FTA with US will not help garment industry, says US trade specialist

Financial Times (Colombo) | 4 March 2007

FTA with US will not help garment industry, says US trade specialist

By Dilshani Samaraweera

A free trade agreement with the US will not guarantee a competitive advantage for Sri Lankan garments in the US, says a US trade law specialist.

The US is Sri Lanka’s largest garment export market but Sri Lanka has been losing market share to lower cost producers like China, India and Bangladesh. However, a trade agreement with the US is not considered good enough to hold US market share, even with duty reductions.

“It is wrong to assume that a free trade agreement or a preferential agreement with the US will solve your competitiveness problems in the US. US buyers don’t believe this any more and you should not do so either,” said Ms Brenda Jacobs, an attorney at law specialising in US trade issues and a counsel for the US Association of Importers of Textile and Apparel (USA-ITA), the largest trade association of US importers and retailers of textile products.

Jacobs was speaking at the Textile Institute World Conference held at the Cinnamon Grand hotel on Friday.

“Don’t fall into the trap of believing that you need free trade agreements or preferential trade agreements to be successful in the US and don’t let your governments get caught in the trap of looking for favours from the US.

These may not ultimately be to your advantage,” said Ms Jacobs.

The US trade law specialist pointed out that US free trade agreements and preferential trade agreements are becoming increasingly less effective for garment exporters like Sri Lanka.

This is mainly because of the political muscle of the US textile industry. The US textile industry that represents thousands of American jobs is increasingly threatened by job losses and market share losses because of trade agreements and increasing imports.

As a result, trade agreements with the US are harder to come by and are becoming more and more difficult to actually use. US trade agreements are now full of complicated rules and compliance procedures that add to costs and time. This strategy effectively takes away the benefits of even duty free entry.

The result is that both US buyers and foreign country exporters are automatically discouraged from using the trade agreement and the US textile industry is protected.

So garment exporting countries like Sri Lanka are advised to concentrate on other avenues to gain a foothold in the US markets.
One strong entry strategy is to maintain good labour and environmental standards when manufacturing goods.

“There are other ways of appealing to US buyers, such as maintaining good labour and environmental standards and of course certainty and speed of delivery,” said Ms Jacobs.

Ms Jacobs clients on trade matters include governments and industry associations in Asia and the western hemisphere and trade associations and multinational companies.

She represents clients before the office of the US Trade Representative, the US Department of Commerce, the US Bureau of Customs and Border Protection, the US Department of State, the US Department of Labour and the US Congress.

source: Financial Times