Garment industry seeking preferential access into the US

Sri Lanka’s garment industry is trying to use newly proposed legalisation in the US to get duty cuts to export to the US.

Previously, to hold US market share and protect thousands of garment factory jobs, Sri Lanka considered a free trade agreement (FTA) with the US. However, this time the garment industry is trying a different tack. Instead of asking for a FTA the industry is looking to capitalise on proposed new laws in the US itself, supported by ethical manufacturing practices in Sri Lanka. In June, industry representatives visited Washington to discuss these possibilities with US business and political representatives.

“Everyone was impressed by our labour and manufacturing standards. A congressman told us it was refreshing to hear of such standards in a developing country. So there is definitely support for us in Washington in the context of promoting ethical trade,” said chairman of the Joint Apparel Association Forum (JAAF) Ajith Dias.

The US is Sri Lanka’s biggest customer for ready-made-garments, buying up over half (around 55%) of total export production.

However, Sri Lankan garments are facing increasing competition in US markets from lower cost Asian competitors. The situation is expected to get worse when restraints on Chinese garment exports are removed after next year.

“China is still restricted in some categories and 5 of these categories are key categories for Sri Lanka, accounting for most of our exports. These include lingerie, mens’ pants and knitted T-shirts. So the removal of safeguards on China, in end December 2008, may cause serious disruption to our exports,” said Dias.

Therefore, given the limited time at its disposal, the garment industry is now trying to use some new laws that are on the way in the US, coupled with good manufacturing practices, to gain an edge over competition. The growing consumer movement in the US for ethical and environmentally friendly goods, is also expected to help.

“We are looking at a number of options, including proposed new legislation and of course our ethical manufacturing standards. This is also because consumers in the west are now demanding ethical manufacturing practices,” said Dias.

The industry is looking at using two new laws that are in the pipeline in the US. These are the Decent Workplace Conditions and Fair Competition Act of 2007 and the Tax Relief Assistance for Developing Economies Act of 2007.

Because of the already high standard of labour laws in Sri Lanka, local garment factories are expected to qualify for concessions under these laws if they were to be implemented.

Another option being considered is a special GSP scheme from the US similar to the EU’s GSP+ scheme, also on the basis of ethical manufacturing standards. The existing GSP scheme of the US does not give duty concessions for garment exports.
The industry is now looking for professional ‘lobbyist services’ to promote its ethical manufacturing line in Washington. The JAAF has already asked for government help to do this.

“We have asked the government to help us obtain the services of a professional lobbyist firm to promote our cause in the US,” said Dias.

The industry body says that other garment exporting countries in the region also use lobbying to influence American policies and laws.

“Others countries also hire lobby groups to push for their interests in Washington. For instance, we found that Bangladesh, Cambodia and Vietnam spend several millions of dollars per year on lobbying for trade matters,” said Dias. With professional help behind it, the JAAF expects some positive results over the medium term.