These Are the Five Nations That Could Be Dramatically Impacted by Reworked Trade Deals

The United States wants trade agreements that are more beneficial than President Trump feels they are at present, and it’s taking every effort to outline and eliminate barriers to those would-be better trade relations — whether or not it means turning everything upside down to get there.

On Friday, the Office of the U.S. Trade Representative (USTR) released the 2018 National Trade Estimate (NTE) annual report, which highlights the foreign trade barriers American exports face.

Never missing an opportunity to reiterate the need for fairness in trade, U.S. Trade Rep. Robert Lighthizer said, “The president is fully committed to addressing unfair foreign trade barriers through tough enforcement and the negotiation of new agreements that increase U.S. exports and support high-paying jobs for all Americans. … We will use every available tool to ensure Americans are treated fairly.”

Results coming from the annual report point to the potential for greater shakeups to existing trade agreements, as U.S. concerns run wide. Here’s a look at the concerns connected to the apparel and textiles industries.

Bangladesh

When it comes to apparel and textiles, Bangladesh is the United States’ sixth largest supplier. The U.S. took in $5.27 billion worth of apparel and textile goods from Bangladesh in 2017, according to data from the Office of Textiles and Apparel.

Deficits: As trade deficits have been among Trump’s major indicators of an imbalanced trading relationship, the NTE report reviews those deficits for each country. In 2017, the U.S. goods trade deficit with Bangladesh was $4.2 billion, a 15.6 percent decrease over 2016. U.S. goods exports to Bangladesh were up 61.7 percent to $1.5 billion, and U.S. imports from Bangladesh were down 3.8 percent to $5.7 billion.

Tariffs: The average most-favored nation tariff rate for goods going to Bangladesh is 14.78 percent, and the maximum applied rate is 25 percent. The tariffs are targeted to general input items, like basic raw materials and intermediate and finished goods.

Key concerns: Among the trade concerns tied to the apparel sector, the U.S. wants to see Bangladesh eliminate the double fumigation of its imported cotton.

“Bangladesh requires imported U.S. cotton be fumigated at the Chittagong Port for boll weevil. U.S. cotton exporters and Bangladeshi cotton importers have described this requirement as unnecessary because U.S. cotton is already fumigated for boll weevil in the United States,” the report noted. “This additional fumigation adds 1 to 2 cents to the cost of each imported bale, which decreases demand for U.S. cotton and increases costs for Bangladeshi importers.”

China

China remains by far the United States’ largest supplier of apparel and textiles, exporting $38.7 billion worth of the goods to the U.S. last year.

Deficits: China, according to the Trump Administration, accounts for more than half of the overall trade deficit, which is why the country has been the target of much of the president’s trade ire. In 2017, the U.S. goods trade deficit with China was $375.2 billion, an 8.1 percent increase over 2016. U.S. goods exports to China were up 12.8 percent to $130.4 billion, and U.S. imports from China were up 9.3 percent to $505.6 billion.

Tariffs: Recent tariffs levied by the U.S. have largely been targeted at China: first, the steel and aluminum tariffs aimed at curbing China’s overcapacity in steel, and then the $60 billion in tariffs over concerns with China’s intellectual property and technology transfer actions — the targets of which will be announced this week. China has retaliated with $3 billion in tariffs on U.S. fruits and steel in response to the U.S.-levied metal tariffs, but has yet to respond to the intellectual property tariffs, so more tariffs are expected as the battle between the nations continues.

Key concerns: The U.S. list of concerns over trade with China isn’t a short one, but the focus for now has been on the country’s “unfair” intellectual property practices, which involve forcing U.S. companies to transfer proprietary technology information to Chinese companies. The other key concern is China’s Made in China 2025 plan, which the U.S. said seeks to build up China’s information technology at the expense of foreign technology.

“While ostensibly intended simply to raise industrial productivity through more advanced and flexible manufacturing techniques, Made in China 2025 is emblematic of China’s evolving and increasingly sophisticated approach to ‘indigenous innovation,’ which is evident in numerous supporting and related industrial plans,” the report noted. “Their common, overriding aim is to replace foreign technology, products and services with Chinese technology, products and services in the China market through any means possible so as to ready Chinese companies for dominating international markets.”

