.  

However in the USTR’s statement, Ms. Barbara Weisel, chief U.S. negotiator, said the US government recognizes the importance of obtaining as broad a range of input from the public as possible throughout the TPP negotiations. This negotiating round featured numerous opportunities for nearly 300 people who had registered to meet with US and other TPP negotiators. 

On the first day of the negotiating round, a Direct Stakeholder Engagement Forum was held, which enabled representatives of industry, non-governmental organizations, academia, and the general public to meet directly with negotiators to discuss specific TPP issues. 

The chief negotiators from all nine TPP countries subsequently held a briefing with stakeholders, and Ms. Weisel also participated in a roundtable discussion hosted at the University of California, San Diego. Moreover, there were additional meetings between negotiators and interested parties throughout the negotiating round.

During this round, US Trade Representative also notified Congress of its intent to enter into TPP negotiations with Mexico and Canada on July 9 and 10, respectively. This notification triggers a 90-day period during which the Obama Administration will consult with Congress on objectives related to these new entrants to the TPP negotiations. Mexico and Canada will join the TPP negotiations once current TPP members successfully conclude their domestic procedures.

The 14th Round of TPP negotiations will be in Leesburg, Virginia on September 6-15. 

The United States and eight other Pacific Rim members of the Trans-Pacific Partnership (TPP) concluded a 12th round of trade negotiations in Dallas, Texas, last week.  Progress was made on a number of fronts, according to the US Trade Representative’s office, but few details have been made available.

A news release from Washington reported that discussions on a US proposal regarding State-owned enterprises (SOEs), and how to ensure that they compete fairly with private companies, was among the focus areas.  Negotiating teams also discussed new issues related to trade and the environment, the digital economy, and the development of supply chains in the region, as well as tariff packages that would provide access to member’s industrial goods, agricultural, and textiles markets.

Meantime, the Textile and Apparel Alliance for TPP (TAAT), a global coalition of US textile and apparel trading partners from Africa, North, Central and South America, as well as US congressional allies, are pressing the US Trade Representative to ensure that the textile and apparel section of the final pact provides a “positive environment for job creation among TPP members” and prevent non-members, namely China, from reaping a business windfall without being obligated to abide by the rules of the trade agreement.

In a statement issued earlier this month, the TAAT commended 76 members of Congress who have formally written to urge the US Trade Representative to see that textile rules in the TPP agreement support US jobs, develop new export markets, increase opportunities for private investment and entrepreneurship, and reinforce strong trade ties with existing Free Trade Agreement (FTA) partners.

Background information in the statement explained that “the TAAT coalition was formed in February after Vietnam, a TPP participant, proposed country-of-origin rules for textiles and apparel that are far weaker than those in current US free trade agreements (FTAs) and preference programs.” 

TAAT contends that if adopted, the weaker rules would allow Vietnam's state-owned enterprises to export textiles and apparel made from subsidized inputs produced by China's “massive” textile SOEs duty free to other TPP countries. The competitive advantage gained by Vietnam's SOEs would therefore shift business to them at the expense of privately-owned and financed textile and apparel producers in the United States and elsewhere in the African and North and Central American trade blocs, “thereby harming potential for new textile and apparel export markets for US producers and those of FTA partners.” 

Vietnam, a non-market economy, exported US$7.2 billion in textiles and apparel to the United States in 2011, making it the second largest supplier of those products behind China, the TAAT noted. The Vietnamese government both owns and subsidizes textile and apparel production. Vinatex, Vietnam's state-owned textile and apparel conglomerate, is one of the largest garment producers in the world. In addition, Vietnam depends on China for much of its yarns and fabrics, importing US$4.4 billion of textile components from that country in 2010.

Therefore China, “the largest textile and apparel exporter in the world and a country not participating in the TPP, would gain substantial new access to the US market without having to make trade concessions in return,” said the statement.

Consequently, the TAAT coalition said it is supporting rules proposed by the US government which build on the free trade agreements that have been negotiated over the past 25 years. 

These include the "yarn forward" rule of origin, responsible market access provisions, and strong customs rules and enforcement. A yarn-forward rule of origin means that all yarn, fabric, and assembly production stages must be done in a TPP country for a textile or apparel product to be eligible for duty-free treatment, unless an exception applies. 

TAAP said Washington has also insisted that the TPP agreement ensure "that state-owned enterprises compete fairly with private companies and do not distort competition in ways that put US companies and workers at a disadvantage."

The TAAT coalition includes textile and apparel associations from the United States and more than two dozen other free trade and trade preference countries. Coalition members represent nearly two million workers in the textile, apparel, and fiber production sectors, thousands of privately owned factories, and nearly US$25 billion in two-way textile and apparel trade.

