How to Keep NAFTA Dressed for Success | U.S. Chamber of Commerce
Nov 28, 2017 - 2:45pm

How to Keep NAFTA Dressed for Success


Executive Vice President, American Apparel & Footwear Association

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Blazers hang in a clothing factory in New York City.
Blazers hang in a clothing factory in New York City.

Textile and apparel executives, and their U.S. workers, are nervously eyeing the ongoing negotiations to modernize the North American Free Trade Agreement (NAFTA). Concerns around possible job losses in this sector are running high and rising.

If you had read those statements in the mid-1980s, you might assume this sector was hoping trade talks would unravel, due to threats of foreign competition. Some still believe that to be the case, but they are mistaken.

The reality is that the textile and apparel industry needs NAFTA. And needs it badly.

What a difference a generation makes.

To understand why NAFTA helps the U.S. textile and apparel industry compete, you need only understand one number: 97.

That is the percentage of clothes that are purchased every year by Americans and produced offshore. We still make clothes here in the United States — primarily for fast turns, for the military, and for special programs — and we always will. But the bulk of our clothing is sewn offshore.

Asian countries own a good chunk of that 97%. Six of our top ten clothing suppliers are in Asia with China leading the way at about 40% market share. But the other four top suppliers are in the Western Hemisphere, and they include Mexico — one of our two NAFTA partners.

This is a good thing because clothing made in Mexico, and shipped back to the United States under NAFTA, contains a high amount of U.S. content. This includes both intangible U.S. content drawn from U.S. global value chains — such as design, quality control, and branding — as well as physical U.S. inputs, such as yarns, fabrics, buttons, zippers, and so on.

And here’s where the U.S. textile industry comes in. Because of arrangements like this in our industry, Mexico has emerged as a top U.S. export market for U.S. textiles. More than one-third of all U.S. yarn and fabric exports are sent to Mexico, where many of them are incorporated into clothing. If we add in Canada, that number jumps to nearly 50%.

Clothes made in other parts of the world may incorporate that critically important intangible U.S. content, but they don’t use nearly as much U.S. textiles. The garments we import from China, Vietnam, and elsewhere in Asia don’t contain as many U.S.-made yarns and fabrics as those made in Mexico and other Western Hemisphere free trade agreement partners.

Scuttling NAFTA will unravel many of these Western Hemisphere supply chains, threatening hundreds of thousands of America’s textile and apparel jobs.

But jacking up NAFTA’s content requirements in a mistaken bid to induce even more U.S. content into these supply chains would also threaten American jobs. Well-documented auto industry concerns — that higher content requirements will lead to less, not more U.S. content — are mirrored in the textile and apparel industry as well.

Clothes made in Mexico must comply with the strict "yarn forward" rules of origin. Negotiators built into those rules a series of provisions to give sourcing executives very limited flexibility to adapt supply chains to ever changing fashion needs. These include Tariff Preference Levels (TPLs), which anchor supply chains that use considerable U.S. content. Loss of these TPLs will push supply chains outside of North America, to supply chains that don’t use U.S. yarns and fabrics, decimating thousands of U.S. textile jobs.

A similar fate is in store if we stitch in new provisions that require sewing thread, buttons, and pocketing to originate in the NAFTA region. In truth, most of these items already originate in the U.S., even though they don’t have to. Why? Because U.S. suppliers of those products make globally competitive products that are easily "Made in the U.S." and shipped to Mexico. But adding an origination requirement increases the compliance and paperwork costs.

In some cases, however, these materials aren’t manufactured in the United States, so they must be sourced globally. To understand how such a small thing could have such a big impact, imagine the child’s riddle where the lack of a nail led to the loss of the horseshoe, the knight, the battle, and, ultimately, the kingdom. To paraphrase that riddle, for lack of an originating elastic strip, the U.S. jobs in the supply chain were lost.

Sadly, while we are focusing our energies on defending current market access, we are missing an opportunity to truly modernize the agreement to have it work even better for the U.S. textile and apparel industry. Creative ideas have been suggested that would introduce more flexibilities to support innovative manufacturing techniques. Such innovations would indeed create more Made in U.S. apparel production.

Other proposals envision linking NAFTA up with other hemispheric partners so that the trade agreements would mirror how the industry views this part of the world — as one integrated region. Such ideas are key to ensuring NAFTA is successful for many years to come.

The administration wants to increase the amount of U.S. and regional content in NAFTA trade, but we must look at this more holistically and ask instead how we can increase NAFTA trade overall. The distinction is critical. If we settle for increasing content in NAFTA textile and apparel trade, but that NAFTA trade drops due to the more burdensome requirements, we lose in the long run, and quite likely in the short run too.

However, if we can increase NAFTA trade overall, that means U.S. and regional content will grow, helping U.S. workers immeasurably. In other words, do we want a bigger piece of an ever-shrinking pie, or do we want the pie to get bigger?

Put more simply, the outcome of the NAFTA talks will help us answer the question — Will clothes be made in Mexico using primarily U.S. inputs, or will they be made in Asia using primarily Asian inputs?

Approximately 200,000 U.S. textile and apparel jobs depend on us answering this question correctly.

About the Author

About the Author

Steve Lamar is executive vice president at the American Apparel & Footwear Association.
Executive Vice President, American Apparel & Footwear Association
Lamar is responsible for the design and execution of AAFA lobbying strategies on a series of issues covering trade, supply chains and brand protection.

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