A 21 st Century Trans-Pacific Partnership Agreement (TPP) For Apparel Helga Ying Senior Director, Worldwide Government Affairs and Public Policy Levi Strauss & Co. USA-ITA West Coast Seminar February 16, 2012
About Levi Strauss & Co. (LS&Co.) Based in San Francisco, California, one of the world s largest brand-name apparel marketers with sales in more than 110 countries Revenue of $4.4 billion in 2011 Apparel products sold under the Levi s, Dockers, Signature by Levi Strauss & Co., and denizen brands Global corporation with roughly 16,000 employees worldwide Global supply chain sourcing in about 40 countries, with no more than 20 percent of product manufactured in any one country
Realities of LS&Co. s Sourcing Model Market in 110 countries and source in about 40 countries = truly global with complex supply chain Flexibility is critical to sourcing model = need ability to source from a variety of suppliers who can meet our complex demands for fashion, quality, speed to market, etc. Inputs are not commodities that are interchangeable (e.g., denim quality varies and different mills offer varying levels of quality and design features) Key concerns include: skilled labor, cost, availability of inputs, speed to market, quality of production, and infrastructure (electricity, roads, ports, etc.)
Total Duties: $1.65 billion Source: USITC
Key Industry Interests in the TPP No Separate Textile Chapter or Negotiations Textiles and Apparel are integrated in World Trade No Separate Textiles/Apparel Negotiation in the Doha Round No more quotas Flexible and Simple Rule of Origin (not yarn forward): Reflects Global Supply Chains of the 21 st Century Industry Maximizes Industry Ability to Use TPP Now and in Future Immediate Duty Free Access Lengthy Phase Outs Delay Benefits of the TPP
Consequences of a Meaningless Agreement Without a liberal and simple rule of origin and other benefits for the apparel industry the TPP will: Produce no new trade in our sector Suppress market access offers from other industries Be administratively burdensome and reduce speed to market Hinder interest in investment (business likes flexibility) Past FTAs with strict rules yielded little benefit AGOA s requirement to use local denim fabric resulted in a move away from production of denim apparel in Africa The US-Australia, Singapore and Chile FTAs have failed to achieve expanded trade in apparel for those countries Only FTAs with neighboring countries have had positive results
Consequences of a Meaningless Agreement Existing TPP partner FTAs with YF rule have failed to expand trade
Exports in Thousands of US$ US Export of Yarn and Fabric to TPP FTAs and China 600000 US Exports of Yarns and Fabrics To TPP FTAs and China 500000 400000 Four TPP FTAs China 300000 200000 100000 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Why Does a Yarn Forward Rule of Origin Not Work in Today s Global Supply Chains? 9
Two Garment Timelines How a garment is produced 1 2 3 4 5 6 7 8 9 How a garment is produced from a trade agreement perspective 4 5 6 1. R&D, Design Garment 2. Legal Reviews 3. Order Garment and Inputs 4. Make/Ship Yarn 5. Make/Ship Fabric 6. Make/Ship Garment 7. Distribute Garment 8. Market Garment 9. Sell Garment 10
Advantages of Liberal Rules of Origin, Disadvantages of Restrictive Rules Liberal Rules: Provide value to consumers Increase competitiveness Diversify and improve the supply chain Create jobs Drive investment in line with market realities Deliver the commitment to the 21 st century Restrictive Rules: Do not consider supply chain realities Administratively burdensome Reduce speed to market Drive up cost Limit interest in investment Limit interest in FTA Will suppress valuable market access offers in other sectors
Conclusion Modern supply chain for most products, including apparel, is intricate and complex and has become truly global. Flexibility is critical as we need to source from a variety of suppliers who supply various components of our products in line with demands for fashion, quality and speed to market. Quotas are gone and it is time to afford the apparel industry the same simple rules of origin enjoyed by most industries. Flexibility would provide incentives for companies throughout TPP and opportunities for TPP partner countries such as Vietnam.
Thanks For more information about LS&CO: www.levistrauss.com For more information about the TPP Apparel Coalition: www.tppapparelcoalition.org