The six-year-old Trans-Pacific Partnership, which has evolved from an original membership of Brunei, Chili, New Zealand and Singapore, now includes New Zealand, Peru, Singapore, the United States, and Vietnam.  The next round of negotiations will be in San Diego, California, from July 2-10. 

Questions:  Considering complaints that TPP talks have been less than transparent to the public, what reasons can be given to open the deliberations or keep them private?

The Dallas round featured the opportunity for those who will be affected by the final agreement to be on the sidelines and meet with chief negotiators.  Does this provide a satisfactory means for stakeholders in the talks to ensure their positions on specific issues are put forward?

As the World Trade Organization (WTO) awaits the Russian government’s approval of an accession package to make the country the group’s 155th member, an article published by the World Textile Information Network examines the pros and cons of an effort that was started in 1993.

Broadly speaking, the multi-lateral agreement shared by member states ensures trade on equal ground, which is a substantial benefit to developing economies.  However, as new members have  realized, accession to the ranks of the WTO often means giving up tariffs higher than allowed between members and the dismantling of trade barriers that have been erected to help less efficient industries survive in the global marketplace.

Russia’s textile industry is among those that will likely face a difficult period of adjustment once the country joins the WTO.  The duty on textiles, apparel and footwear imported from the United States, for instance, will have to be lowered to a range of 5 percent to 7 percent, compared the 10 percent to 20 percent duty that currently prevails.

Moreover, Russian manufactures will witness strong competition from other outside markets.  Relatively low-cost goods from Asia and the Indian sub-continent will be the stiffest challenge, forcing a realignment of prices for domestically-produced goods.

The entire article may be found here.

Questions:  It may be difficult to judge whether the benefits of WTO membership outweigh the initial detriments, but how long should it take Russia to begin realizing more benefits than detriments?

Considering membership in the trade organization affects Russia’s entire economy and may threaten the livelihood of many of the country’s textile and apparel manufactures, how long should it take learn which will survive global competition on an even playing field?  

In 10 to 20 years, what stands to be the size of Russia’s textile and apparel industry?  Will it have shrunken, expanded, or be about the same after only the most efficient have survived?

The World Trade Organization (WTO) concluded its eighth biennial ministerial conference in Geneva, Switzerland, on December 17, with what Director General Pascal Lamy described as “constructive dialogue among Ministers which has improved the WTO's atmosphere and outlook”; however, accomplishments on the Doha development round remained elusive.

Among the ministerial’s accomplishments were the accession of Russia, Montenegro and Samoa, a government procurement agreement and seven specific decisions that included, among others, a work program on small economies, accession of least-developed countries, preferential treatment to services and service suppliers of least-developed countries and a Trade Policy Review mechanism.

To the dismay of a large number of ministers, however, virtually no forward movement was achieved in the WTO’s Doha Development Round.

In a report to its members, the National Cotton Council of America said that at the conference’s opening session, Mr. Lamy pressed WTO members to address the primary question causing the impasse in the negotiations, specifically: What contribution major emerging markets, such as China, India and Brazil, should make towards the further opening of global markets?

The Council noted that efforts to re-start the Doha negotiations earlier this year, following the collapse of the talks in July 2008, were unsuccessful, in part, because the United States insisted that Brazil, China and India increase access for goods and services. This effort was followed by an unsuccessful attempt to secure a “deliverables” package in favor of least developed countries (LDCs) for the December ministerial. That package would have included concessions on cotton.

The United States refused to include a commitment to 100 percent duty-free/quota free market access for exports from LDCs without additional initiatives that would benefit developed and developing country exporters. To facilitate the discussion of a way forward, Mr. Lamy said he would convene a “panel of multi-stakeholders of the WTO” to analyze all these elements and report back to the WTO membership by the end of 2012, said the Council.

Meantime, US Trade Representative Ron Kirk told the Bureau of National Affairs early this month that he was encouraged that more and more WTO members were coming to the realization that the Doha talks could not go on with “business as usual.” He said, “We can't go back to the same formula and think we'll magically produce a different result. At least we've acknowledged we're at an impasse.”

In his remarks, Mr. Kirk said that the WTO also must lead the way to examine the issues of vital importance to a “healthy global trading system.” These include establishing new market access, disciplining fisheries subsidies leading to stock depletion, food security, trade facilitation and regional trade agreements, he insisted. He said members should celebrate the organization's “day-to-day work” through its standing committees and monitoring functions, as well as the contributions of the dispute settlement system and existing rules. 

Question:  What are the chances that China, India and Brazil will agree to more liberal market access in order for the Doha Development Round to move forward?

