The Canadian Apparel Federation (CAF) has submitted our NAFTA negotiating priorities to the Canadian government. Our submission highlights the importance of maintaining provisions currently in NAFTA which allow Canadian apparel exporters to use a wide range of textiles in their apparel while qualifying for duty-free entry into the U.S. – provisions known as tariff preference level (TPLs).

U.S. efforts to re-negotiate NAFTA are putting at risk duty-free access to the U.S. market for Canadian fashion exporters that use fabrics from outside North America. The U.S. textile industry strongly supports the NAFTA rule of origin which requires apparel to be made from NAFTA fabric constructed from NAFTA yarns – in order to qualify for tariff relief.   The U.S, industry is taking aim at the TPL system, which along with the NAFTA rule of origin are the two main elements of the agreement that concern Canadian apparel manufacturers.

If these rules were changed during the upcoming  negotiations many garments made in Canada which can currently enter the U.S duty-free, would be subject to full duties.  For example, a woman’s polyester blouse (wholesale price of $20.00) made in Canada from Taiwanese fabric can currently be shipped to the US duty-free using TPLs. If they were eliminated - the same garment would be subject to 26.9% duty – adding over $5.00 to the wholesale cost.  

While the duty rates vary substantially from product to product – the fact remains that many Canadian made products, ranging from men’s suits to women’s sportswear, would no longer be duty-free if exported to the U.S.

In this scenario the only way to qualify for free trade for most apparel exporters would be to use fabrics constructed in the NAFTA region – and the options for this are limited for many products. Canadian textile producers also have TPL’s which allow them to use inputs from outside North America in their exports to the U.S.

Our message to the government is clear: maintain and where possible expand our access to the U.S. market by defending TPLs.  More details are contained in our most recent International Trade Update (members only).

Background

The Canadian Apparel Federation has been working since November 2016 to prepare for the renegotiation of NAFTA.  Over the past seven months we have been working to identify key priorities to the Canadian government. In addition to our contacts in the Canadian government we have also had a number of meetings with US Embassy staff in Canada, staff at the US Department of Commerce  and the US Trade Representative (USTR) - and US industry associations. 

In addition to highlighting speficic priorities we have also identified the strong position the U.S. position enjoys within NAFTA.  The US enjoys a $1.3 billion trade surplus with Canada in textiles, textile articles and apparel. 

What you can do

More than anything else - companies that are concerned about this need to get involved.  Join  CAF today if you are not already a member.

U.S. priorities released

The United States Trade Representative (USTR) released their 18-page list of official objectives for NAFTA re-negotiations earlier this week.  While there are relatively few specific references to textiles and apparel – the section on rules of origin speaks directly to their efforts to restrict access to the U.S. market.   The priorities that most concern the Canadian apparel and textile industries are as follows:

• Update and strengthen the rules of origin, as necessary, to ensure that the benefits of NAFTA go to products genuinely made in the United States and North America.
• Ensure the rules of origin incentivize the sourcing of goods and materials from the United States and North America.
  
  

Negotiations will begin on August, 2017.

Please contact CAF Executive Director Bob Kirke with any questions or feedback at bkirke@apparel.ca.