The American Apparel and Footwear Association (AAFA) this week publicly announced its support for the Trans-Pacific Partnership (TPP), but the group is seeking clarifications from the administration on several aspects of the associated U.S.-Vietnam labor consistency plan before the agreement comes to a vote in Congress.
[Daily News| February, 07 2016 | Inside US Trade]
The group's problems relate to a provision in the consistency plan that allows the U.S. to unilaterally suspend future tariff phaseouts after year five of implementation if it determines that Vietnam has failed to allow independent unions to affiliate at the national level by that time. This could have an impact on the most sensitive apparel and footwear items, which are not eliminated until after year five.
If Vietnam disagrees with the U.S. determination, it can challenge that determination before a TPP dispute settlement panel. If it wins the case, or if the U.S. subsequently determines that Vietnam has complied with the cross-affiliation obligation, then the U.S. would resume the tariff phaseouts under their original schedule.
But AAFA is seeking more clarity on the process by which the U.S. government would make an initial determination on Vietnam's compliance and subsequently re-evaluate that determination, as well as on exactly what tariff rates would apply if the U.S. lifts its suspension of phaseouts, according to an industry source.
This source argued that, for example, if the U.S. suspended Vietnam's tariff phaseouts in year five but resumed them in year nine, the text leaves unclear whether the duties would kick in at the level originally foreseen at year nine, or pick up at the level at which they were frozen in year five.
This creates uncertainty for apparel companies who would have to make long-term investments in Vietnam, in light of the fact that tariffs on the most commercially important apparel items are not eliminated until the 10th or 12th year of implementation.
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