Exploring Business and the USMCA in the USA

U.S. textile manufacturers generated $18.3 billion in value in 2016, make yarns and fabrics from raw materials such as cotton and various man-made fibers

The United States is a significant producer of cotton.

China, India, and the United States of America are the top three countries where cotton is produced. Measuring the production of cotton in thousand metric tons, China produced 6,532 thousand metric tons and India produced 6,423 thousand metric tons of cotton in the past year, whereas the USA had a production of 3,553 thousand metric tons.

Florida, Mississippi, California, Texas, and Arizona are the major cotton-producing states in America.

Industry Review

As we can see from the chart below the number employed in the Textile and Apparel industry in the USA has been on a steady decline for 30 years. 

In 2016, apparel manufacturers employed 128,800 workers, which is 830,000 fewer than in 1990.   In 2015, there were around 7,000 domestic apparel manufacturers, compared to more than 11,100 in 2010. 

According to a study by researchers at Duke University, the U.S. apparel industry has retained the more skilled, higher-paying jobs such as those involving the design, branding, supply chain, and marketing of products, with lower-skilled apparel production, has moved offshore.

Apparel brands, retailers, importers, and wholesalers based in the United States are highly dependent on global supply chains, with suppliers making sourcing choices based on factors such as price, speed, and flexibility.

Overall, the United States has a strong export position in yarns and fabrics, with global export shipments of $12.9 billion in 2016 with $6 billion being shipped to their NAFTA partners.

As we explore the numbers we can see that $2.4 billion of U.S.-made yarns and fabrics were exported to the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR).  

NAFTA

Within the NAFTA supply chain, the United States typically exports textiles to Mexico or Canada, which turns U.S.-made yarns and fabrics into apparel, home furnishings, or other industrial textiles for sale in the U.S. market.

Canada and Mexico have more limited textile and apparel trade with one another, although some Canadian apparel producers have turned to Mexico for lower-wage assembly operations.

Canada ships about 90% of its garments to the United States. Similar to Canada, Mexico’s apparel industry relies almost entirely on the U.S. market for exports.

Kissel Agreement

The U.S. textile industry wants the NAFTA renegotiation to address certain exemptions granted to Canada and Mexico under the Kissell Amendment (6 U.S.C. §453b).

A Buy American-type law that requires 100% U.S. content for textile and apparel purchases by the Department of Homeland Security, with limited exceptions.

The Kissell Amendment treats manufacturers in Mexico, Canada, and Chile as “American” sources, thus opening U.S. government procurement to imported goods from these countries.

Another priority for the textile industry in the NAFTA renegotiation is to avoid any future change to government procurement rules that could undermine the Berry Amendment (10 U.S.C. §2533a), a 100% domestic-in-origin requirement for textile and apparel items purchased by U.S. national security agencies.

USMCA

USMCA eases the requirements for duty-free treatment for certain textile and apparel products, but tighten the requirements for other products. 

For example, USMCA eliminates the NAFTA requirements that visible linings must be sourced from members of the agreement; however, USMCA adds more restrictive new requirements for narrow elastic fabrics, sewing thread, and pocket bag fabric.

The only trade flow that might enjoy a notable increase is the U.S. cotton and man-made fiber (MMF) apparel exports to Canada—the TPL is increased to 20million SME annually under USMCA from 9 million under NAFTA.

Conclusion

The current government believes that the Senate will approve the USMCA as it delivers value to the U.S. economy. 

On September 18th, 2019 VP Pence stated “It so much comes down to Speaker Nancy Pelosi, who I believe has been dealing with our administration in good faith on this issue,”

“We’re going to continue to engage Speaker Pelosi, but again, I truly do believe If Speaker Pelosi puts the USMCA on the floor it will pass, then it will pass the Senate and the American people are going to have a tremendous win for our economy.”

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