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Apparel Value Chains and Opportunities to Create

Jobs in the TPP

Toni Dembski-BrandlTarget Corporation,

on behalf of the TPP Apparel Coalition

September 2011

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TPP Apparel Coalition

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TPP Apparel Coalition Key Goals

The Coalition supports the negotiation of a 21st Century TPP agreement, which offers a potential growth platform for economic integration, trade and investment that could provide tremendous new opportunities for our members to buy and sell goods and services, to sustain and grow well-paying jobs and to provide high value add for the U.S. and TPP economies.

TPP Apparel Coalition

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The History of Managed Trade for Textiles and Apparel

Before 1995: Managed through global system of quotas – Multi-Fiber Arrangement (MFA).

1995 – 2004: Phased transition to quota-free trade – Agreement on Textiles and Clothing.

2005 – 2008: Special China Safeguards.2009: Full integration into global trade

system.TPP Apparel Coalition

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Why Does a Yarn Forward Rule of Origin Not Work in Today’s Global Supply Chains?

TPP Apparel Coalition

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Example: Fabric Inputs Required by One Factory For One Year

TPP Apparel Coalition

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What is a Global Value Chain?• The value chain describes the full range of activities

that firms and workers do to bring a product from its conception to the final customer.

• This includes activities such as design, production, marketing, distribution, retail and support to the final customer.

• When considering ways to create new opportunities in the TPP for apparel, it is important to keep in mind the value and jobs created throughout the entire value chain, not just factory production.

TPP Apparel Coalition

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Two Garment Timelines

How a garment is produced

How a garment is produced from a trade agreement perspective

4 5 6

1 2 63 4 5 7 8 9

1. R&D, Design Garment2. Legal Reviews3. Order Garment and Inputs4. Make/Ship Yarn5. Make/Ship Fabric

6. Make/Ship Garment7. Distribute Garment8. Market Garment9. Sell Garment

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Wide Variety of Apparel Value ChainsOne Size Does Not Fit All

• Garments could be made in a TPP country from imported fabric that uses TPP yarns.

• Garments could be made in a TPP country from imported yarns used to make fabric in a TPP country.

• Garments could be made in a TPP country from imported fabric.

• Garments could be designed and marketed and sold in a TPP country, creating additional jobs.

• The ex-factory value of the garment is only a small percentage of the retail value—on average about 25-35%.

TPP Apparel Coalition

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Effective Apparel Rules that Promote Jobs throughout the TPP

• A yarn forward rule of origin is too narrowly focused on this small percentage of value that comes from the factory, while ignoring the majority of the retail value.

• The TPP Apparel Coalition believes TPP negotiators should embrace a modern textiles and apparel policy that facilitates the millions of jobs that are sustained by today’s global value chains.

• Flexible rules of origin based on either a change in tariff heading (CTH) or a regional value-content (RVC) requirement would be most effective to spur new investment in the TPP region.

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A Value Chain Breakdown

Inputs (US, TPP, or Other)-Labor-Yarns/Fabrics-Sewing Thread-Buttons-Label-Embroidery Thread-Finishes-Packaging

Rest of the Picture (US)-R&D-Design-Legal/Compliance-Shipping-Distribution-Merchandising-Retail Operations

25% 75%

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Qualifying Garments in TPP

• Despite the significant value add within the TPP region, under a restrictive yarn forward rule of origin, the jeans couldn’t qualify for duty-free treatment.

• TPP negotiators must create simple and understandable rules for eligibility to encourage more trade in the region.

• Today’s consumers expect a wide variety of fashionable apparel and flexibility in sourcing inputs is necessary to meet design specifications and consumer demands.

TPP Apparel Coalition

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Thank you!

TPP Apparel Coalition