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Jana Bukolovska

Opinion

28th August 2015, Manchester

Transatlantic agreement to change the way we trade

Some specific sectors that will be covered by the agreement include textiles, chemicals, pharmaceuticals, cosmetics, medical devices, and cars. It has been two years since the European Union and the US began formal talks on the TTIP, the Transatlantic Trade and Investment Partnership, which is expected to boost EU annual GDP growth by 0.5% and become the biggest trade deal in history by removing any remaining tariffs and barriers to trade between the two economies.

At the G7 summit that took place this June, US President Barack Obama and German Chancellor Angela Merkel urged a rapid conclusion to the trade talks. However, talks between the EU and US on a transatlantic trade accord could stretch into 2016, according to EU’s chief negotiator Ignacio Garcia Bercero, who shared his prognosis at a news conference in Berlin this April.

Whilst after all this time the free trade deal is remaining a hotly debated topic for activists and various groups who fear that it will bring GMO foods and low quality products to EU stores, it is highly anticipated by textile and clothing industry representatives who are eager to expand into the other side of Atlantic.

“Euratex, as the main voice of the European textile and clothing industry, welcomes the TTIP negotiations and sees them as an excellent opportunity for facilitating trade to the mutual benefit of European and American companies, in particular SMEs. Euratex believes that TTIP should not only reduce but remove technical barriers to trade. The identification of divergent regulations should be the starting point for further and complete harmonization. In order to reach regulatory convergence, Euratex urges the negotiators to find ways to remove the various technical barriers that hamper our reciprocal trade flows,” said Euratex, the European Apparel and Textile Confederation, in a statement.

What is it?

A group of high-level experts created in 2011 came up with recommendations that were submitted in 2013, to launch negotiations for a wide-ranging free-trade agreement. Following the report, US President Barack Obama called for such an agreement. The following day, EU Commission President Jose Manuel Barroso announced that talks would take place to discuss the deal.

The US and EU together represent 60% of global GDP, 33% of world trade in goods and 42% of world trade in services. A free trade area between the two would represent potentially the largest regional free-trade agreement in history, covering 46% of world GDP. According to the European Commission, the TTIP would boost the EU’s economy by EUR 120 billion, the US economy by EUR 90 billion and the rest of the world by EUR 100 billion.

If signed off by the European Parliament, an agreement will remove tariffs, cut red tape and reduce restrictions on investment and trade between the US and the EU.

Some specific sectors that will be covered by the agreement include textiles, chemicals, pharmaceuticals, cosmetics, medical devices, and cars. If signed off by the European Parliament, an agreement will remove tariffs, cut red tape and reduce restrictions on investment and trade between the US and the EU for these and other types of products.

The deal will also need approval by the US Congress. This year is seen as crucial in making progress on the deal, as the US President Barack Obama is due to leave office in January 2017, yet he so far struggled to receive what is called Trade Promotion Authority from Congress, which would make US ratification less difficult.

Why is it important?

By eliminating almost all tariffs on trade between the US and the EU, the agreement can have little impact on certain industries, where the tariffs imposed by the US and EU are already relatively low – on average less than 3%. This, however, is not the case for textiles.

In particular, the United States is the largest export market for the UK textiles and clothing sector outside of the EU, whilst the significant tariffs make the US market unreachable for many UK textile exporters – particularly for small and medium-sized companies (SMEs). UK exports from the textile and clothing sector amount to around £ 8.5 billion a year and the sector employs more than 150,000 workers. Meanwhile, UK produced footwear, for example, faces a 40% tariff in the US while US footwear meets a 17% tariff in the EU.

According to Euratex latest estimates, 173,000 EU textile and clothing companies reached a turnover of EUR 165 billion in 2014 and generated a value added of nearly EUR 44 billion, employing 1.63 million workers.

According to Nick Bannerman, of Johnstons of Elgin, the largest Scottish textile manufacturer, a wool dress of a certain blend could face a 13.6% tariff, while pants with the same blend would face a 14% tariff. The significant tariff rates on many products can arguably shut UK producers out of the US market.

The United States Fashion Industry Association (USFIA) believes that the TTIP will be highly beneficial to both the US and EU economies by boosting growth and creating jobs: “Representing brands, retailers, and importers based in the European Union and United States, respectively, FTA and USFIA agree that a milestone, 21st century agreement between the European Union and United States could have many benefits for the fashion sector, and many other sectors, as well as our economies and people.”

