Changes in trade policy are designed to support “investments here at home” and strengthen U.S. global competitiveness.
Editor’s note: Bill Jackson, Assistant U.S. Trade Representative for Textiles, responds to questions on issues of importance to companies in the textile industry, particularly those engaged in international trade.
Q: Supply chain issues persist, as we all know. Businesses need to know if they should continue to produce PPE, return to their usual product line or attempt to do both. What would you advise? What steps have been taken to support the domestic production of PPE, and can you tell us what to expect in the coming months?
Jackson: The extraordinary role that the American textile industry has played in helping to meet the shortfall in PPE supply during the COVID-19 pandemic has been nothing short of heroic. The challenge now is how to ensure that we never again find ourselves in a position where we are reliant on imports of PPE during a crisis.
President Biden, as one of his first actions in January 2021, signed two Executive Orders directing a whole-of-government approach to assessing vulnerabilities in, and strengthening the resilience of, critical U.S. supply chains, including the public health supply chain essential for the COVID-19 response. One outcome of those Executive Orders was The National Strategy for a Resilient Public Health Supply Chain released in mid-2021, which provides a roadmap for building and sustaining resilient supply chains for PPE and other essential medical products, including federal government support for, and investments in, domestic manufacturing of PPE.
Government procurement provisions in recent legislation will also help to strengthen domestic PPE production through the inclusion of domestic purchase requirements. In November 2021, as part of the Infrastructure Investment and Jobs Act, President Biden signed into law the Make PPE in America Act, which requires the Dept. of Health and Human Services, the Dept. of Homeland Security, and the Veterans Administration to purchase U.S.-made PPE under long-term contracts.
While it is hard to predict what the future demand for PPE will be, the U.S. PPE industry is in a much stronger position now than before the COVID pandemic, thanks to these measures and to the industry’s own investments and innovation.
Q: In discussing the USMCA, you noted that a U.S. objective was to increase the North American value-added in the textile and apparel products traded under the agreement. Can you elaborate on how you addressed this objective? What can textile producers do to take advantage of the textile provisions in the USMCA?
Jackson: NAFTA was a “yarn-forward” agreement, which means that, with certain exceptions, most finished textile and apparel products qualifying for duty-free treatment under the agreement had to be made in the region from the yarn-formation process forward. The yarn-forward approach to the rules of origin ensures that most of the benefits of textile and apparel trade under a free trade agreement stay in the region.
When we considered how we could improve on NAFTA under USMCA we opted to close some of the exceptions to yarn-forward so that even more of the value of products traded under the agreement would originate in North America. We did this in two main ways:
- By introducing “chapter rules” requiring that inputs such as sewing thread, pocketing, narrow elastic bands and coated fabric be made in the region, and
- By restructuring and rebalancing the rules governing tariff preference levels, which allow for duty-free treatment of limited amounts of textile and apparel products made of third-country inputs.
These measures have strengthened the regional supply chain for textiles and provide new market opportunities for the U.S. textile and apparel sector.
IFAI member companies that make these inputs can make the most of the USMCA by exploring these new market opportunities, especially with Mexican and Canadian producers who had previously been using third-country inputs under NAFTA.
Q: Migration from Central America is an ongoing issue. “We know that textiles are a big industry there, with jobs on both sides of that supply chain,” you said in your discussion at Expo. What progress has been made, and what can the textile industry expect in the future from trade agreements with this region?
Jackson: “Addressing economic insecurity and inequality” is one of the five pillars of the administration’s Strategy for Addressing the Root Causes of Migration in Central America, led by Vice President Harris. The textile and apparel industry in Central America, already one of the biggest employers in the region, holds great potential for driving new, inclusive, worker-centered economic growth and creating new jobs, especially for women and underserved and marginalized populations.
The CAFTA-DR trade agreement, which provides duty-free access to the U.S. market for apparel manufactured in Central America under yarn-forward rules, provides the foundation upon which the industry can grow, while at the same time supporting jobs in the U.S. industry, which supplies much of the fibers, yarn and fabric used in apparel production in CAFTA-DR countries. A key element of what the region needs now is investments by textile producers to expand capacity and new commitments by brands and retailers to source more from the region.
On December 13, as part of the Vice President’s Call to Action for the private sector to deepen investment in Central America, Parkdale Mills, based in Gastonia, N.C., announced a $150 million investment in a new yarn spinning facility in Honduras and expansion of an existing facility in Virginia. This is just the first of what we hope will be a series of new investments and sourcing commitments to bolster the Central American textile industry and the larger Western Hemisphere supply chain. Maintaining certainty on the rules of origin and the short supply process in the CAFTA-DR is critical to facilitating investments in the region by U.S. and Central American textile producers.
Q: You also said, “We have a tremendous capacity here in the Western Hemisphere to actually produce more in this region—competitively. … We’re seeing a once-in-a-generation opportunity to shift that production to the U.S.” We’ve recently posted a story about the Uighur Forced Labor Prevention Act (UFLPA), which will impact trade with China. What is the Biden Administration prepared to do to support more growth in manufacturing products typically produced in China? The raw materials, manufacturing capacity and workforce have to come from somewhere.
Jackson: Recent concerns about the unreliability of geographically-extended supply chains and the pervasiveness of forced labor in Xinjiang make this a particularly opportune time for producers to reshore or nearshore manufacturing. In the apparel sector, nearshoring, especially via production in FTA partner countries, would increase the use of U.S. fiber, yarn and fabric inputs that support hundreds of thousands of jobs in the textile supply chain in the United States. Toward that end, we are encouraging new investments in the regional supply chain, such as with our CAFTA-DR partners, and urging brands and retailers to take a fresh look at the advantages of sourcing closer to the U.S. market.
More broadly, President Biden has been clear that investments here at home are the key to strengthening our global competitiveness and creating shared prosperity. We must invest in research and development and clean energy technology, strengthen our workforce and manufacturing base, and incentivize companies to make their supply chains more resilient and more sustainable. This will create more opportunities and more jobs with better wages here in the United States.