Below is a collection of stories related to trade and government policy that may impact the sewn products industry around the world.
USTR Proposes New Section 301 Tariffs Back in January, the United States Trade Representative (USTR) determined that the Digital Service Taxes (DSTs) adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom were subject to action under Section 301 because they discriminated against U.S. digital companies, were inconsistent with principles of international taxation, and burdened U.S. companies. The agency is now moving forward on the next steps in its investigations which include an opportunity for public comment on its proposed trade remedies. Specifically, USTR is proposing to impose additional tariffs of up to 25 percent on goods imported from the identified countries. The list of products affected is different for each country, but includes some textiles, apparel, furniture, and other sewn products. (The links for each country’s specific proposed action and affected goods are available at the bottom of the USTR Press Release.) The deadline for requests to appear at a virtual hearing for a specific country/investigation is April 21st. The Deadline for written comments is April 30th. The virtual hearings will take place at the beginning of May.
USTR also announced it was terminating Section 301 tariff investigations against Brazil, the Czech Republic, the European Union, and Indonesia because these jurisdictions have not adopted or implemented previously considered DSTs.
Side note: Reuters recently reported that the European Union has suggested it and the United States suspend tariffs imposed on billions of dollars of imports for six months. This move would go beyond the four-month suspension agreed to last month as the two parties continue to search for compromise on their 16-year-old aircraft subsidies dispute.
Vietnam Dropped from Currency Manipulator List On a more positive note, Vietnam has been removed from the list of nations labeled by the U.S. as currency manipulators, which could indicate lower chances for new tariffs on imports from Vietnam as part of USTR’s ongoing Section 301 investigation into the country’s currency valuation. Switzerland was also removed from the naughty list. In the Biden administration’s first semi-annual report to Congress on currency manipulation, the U.S. Treasury Department stated that no country currently meets the U.S. criteria as a manipulator. However, Vietnam and Switzerland, along with Taiwan, will be under enhanced monitoring. Read more.
NTE Report Highlights Trade Barriers USTR released its annual National Trade Estimate (NTE) Report March 31st, providing a detailed inventory of significant foreign barriers to U.S. exports of goods and services, investment, and electronic commerce. In regard to apparel and footwear, the report highlighted industry complaints of long-standing non-tariff barriers in Argentina and Brazil, as well as unfair export-subsidy programs in India, and high tariffs in various locations. USTR vowed to continue to battle foreign trade barriers and engage with foreign governments on issues that threaten U.S. exporters.
EU Grants GSP+ to Uzbekistan As of April 10th, Uzbekistan is now the 9th country to receive benefits under the European Union’s GSP+ program. The EU’s Generalised Scheme of Preferences (GSP) removes or reduces import duties on products coming into the EU market from vulnerable developing countries. GSP+ adds further benefits as incentives for sustainable development and good governance.
Dutch Due Diligence Bill
Last month, we noted supply chain due diligence initiatives in Germany and the European Union. The Netherlands is now the latest country to introduce a similar legislative proposal. The Bill for Responsible and Sustainable International Business Conduct would require a duty of care for all companies in the Netherlands and an obligation to conduct due diligence in accordance with the OECD Guidelines for Multinational Enterprises for all enterprises with more than 250 employees. Read More.
New European Import Control System
The European Commission has launched a new import control system (ICS2). This isn’t exactly a policy update, but it would be important to understand for anyone looking to export to the EU. Read more.
U.S. Suspends Trade with Myanmar
At the end of March, the U.S. Government announced the suspension of all U.S. engagement with Myanmar (Burma) under the 2013 Trade and Investment Framework Agreement (TIFA), effective immediately. USTR noted the suspension would remain in effect until the return of a democratically elected government. Read more.
As the unrest in Myanmar continues, the sewn products industry will likely remain in the spotlight. Prior to the February 1st coup, apparel, footwear, and accessories were the country's three largest export sectors, accounting for one-third of total exports. These sectors also employed more than 500,000 workers, many of whom have taken the lead in pro-democracy protests. We believe the events in Myanmar will have lasting effects on how the global sewn products industry interacts with politics and supply chain issues. Here are some recent articles for anyone looking to learn more about this topic:
Related: Beyond Myanmar, a number of other sewn product sourcing countries are struggling with “a combination of escalating geopolitical tensions and the long-term fallout of the Covid-19 pandemic.” Sourcing Journal examines Ethiopia, Cambodia, and Bangladesh here.
Xinjiang Sanctions Also in March, the United States, Canada, the European Union, and the United Kingdom announced sanctions on several Chinese officials for what they described as genocide against Uyghurs, Kazakhs, and other Turkic Muslim minorities in the Xinjiang Uyghur Autonomous Region in China. The Chinese government, which has denied the allegations of abuse, claiming its camps are re-education facilities used to combat terrorism, then announced their own sanctions in retaliation (read about them here and here). All involved parties have claimed the sanctions against them are “baseless.”
While these sanctions are related to individuals, the situation will continue to develop as international leaders and sewn product companies take a close look at human rights issues along the supply chain. Here is some additional reading on the topic:
Related: U.S. Congressional members have proposed a few different initiatives related to this issue (an example here). Senator Rob Portman (R-OH) made the argument that manufacturing PPE in the United States would not only bring jobs back home, but also prevent forced labor in supply chains.
Additional Reading on Trade: