The Office of the U.S. Trade Representative has announced new product exclusions for List 3 that will be published in tomorrow’s Federal Register. The product exclusions announced will apply retroactively to September 24, 2018, the effective date of the $200 billion action, and will remain in effect until August 7, 2020. Of note to fashion brands and retailers, the exclusions include several fabrics and one yarn: 

• 5007.20.0065 Silk fabrics, containing 85 percent or more by weight of silk or of silk waste other than noil silk, the foregoing not printed, not jacquard woven, measuring over 127 cm in width
• 5007.20.0085 Silk fabrics, containing 85 percent or more by weight of silk or of silk waste other than noil silk, the foregoing not printed, not jacquard woven, measuring 107 cm or more but not over 127 cm in width 
• 5402.20.3030 High tenacity single yarn of polyester multifilament, of 554 decitex or more but not over 556 decitex, with twist of 5 turns or more per meter 
• 6006.34.0080 Circular knitted fabrics of polyester and spandex, printed, other than of double knit or interlock construction, on rolls

This month USFIA joined the Washington International Trade Association for a discussion on The Trade Agenda: What’s at Stake for Developing Countries. The panelists focused on the benefits of trade for developing countries, including benefits for GSP eligible countries and the latest developments in the African Continental Free Trade Agreement (AfCFTA), as well as how the current dynamics of U.S. trade policy affect developing countries. Click here to read more.

Currently, the Generalized System of Preferences (GSP) extends duty-free benefits of approximately 5,000 tariff lines to 120 countries and territories. Under the Trump Administration, GSP has been renewed for three years (until December  2020) and product eligibility for duty-free treatment has been expanded so that many travel goods are eligible for duty-free treatment. There have also been structural changes to the program under the current Administration, involving new methods for product and country reviews and adoption of new means to enforce the eligibility criteria. The heightened scrutiny by the Administration to ensure countries are “playing by the rules” is exemplified in the recent decisions to end GSP benefits for India and Turkey, as well as this month’s announcement to suspend $1.3B in trade benefits for Thailand.

Considering the structural changes to the program, the panel emphasized the significance of the new eligibility criteria. Dan Anthony, Vice President of The Trade Partnership, spoke about the potential consequences on the Administration’s decision to remove India and Turkey’s GSP benefits. According to the Coalition for GSP, Turkey and India accounted for one third of GSP savings for American importers. The decision to remove benefits for these countries will cost American businesses over $300 million in additional taxes. Without GSP benefits American small businesses face a new tax that will mean job losses, canceled investments, and cost increases for consumers. This creates a negative effect on American companies and the developing beneficiary countries, Anthony said. 

While not endorsing the China tariffs, Anthony also discussed how the current trade dynamics surrounding the U.S. and China have led to an increase in companies sourcing from GSP countries. The trade data shows there is a definite positive impact for developing countries. The Coalition for GSP has found that in the first quarter of 2019, GSP saved American companies $285 million (an increase of $63 million more than the first quarter of 2018) and products hit by Section 301 tariffs when imported from China account for 90 percent of increased GSP imports in 2019. GSP imports of products on China Section 301 lists increased 19 percent, while GSP imports of other products increased by just 5 percent.

While the GSP program has a significant impact on beneficiary countries, the panel also raised the point that it is important for developing countries to think beyond U.S. policies and trade with the U.S. One of the speakers focused on the opportunities for developing countries to expand trade with each other. 

The Continental Free Trade Agreement (AfCFTA) is a developing free trade agreement between African Union member states. The main objective of the agreement is to create a single continental market for goods and services with free movement of businesspersons and investments while enhancing competitiveness at the industry and enterprise level. The AfCFTA beneficiary countries will hopefully see duty reductions by July 2020, said Stephen Lande, President, Manchester Trade, and will create strong economic development for Africa. Since launching the agreement, Lande added Africa could be a good sourcing destination for U.S. companies and should be considered for duty-free treatment.

Finally, looking at trade, development, and diplomacy, Orit Frenkel, Executive Director of American Leadership Initiative offered three recommendations to improve U.S. market access for developing countries; 1) Expand GSP benefits to beneficiary countries’ main products, including high tariffed items such as apparel and footwear; 2) Increase funding in developing countries to assist with infrastructure needs and labor enforcement. By helping with these barriers, the U.S. is fulfilling American values and strengthening national security; 3) Integrate global development programs and trade policy into a single agenda.

International trade has always played a critical role in development across the globe, as well as for American companies and consumers. By expanding GSP benefits to travel goods, American companies and consumers have benefited from duty savings, said Anthony. He continued to say that by expanding GSP benefits for apparel and footwear U.S. consumers and companies could be relieved of financial burdens and it would create new and important jobs in the U.S. Frenkel echoed Anthony’s support to extend GSP for apparel and footwear to help developing countries expand their economies.

This week, the House Foreign Affairs Committee unanimously passed the Uyghur Human Rights Policy Act of 2019. The Committee amended the Senate bill to add sanctions and export restrictions. The bill updates export controls to identify and exclude items that “suppress individual privacy, freedom of movement, and other basic human rights,” through surveillance and identification of individuals through facial recognition, voice recognition, or biometric indicators.  The Uyghur Human Rights Project (UHRP) released a press release welcoming the Congressional Action. UHRP Director Omer Kanat commented, “The House action on this bill sends a strong message that all branches of the US government are taking action to counter the human rights abuses taking place in East Turkestan.”

There were high expectations that when President Trump and President Xi met at the APEC Leaders event they would sign the phase one trade deal.  Those hopes are shattered today when the APEC host country, Chile, cancelled the APEC Summit.  As you may have seen in the news, Chile has been hit with serious protests and there currently is a state of emergency.  No statement yet from the White House or USTR.  

If you have not already registered for the 31st Apparel Importers Trade and Transportation Conference, we encourage you to join us next week in New York City and hear the latest updates and predictions on trade policy, the U.S.-China trade war and more.