As experienced members of the fashion industry can attest, trade matters such as duties and taxes, and other regulations can have a huge impact on global sales and sourcing decisions. In an effort to resolve differences over trade practices and increase the already $1 trillion in annual trade, the United States and the European Union (EU) conducted free-trade agreement talks under the Trans-Atlantic Trade and Investment Partnership (TTIP) from July 9 to July 13, 2013 in Washington, DC. However, US women’s jeans producers have been pressing US trade officials to address a recent EU trade measure that has hit the fashion industry hard.
In April, the EU announced that, effective May 1, 2013, additional tariffs on certain US-made goods, including women’s denim jeans, would more than triple from the normal 12% rate to 38%. The EU’s tariff increase is likely to have a significant effect on the premium denim industry, which is largely based in California, by causing higher prices, which could ultimately reduce exports to the EU. To avoid these added costs, jeans manufacturers are looking at alternative solutions. For example, some manufacturers have decided to take their existing European orders for women's jeans and transfer production from Los Angeles to countries overseas. In addition to moving operations outside of the US, many are focusing on increasing sales in emerging markets without free trade agreements.
The EU’s tariff increase is related to sanctions authorized by the World Trade Organization (WTO) in response to a case the EU won against the US that the Continued Dumping and Subsidy Offset Act of 2000, also known as the Byrd Amendment, violated WTO rules. Under its ruling, the WTO has allowed other countries to act in retaliation to the continued application of the Byrd Amendment by increasing tariffs on goods imported from the US up to a certain amount each year. US officials cannot estimate how much longer the money disbursements – or retaliation – will take place.
This dispute highlights the complex nature of the fashion industry and the need for cohesive representation for the industry. While US manufacturers hoped that the TTIP talks would result in a reversal of the tariff, the issue was not resolved in this first round of talks. The second round of TTIP negotiations will be held in Brussels in October 2013. US manufacturers also hope for harmonization of customs procedures and other regulations that affect the fashion industry such as product safety, labeling, and other measures. Arent Fox is continuing to monitor this EU tariff increase matter as well as other trade matters involving the fashion industry.