Canada

One of the United States’ major trading partners overall, Canada was the ninth largest supplier of apparel and textiles to the country, sending $1.3 billion worth of goods over in 2017.

Deficits: Despite being a key partner under the North American Free Trade Agreement, Canada’s trade deficit still gives the U.S. pause. In 2017, the U.S. goods trade deficit with Canada was $17.5 billion, an 59.7 percent increase over 2016. U.S. goods exports to Canada were up 5.9 percent to $282.5 billion, and U.S. imports from Canada were up 8 percent to $300 billion.

Tariffs: NAFTA frees up much of the tariff barriers between the U.S. and Canada, and the country was recently exempted from the U.S. steel and aluminum tariffs, but Canada still maintains tariffs on dairy, poultry and egg products from the U.S., while the U.S. still puts tariffs on Canadian imports of dairy, sugar and peanut products.

Key concerns: The U.S. has pointed to Canada’s de minimis threshold as a barrier to trade, as Canada’s maximum threshold below which no duty or tax is charged on imports is 20 Canadian dollars ($15), while the U.S. raised its threshold in 2016 from $200 to $800.

“Stakeholders, particularly shipping companies and online retailers, maintain that Canada’s low de minimis threshold creates an unnecessary trade barrier,” the NTE report noted.

Mexico

Mexico was the fifth largest supplier of apparel and textiles for the U.S. in 2017, shipping $4.7 billion worth of goods.

Deficits: In 2017, the U.S. goods trade deficit with Mexico was $71.1 billion, a 10.4 percent increase over 2016. U.S. goods exports to Mexico were up 5.8 percent to $243 billion, and U.S. imports from Mexico were up 6.8 percent to $314 billion.

Tariffs: There are virtually no tariff barriers for U.S. exports to Mexico under NAFTA, and the U.S. also exempted Mexico from its recent metal tariffs.

Key concerns: The NAFTA renegotiations are still underway, though Trump launched new threats to kill it on Sunday, saying on Twitter: “Mexico is doing very little, if not NOTHING, at stopping people from flowing into Mexico through their Southern Border, and then into the U.S. They laugh at our dumb immigration laws. They must stop the big drug and people flows, or I will stop their cash cow, NAFTA. NEED WALL!”

Separately, the NTE report said Mexico applies several new regulations that govern the import of footwear, apparel and textile goods, including the creation of reference prices and establishing an import licensing system.

“According to the Mexican government, the measures were designed to enhance the productivity and competitiveness of Mexican footwear and apparel producers and protect Mexico’s domestic footwear and apparel industries from the importation of undervalued goods. U.S. exporters expressed a number of concerns with regard to the schemes, including a lack of transparency in how reference prices are determined and uneven enforcement by Mexico’s customs and tax authorities,” the report noted, adding that the U.S. government continues to monitor the schemes and how they are applied.

India

For textiles and apparel, India is second only to China in terms of supplying the U.S. with goods. Last year, India shipped $7.4 billion worth of product for the category to the U.S.

Deficits: In 2017, the U.S. goods trade deficit with India was $22.9 billion, a 5.9 percent decrease from 2016. U.S. goods exports to India were up 18.7 percent to $25.7 billion, and U.S. imports from India were up 5.6 percent to $48.6 billion.

Tariffs: India has a disparity between its bound rate tariffs (the rate that cannot be exceeded, per WTO rules) and applied tariff rates charged at the border, with the bound rate averaging 48.5 percent and the applied rate closer to 13.4 percent.

“The large gap between bound and applied tariff rates allows India to use tariff policy to make frequent adjustments to the level of protection provided to domestic producers, creating uncertainty for importers and exporters,” the NTE report noted. “Despite its goal of moving toward Association of Southeast Asian Nations (ASEAN) tariff rates (approximately 5 percent on average), India has not systematically reduced tariffs and in recent years has generally been increasing tariff rates across sectors.”

Key concerns: India’s multilayered policies on tariffs and other policies contribute to time consuming procedures, though the NTE report said some progress has been made.

“India’s customs officials generally require extensive documentation, inhibiting the free flow of trade and leading to frequent and lengthy processing delays,” the report noted. “In large part, this is a consequence of India’s complex tariff structure, including the provision of multiple exemptions, which vary according to product, user, or intended use.”

Editor’s Note: This story was reported by FN’s sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

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