What is in this article?:
- The 15th round of the ongoing cotton talks in the Trans-Pacific Partnership trade agreement hearings ended this past fall with much the same results — Vietnam walking out on the negotiations.
- The two sides are bitterly divided between two basic marketing principles: The Single Transformation Rule and the Yarn Forward Rule.
Definition of rule
The Yarn Forward Rule of Origin, usually called Yarn Forward Rule means that all products in a garment from the yarn stage forward must be made in one of the countries that is party to the agreement for trade with other countries.
For example in the Central American Free Trade Agreement (CAFTA), the Yarn Forward Rule means the yarn, fabric, sewing thread and the final garment itself must be made in the region, either in the United States or one of the six Caribbean or Central American countries that is party to the agreement.
If products meet these requirements, they can be traded tariff-free in member countries.
The Single Transformation rule would allow fibers and fabric from different sources to be used in finished goods.
Already there are numerous exceptions to the Yarn Forward Rule in CAFTA and NAFTA trade agreements, but allowing for components of finished goods to come from countries, like Vietnam, with lower labor wages, would mean an end to growth of the U.S. textile industry, some contend.
Resurgence in the U.S. textile industry in recent years has pushed U.S. purchases of domestic cotton to a recent high of 3.5 million bales last year. If the Yarn Forward Rule continues to be deciding factor on tariff free trading, U.S. textile officials contend domestic use of U.S. cotton will continue to grow.
Cass Johnson, president of the National Council of Textile Organizations, says the Single Transformation Rule maximizes opportunities for lower wage apparel jobs.
This would provide an incentive for burgeoning textile plants in the U.S. to move operations to countries with lower wages for textile workers, hence ending the upward trend in U.S. cotton usage.
Speaking at the recent annual meeting of the Southern Cotton Growers Association and Southeast Cotton Ginners Association, Andy Warlick, President and CEO of North Carolina-based Parkdale Mills, points out the average wage of textile workers in Vietnam is only 70 cents an hour.
Among the top Asian textile exporting countries, China has the highest average wages for textile workers, at $3.90 per hour.
“If the Single Transformation Rule stands in the Trans-Pacific Partnership trade negotiations, as the Vietnamese want, this would cut domestic use of cotton back to about two million bales, or about half of projected future U.S. mill consumption of cotton,” Warlick says.
The Trans-Pacific Partnership Agreement (TPP) is a proposed regional free trade agreement
(FTA) currently under negotiation among 11 Pacific Rim countries, includes the United States, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Initiated under President George W. Bush, the concept has wide support, but also growing opposition in the U.S. Congress.