Labelling

Another issue to be dealt with under the agreement is labelling requirements. Country of origin labelling, as well as washing instructions and safety tests were discussed at the last round of TTIP negotiations in May. Some European textile manufacturers sew their labels into the side seam of shirts, while the Made in label has to be in the middle of the collar seam in the US.

So far, according to the European Commission, it is possible for both parties to agree to minimize the number of compulsory labelling requirements affixed to the products, approximate or align the names used to designate textile fibres on basis of ISO standards, harmonize or mutually recognise care instructions symbols based on the ISO standard in this area, and fulfil any legitimate request for additional labelling information by using non-permanent labels.

Fire safety

In the EU there is no particular harmonised regulation on flammability. Companies have the general obligation to offer only safe products to the market. In doing so, companies can use the existing EU standards, such as EN 1103 procedures for testing burning behaviour of fabrics for apparel and EN 14878 related to flammability of children nightwear. There is, however, no compulsory testing or certification of clothing products in the EU.

In the US, the law requires textile products to be tested as regards their flammability rate.

In the US, the law requires textile products to be tested as regards their flammability rate. In the case of non-children products flammability tests can be performed by the manufacturer. However, in the case of children products the tests have to be carried out by an authorized laboratory, which can be located in the US or abroad, provided it fulfils the requirements of the Consumer Protection Safety Commission (CPSC) laboratory acceptance programme.

At the moment, only some non-children clothing items produced using certain fibres like nylon and polyester, are considered low flammable and are exempted from testing.

The agreement could help both parties develop common classification of the flammability degree of fabrics based on data evidence brought by each side. Specifically, the case of silk could be examined. In the US Flammability Act, silk is currently not classified as low flammable fibre while available testing data could warrant a change of that classification. The deal could also, for example, allow both sides to accept manufacturers’ test results (based on EN standards) for the certification of children products as regards their flammability without the intervention of a third party laboratory.

Chemicals and standards approximation

Both US and EU could also work towards establishing a common list of chemicals and other substances that are prohibited or restricted in textile and clothing products, as well as establishing common maximum allowed levels.

The technical requirements applicable to certain textile products are sometimes slightly different between the two sides of the Atlantic.

The technical requirements applicable to certain textile products are also sometimes slightly different between the two sides of the Atlantic. One important trade barrier between the two parties is the fact that EU and US use different voluntary standards, such as test methods, to show compliance with their own technical requirements.

In this context, both sides could work towards establishing a mechanism for standards comparison and possibly approximation/harmonization, with the involvement of the relevant standardisation organisations (EUCEN and standard bodies from the US side).

Why should we worry?

There are plenty of issues and questions raised by activist groups and NGOs regarding digital rights, fracking, pesticide regulation and crude oil and natural gas export that are falling under some of the agreements terms and conditions.

Thousands of protesters took to the streets in Europe this April to oppose the deal. Especially fierce the resistance to the TTIP is in Germany, where people were joining demonstrations across the country. Campaigners are worried that the agreement would harmonise regulations to an unprecedented degree, affecting level of standards across various industries, including food sector, which would have to accept the genetically modified organisms (GMO) into the EU market.

One of the major concerns, however, is related to the legislature, in particular, the introduction of the ISDS, an Investor-state dispute settlement, an instrument of public international law that allows an investor to sue against a foreign government. Many Europeans fear that the mechanism will be used to challenge Europe’s food, labour and environmental laws on the grounds that these restrict free commerce.

Will it benefit textile and clothing companies?

While there is a public debate about different effects resulting from the TTIP, many studies and reports come to the conclusion that the deal can bring substantial benefits for businesses that will by far exceed the negative consequences.

Euratex believes that TTIP should not only reduce but remove technical barriers to trade.

According to Euratex latest estimates, 173,000 EU textile and clothing companies reached a turnover of EUR 165 billion in 2014 and generated a value added of nearly EUR 44 billion, employing 1.63 million workers. The European textile industry backbone is composed of a large number of SMEs. Currently these companies are facing difficult customs procedures when exporting to the US, which is sometimes challenging due to the lack of means and resources that are needed to handle difficult rules and procedures.

The agreement with the US could help these clothing and textile firms to establish themselves in distant markets, backed by the legal certainty and guaranteed that they will not lose profit due to the unfair ruling by the national authorities in the foreign country.

Further reading

USFIA and FTA say TTIP a win-win deal

Euratex position paper on textile and clothing regulatory issues to be addressed in the TTIP negotiations

European Commission: EU position on textiles and clothing

 

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