OBAMA ADMINISTRATION PUSHING FOR TPP CONCLUSION BY YEAR’S END

24 Sep OBAMA ADMINISTRATION PUSHING FOR TPP CONCLUSION BY YEAR’S END

by FDRA President Matt Priest

With the 19th and most recent round of Trans-Pacific Partnership (TPP) negotiations completed the last week of August in Brunei, the leaders of the 12 participating nations are pushing for the agreement to be finalized by year’s end.  The Brunei round was considered by many in the U.S. Government to be the last official round of negotiations with subsequent discussions taking place in smaller bilateral and multilateral settings.  Those discussions are ongoing and have already taken place in a variety of different forums.  There is an expectation that the TPP leaders will put forth some sort of statement or commitment while attending the upcoming Asia-Pacific Economic Cooperation (APEC) Summit in Bali, Indonesia October 5-7.

Footwear continues to be one of the top political issues impacting the overall movement of the agreement.  As one of its top priorities, the Vietnamese Government is committed to its goal of duty-free treatment of footwear on day one of the implementation of the agreement.  FDRA and its members fully share this goal and have been advocating for this position for several years now.  Key officials within the Obama Administration have told FDRA that the decision on how footwear is treated under TPP will be made at the highest levels within the White House.  It has been quite some time since footwear has risen to such levels of interest inside of our Nation’s Capital.

The prospects for passage of TPP have been of keen interest to FDRA members and the industry as a whole — and for good reason.  Vietnam continues to display impressive growth in imports as the second largest supplier of footwear to the U.S. market behind China.  Footwear volume from Vietnam increased 12.6% in 2012 over 2011 and is up an impressive 21% year-to-date 2013.   In this time of footwear sourcing uncertainty, many companies are exploring Vietnam as a potential new supplier in their sourcing mix or seeking to increase their orders with factory partners already established in the Southwest Asian country.  This growth and the potential of duty-free footwear seems to play right into the geopolitical goals articulated by the Obama Administration of establishing an economic trade zone that provides alternatives to China sourcing.  If the Administration fails to negotiate an agreement that provides dramatic duty savings, it will have failed to live up to its own standard of establishing a “21st Century Trade Agreement.”

New Balance and several other footwear companies continue to push for exclusions of almost 57% of all Vietnamese footwear exports to the U.S.  This includes a majority of athletic footwear, as they seek the continuation of duties on imports.  With 99.5% of footwear sold in the U.S. made overseas, it seems highly illogical for the U.S. Government to negotiate such a comprehensive agreement that extends these tariffs that were established in 1930.  Even a majority of footwear companies that manufacture in the U.S. are supportive of the elimination of duties via the TPP because as importers, these companies can reinvest realized savings from the agreement back into their domestic production activities.  In 2012, $297 million in duties were collected on footwear from TPP countries alone.  There is no economic reason to continue this policy in any way.

In addition, several New England footwear companies joined forces to send a letter to the U.S. Trade Representative (USTR) Mike Froman asking for the TPP to eliminate duties on footwear to help drive job growth and lower prices for American consumers.  This letter was in direct response to Ambassador Froman’s recent visit to a New Balance factory in Maine and was designed to inform Froman that even a majority of footwear companies in New England support a robust and liberal TPP.  A copy of the letter can be found here.

FDRA will continue to be the only association in Washington pushing for duty-free treatment on all footwear under TPP immediately.  Keep an eye on this space for additional updates or contact FDRA President Matt Priest at mpriest@fdra.org.