Press reports from Washington this week indicate that the World Trade Organization’s 8th ministerial conference should proceed smoothly later this month.  A draft of the chairman’s text has been circulated among the delegations, most of which voiced their satisfaction with the language aimed at addressing three areas -- the multilateral trading system, trade and development, and Doha Development Agenda trade negotiations.

Nigeria’s trade and industry minister, Mr. Olusegun Aganga, will chair the three-day conference, starting December 15, in Geneva, Switzerland.

Despite the satisfaction expressed by some countries, however, others voiced concern over what they considered an absence of specificity on how to move deliberations forward.  Of the three areas, language with respect to the Doha Development Agenda appeared weakest, according to some comments.

Indeed, the draft text reportedly acknowledges that negotiations are at an impasse on Doha and says member countries have widely divergent perspectives on how agreement can be reached in various areas of debate.  Consequently, it may be necessary to focus on individual issues where consensus can be reached rather than insist that the entire deliberative effort be concluded at one time.

Meantime, some agriculture negotiators expressed misgiving over the absence of a “standstill” understanding in the chairman’s draft text.  The ‘Cotton-4’ group (Benin, Burkina Faso, Chad and Mali) put forward a proposal last week at an agriculture committee meeting that would ask ministers to reaffirm several decisions made on cotton in the 2005 Hong Kong Ministerial Declaration.  The decisions include a commitment to reduce trade distorting subsidies for cotton by more than the reductions on other agricultural products, which has faced strong opposition from the US.

Opinion was mixed at the meeting with respect to the Cotton-4 effort to have countries freeze, or bring to a standstill, current levels of domestic support for cotton.  To the dismay of those supporting the proposition, however, the meeting was held on the last day before the deadline for placing items on the ministerial agenda for the December meeting, and it appears the Cotton-4 position will not be taken up.

The US cotton industry, meantime, insists that any commitments from the Hong Kong ministerial can only be addressed as part of an overall Doha agreement and that cotton should be treated no differently than any other commodity.

The US government position expressed by Ambassador Michael Punke, Deputy US Trade Representative, following a WTO Trade Negotiations Committee meeting in May, is as follows:

“The commitment at Hong Kong with respect to domestic support was that trade distorting domestic subsidies for cotton production would be reduced more ambitiously than under whatever general formula is agreed and that it would be implemented over a shorter period of time than generally applicable. We are now in a new context, with no generally agreed formula and no generally applicable period of time. Our discussion must recognize this new and starkly different context.

“I also hear frequent references to ‘the mandate.’ Let’s be clear on that point as well. The cotton mandate agreed in the framework agreement of 2004 states, and I quote: ‘Work shall encompass all trade-distorting policies affecting the sector in all three pillars (covered by the agriculture negotiations) of market access, domestic support and export competition…’ 

“If we are going to have a discussion about cotton, it must be a comprehensive discussion about all forms of market distorting practices in all three pillars. We would need to discuss both direct subsidization and other practices such as import licenses, sliding tariff scales, and reserves management – that produce very substantial levels of effective support for domestic cotton producers.

“If people wish to discuss cotton, everyone’s cotton programs must be on the table.”

Questions:  Is there equity in treating the US cotton program differently than any other country’s?

Considering the Doha Development round of talks began 10 years ago, what are the prospects of an agreeable conclusion within, say, the next two to three years?

A comprehensive free trade agreement (FTA) across a variety of sectors between the US and South Korea is expected to prove particularly beneficial to the Korean textile industry, but its counterpart in the US is bracing for further import pressure and the impact it will have on employment numbers.  Textile and apparel employment has fallen from around 1.1 million jobs in 2000 to slightly more than 400,000 in 2010.

The agreement was signed into law by President Obama last month.

The tariff on most qualifying US textile and apparel products exported to Korea will be eliminated as the agreement becomes effective. All others will be lifted in three- or five-year stages.  In return, US import duties, which average 13.1 percent of valuation, but can be as high as 32 percent on certain products, also will be abandoned.

The Korea Institute for Industrial Economics and Trade predicts that Korea’s textile exports to the United States will jump by an annual average of $183 million during the next 10 years, while imports should rise by $25 million, as a result of the trade pact.

An official of the Korea Federation of Textile Industries has said that “because we will have cost-competitiveness against our rivals Taiwan, China and Japan, the FTA will not only increase our exports, but also enhance our brand image.”

Following the abolition of textile quotas in 2005, South Korea faced severe competition with Chinese, Turkish and Indian companies in the US market. Consequently, Korea’s textile market share in the US dropped by half, from 1.8 percent in 2006 to 0.9 percent last year, according to the US Department of Commerce.

