THE NATIONAL COUNCIL OF TEXTILE ORGANIZATIONS

REPRESENTING THE ENTIRE SPECTRUM OF THE U.S. DOMESTIC TEXTILE INDUSTRY

Stakeholder PresentationU.S. Textile Industry Positions

Trans-Atlantic Trade and Investment Partnership (T-TIP)

May 21, 2014 Arlington, VA

Augustine D. TantilloPresident & CEO

NCTO INTRODUCTION

• NCTO is a non-profit trade association representing U.S. textile manufacturers.

• NCTO represents the entirety of the U.S. textile industry, including the yarn, thread, fabric, dyeing and finishing, and even certain apparel sectors.

U.S. TEXTILE INDUSTRY SNAPSHOT

• U.S. textile shipments totaled $56.6 billion in 2013 (2013 shipments were6.8% greater then 2012)

• The U.S. textile industry is the third largest exporter of textile productsin the world. Exports of all textile products were nearly $18 billion in2013. Total textile and apparel exports were a record $23.7 billion in2013 (2013 exports were 4.3% greater than 2012)

• The U.S. textile industry invested $17.7 billion in new plants and

equipment from 2001 to 2011. While 2012 and 2013 numbers have not

been released yet, NCTO has witnessed a dramatic increase in

investments over the past two years.

PURPOSE OF A FREE TRADE AGREEMENT (FTA)

• To extend trade preferences for the benefit of the contracting parties.

• By their very nature FTAs are designed to be exclusive: benefits should be reserved for the agreement partners.

• Properly designed FTAs require a rational set of commitments and obligations in order to gain lucrative benefits.

• FTAs must be symbiotic – mutually beneficial

YARN FORWARD

• NCTO strongly supports the yarn forward rule of origin.

• The yarn forward rule is:

• Logical

• Fair

• Critical

YARN FORWARD IS LOGICAL

• T-TIP region contains the entire textile and apparel supply chain.

• All necessary components/processes are available in region (yarns, fabric, thread, dyeing and finishing, and final assembly).

• All elements of supply chain must see benefits from T-TIP.

T-TIP REGION HAS SUBSTANTIAL TEXTILE EXPORTS

• Total T-TIP Textile Exports - $35 billion

*Source: World Trade Organization – 2012 data

FTA Partner Textiles

U.S. $13 billion

E.U. 27 $22 billion

TEXTILES HIGH VALUE COMPONENT OF FINISHED PRODUCTS

Fiber, yarn, fabric, dyeing, finishing and printing often times account for:

• 60 +% of the value of finished apparel

• Even higher % of the value of home furnishings

YARN FORWARD IS FAIR

• The U.S. and EU are the two largest textile/apparel

consumption markets in the world.

• The U.S. Imported over $114 billion in 2012. Accounted

for more than 16 percent of total world imports of

$708 billion.

• Extra-EU imports combined accounted for S117 billion,

or 16.5 percent, of world imports in 2012.

BENEFITS SHOULD GO TO T-TIP PRODUCERS

• T-TIP partners are agreeing to a mutual set of commitments:

• Preferential market access

• Intellectual property rights

• Environmental standards

• Safety and labor standards

• No Free Riders – Non-T-TIP countries should not be granted equal or greater benefits than T-TIP countries.

YARN FORWARD IS CRITICAL

• Weak Rule of Origin = No Textile Investment

• Yarn forward is critical for T-TIP countries to attract long-term manufacturing investment versus being relegated to final assembly.

YARN FORWARD IS CRITICALRecent foreign direct investment in the United States due to the

yarn forward rule of origin

CompanyCompany

Nationality

Investment

Location(s)

Investment

Amount

Estimated

Job Creation

Gildan Activewear Inc. CanadaDavie and Rowan

Counties, NC$250 million 500 jobs

Keer ChinaLancaster

County, SC$218 million 500 jobs

Gulf Coast/Zagis USA Mexico Bunkie, LA $130 million 300 jobs

Shrivallabh Pittie Group IndiaScreven County,

GA$70 million 250 jobs

JN Fibers Inc. ChinaChester County,

SC$45 million 318 jobs

Shri Govindaraja Textiles India Eden, NC $40 million 84 jobs

BUT DON’T TAKE OUR WORD FOR IT….

Gildan Activewear -- $250 million U.S. textile industry investment over the past year.

Peter Iliopoulos, Senior Vice President of Public and Corporate Affairs at Gildan states:

“The yarn forward rule was a significant factor in Gildan’s decision, announced in September of 2013, to make an additional investment of approximately $250 million in U.S. yarn spinning operations. We have designed our supply chain in order to most effectively leverage preferential treatment under U.S. trade agreements. Consequently, we want to ensure that our products are always eligible for such preferential treatment.”

U.S. POLITICAL CONSIDERATIONS

• T-TIP terms will be highly scrutinized in Washington to determine that the agreements terms are consistent with the structure of FTAs which have yielded positive growth for U.S. exports

• Jobs are top priority in the U.S. in current economic climate.

• Congress will not approve a lopsided agreement that disadvantages U.S. producers and costs jobs.

YARN FORWARD HAS STRONG POLITICAL SUPPORT

• In July 2013, 168 members of congress signed a letter to USTR Ambassador Froman calling for strong yarn forward rules in the TPP

• In a 2008 letter to the U.S. textile industry, President Obama stated: “I also support inclusion of the yarn forward rule in free trade agreements...”

WIDE COALITION SUPPORTS YARN FORWARD

• American Fiber Manufacturers Association

• Carpet and Rug Institute

• Georgia Association of Manufacturers

• National Cotton Council

• National Council of Textile Organizations

• Service Employees International Union

• South Carolina Manufacturing Alliance

• U.S. Industrial Fabrics Institute

MARKET ACCESS

• U.S. traditionally uses a basket system for tariff elimination

• Baskets are based on sensitivity

• Examples:• Basket A – immediate duty free for items with least sensitivity. For

example silk fabric is typically in this basket.

• Basket B – mid-range phase out period, 5 years. This includes items with a moderate level of sensitivity to the domestic market.

• Basket C – longest duty phase out period for most sensitive items. For example, denim trousers and cotton knit shirts are typically in this basket.

MARKET ACCESS

• Market access determinations should not be made until the rules of origin are settled

• Negotiators cannot accurately gauge product sensitivity without knowing the rules of origin

GOVERNMENT PROCUREMENT

• A “warm” industrial base capable of supplying the military is essential to national security

• Textile and apparel sales average $1.5-2 billion annually

• Military procurement rules mandated by Congress since 1949

• Industry and Congress will not support elimination of the Berry Amendment

REGULATORY HARMONIZATION

• Regulatory differences should not serve as a barrier to trade

• A science-based and market-oriented regulatory system is essential for all safety and public health regulations

• Additional areas that will need to be addressed include intellectual property and labeling requirements

IN SUMMARY

• The T-TIP agreement will be one of the most critical ever negotiated.

• Has to have benefits for all countries and segments of the textile production chain.

• To be balanced and fair, it must contain a yarn forward rule for textiles and apparel.

Auggie Tantillo

President & CEO

NCTO

1001 Connecticut Ave. NW

Suite 315

Washington, DC 20036

atantillo@ncto.org

www.NCTO.org