WASHINGTON — One of the niche industries that has helped American textile firms solidify their businesses in recent years could soon be open to more imports and competition.
Textile officials and executives are raising concerns about the potential economic impact of a new World Trade Organization “Environmental Goods Agreement” being negotiated that could eliminate tariffs on some imported environmental goods, including certain fibers, yarns, fabrics and apparel.
Sustainability has been a key focus in the fashion industry in recent years and companies have reduced costs and been profitable in the segment by finding better ways to use waste water, for example, or using recycled materials in inputs and end products.
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The EGA being negotiated by 14 WTO members, including the U.S. and China, could hurt U.S. textile producers more than it helps them in that niche business, according to industry officials. But it could also give U.S. apparel and textile companies more access to cheaper environmentally friendly technologies, helping them reduce costs in their manufacturing processes and open markets to exports.
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Unifi Inc., a publicly traded textile company that has built a profitable business on its Repreve recycled fiber brand, is monitoring the negotiations and voicing some concern about potential duty-free treatment for certain yarns that are under review.
“In some cases, it is unclear whether the petitioner is asking for duty-free treatment on all yarns in the classification, or just recycled yarns under those codes, so we have more questions than answers right now,” said Bill Jasper, chairman and chief executive officer of Unifi, who said he is working closely with the United States Trade Representative’s office and the United States International Trade Commission for clarification. “In any case, we are very concerned about a number of items on the list and the negative impact that a duty free regime could have on our business.”
Jasper said, “Currently, there is no definitive, globally recognized test to distinguish between recycled polyester resins, fibers, yarns, etc., and virgin offerings, so there is no reliable procedure for customs to verify these products.”
When the EGA talks were launched in July 2014, the environmental categories being considered for duty elimination included products such as wind turbines, water-treatment filters and solar water heaters, many of which could help textile and apparel manufacturers looking for more sustainable manufacturing processes.
U.S. Trade Representative Michael Froman recently sent a new, expanded list of products under the auspices of the EGA to the ITC and requested an economic study of the impact of duty elimination on hundreds of new products, including several categories of fibers, yarns, fabrics and finished apparel.
“These negotiations have the potential to increase U.S. exports of environmental goods, support jobs in the United States, and help member [WTO countries] address a wide array of environmental challenges that they currently face,” Froman said in a letter to ITC chair Meredith Broadbent.
The WTO members taking part in the talks with the U.S. and China are Australia, Canada, Costa Rica, the European Union, Hong Kong, Japan, South Korea, New Zealand, Norway, Singapore, Switzerland and Chinese Taipei, which combine to account for 86 percent of global trade in environmental goods, according to the U.S. More countries are expected to join the talks and some experts have suggested that the agreement will be open to all WTO members.
“The purpose of the EGA is to make it easier to trade products that have a beneficial impact on the environment and sustainability,” said Augustine Tantillo, president at the National Council of Textile Organizations. However, this should not be used as an excuse to disenfranchise workers and cause a major disruptive impact on any one nation’s economy.”
Tantillo said NCTO has identified about 30 tariff lines of concern on the list that the ITC is studying, including aramids and polyester staple fibers; a “large number” of man-made filament yarns, felts, coated and laminated fabrics; knit garments; flags and other made-up articles that go into a wide range of products, including apparel, home furnishings and industrial applications.
“Duty-free imports of products claiming to have recycled polyester fiber and yarn content would threaten significant virgin and recycled polyester PET, fiber, thread and yarn production in the U.S, including substantial new investment and growth in this segment,” Tantillo said.
He said the impact of removing duties on the textile products could have a “devastating impact on the U.S. textile industry.”
“The U.S. market would see a surge of import activity from large producers of these goods, China being the largest producer followed by Mexico, Canada and South Korea,” Tantillo said. “For some companies these products represent a large enough share of their business to call into question the viability of their operations in the U.S., which would have a substantial impact on U.S. jobs.”
Meanwhile, apparel importers said the EGO could provide some positive opportunities for companies, including duty-free benefits for certain recycled and green apparel items on the list.
Julia Hughes, president at the U.S. Fashion Industry Association, said the definition of what qualifies as an “environmental” good is still unclear, but that her members have expressed support for eliminating duties on the list of products.
“If indeed there are apparel and textile products that meet the criteria, then we are supportive of having them in the agreement and having duties eliminated on them,” Hughes said. “That seems like a market opening opportunity. On face of it, it seems like a positive thing.”
Stephen Lamar, executive vice president at the American Apparel & Footwear Association, said, “We have an industry that has done a lot more about trying to have more sustainable production. These kinds of metrics are really important for how the supply chain functions and trying to make sure you are reducing your environmental or carbon footprint. When you have an industry that is so attuned to that and an opportunity comes along to pull further costs out of the system to help you achieve that environmental sustainability, that seems like a great opportunity.”
USTR, which did not respond to a request for comment regarding the textile industry’s concerns and objectives of the agreement, said Friday that the ninth round of EGA negotiations has been set for Sept. 16 to 22 in Geneva.