Principal textile and apparel exports to the US include knitwear, such as sweaters, socks, synthetic resin and men’s shirts. Major import items are synthetic fiber materials such as cellulose acetate and animal fiber materials.

The trade agreement includes a textile safeguard that will permit the US to impose tariffs on certain goods in the event of import surges.  However, the Washington DC-based National Council of Textile Organizations (NCTO) insists that the pact’s customs enforcement language is weak and ineffective and will result in a wave of illegal Chinese textile and apparel products entering the US through Korea.

Moreover, the tariff phase-out schedule in textiles is tilted strongly in favor of the Korean textile industry and hurts US producers of sensitive textile products, it says.

“Contrary to the NAFTA (North American Free Trade Agreement) and all succeeding Free Trade Agreements (FTA), 60 percent of sensitive textile product tariff lines are duty free immediately. An additional 29 percent fall under the five-year phase-out,” NCTO says in a position paper. 

“This is the first time that an Administration has allowed a large number of sensitive textile products from a country with a sophisticated textile industry to receive immediate access to US markets.”

The trade organization also objects to what it calls a loose ‘Rule of Origin’ requirement that allows non-signatory countries duty-free access to the US market.

“Certain components such as sewing thread, narrow fabrics, and pocketing fabrics are not covered under the KORUS rule of origin requirements, despite these products being available in the United States. The failure to include these components in the rule of origin requirement provides non-signatory countries, such as China, direct access to the US market duty free while hurting US workers that produce these components.

Questions:  To what extent does the KORUS FTA threaten the US textile industry?

Now that the agreement finally is to become effective, how will this impact long-term plans for US and Korean textile manufacturers?

A news item issued by the World Trade Organization provides details of an informal meeting of the group’s Trade Negotiations Committee yesterday where WTO Director-General Pascal Lamy told ambassadors that member countries risk failing to deliver the breakthrough needed in April in order to conclude the Doha Round negotiations this year.

“Now is the time for all of you, and in particular those among you who bear the largest responsibility in the system, to reflect on the consequences of failure,” he said, and urged members “to reflect on the costs of the non-Round to the world economy as well as to the development prospects of Members, in particular the smaller and least-developed which are more dependent on an improved set of global trade rules.

“And above all, it is time to think about the consequences of the non-Round to the multilateral trading system which we have so patiently built over the last 70 years. It is the time to think hard about multilateralism, which your leaders, yourselves and myself preach at every occasion. In politics, as in life, there is always a moment when intentions and reality face the test of truth. We are nearly there today.”

Delegations broadly echoed his concern, some arguing that progress is still possible provided members show the political will to produce give and take.

Mr. Lamy said gaps remain too wide in a range of issues for the negotiating group chairs to produce the revised draft negotiating texts that members have agreed should be produced by Easter (the weekend of 24-25 April).

He identified one issue as the biggest stumbling block at this stage: “NAMA sectorals”. This is about proposals for major trading countries — including emerging economies — to allow duty-free or lower-than-normal duty on imports in particular sectors within the non-agricultural market access (NAMA) negotiations.

“The absence of progress in NAMA sectorals constitutes today a major obstacle to progress on to the remaining market access issues,” Mr. Lamy said. “However, let me be clear, this is not the only market access related problem area. There are other issues whether in agriculture or to a larger extent in services — which have not been resolved either.”                                     

He said he will consult members privately in the fortnight starting on 4 April, “with a view to understanding the size of the gaps on the NAMA market access,” he said.

“Once I have done this I intend to report to the entire membership. Together — and on the basis of an across the board view of progress in all areas in the negotiation, including the regulatory part as well as market access — we will then decide on the next steps.”

Delegations reiterated the particular issues that concern them: agriculture, non-agricultural market access, services, the balance of ambition between the three, special treatment for developing and smaller countries, cotton and fisheries subsidies and so on.

Some developed countries called for more real access to markets; some developing countries said they were demanding too much, particularly when compared to what they were offering in agriculture. Some said focusing on single issues such as free or freer trade in a particular non-agricultural sector will not work at this stage since negotiators have to view this in comparison with other issues such as agricultural reform.

Some briefed the meeting on their attempts at a breakthrough bilaterally or in groups such as a group of 11 WTO members sometimes called the G-11.

Questions:  What are the long-term ramifications of a failure to conclude a world trade pact?

Will countries be more inclined to negotiate bilateral or regional trade deals in its absence?

Would these be considered just a stop-gap measure until new broader negotiations could be initiated, or does failure of the Doha Round signal that there is a lack of will among WTO member countries to reach successful compromise on global trade rules?