NAFTA Withdrawal Could Spur More Textile and Apparel Sourcing From Top Global Producers in Asia, CRS Finds
A U.S. withdrawal from NAFTA could lead U.S. retailers and apparel companies to source more textiles and garments from Asia, which could reduce demand for U.S.-made yarns and fabrics within North America, according to an Oct. 30 Congressional Research Service report. As of 2016, China accounted for two-thirds of total worldwide man-made fiber production, the report says. Tariffs on U.S. textile imports from Canada and Mexico would rise from zero to 20 percent, and apparel imports would see tariffs increase from zero to 32 percent, without a NAFTA in place, the report highlights. Further, “U.S. exports of textiles and apparel could face higher tariff rates entering Canada and Mexico,” the report says. “Over the long run, global textile and apparel supply chains would adjust to a modified NAFTA or to its elimination, but it is unclear how long that may take.”
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Even now, some U.S. fashion companies say NAFTA tariff savings aren’t worth the time and resources required to comply with NAFTA textile and apparel rules of origin and documentation requirements, as approximately 16 percent of qualifying textile and apparel imports from Canada and Mexico paid tariffs in lieu of filing for benefits, the report says. Apparel sourced from NAFTA countries enjoys zero U.S. tariffs through certain rules of origin such as a requirement for cotton T-shirts or cotton twill trousers manufactured in Mexico to include U.S. inputs to avoid a 16.5 percent tariff, according to the report. “Tariff preferences appear to be important in keeping apparel producers in the Western Hemisphere competitive in the U.S. market, and thereby helping to preserve export markets for U.S.-made textiles,” the report says. China in 2016 was the top apparel supplier to the U.S., with imports registering at $29 billion, and the country also led in U.S. yarn and fabric categories. Vietnam is the second-largest apparel exporter to the U.S., totaling $10.9 billion in exports to the U.S. last year, the report says.