Because yarn and fabric production are capital- and scale-intensive, they demand higher worker skills than apparel production. At the end of 2015, the domestic textile industry employed about 232,000 workers, accounting for about 2% of the 12.3 million domestic factory jobs (see Appendix A ). U.S. Trade in Textile Products

In 2015, approximately one-third of U.S. textile production was exported, with a value of $17.6 billion (see Table 1 ). The United States has a strong export position in yarns and fabrics, posting a modest trade surplus in these products for two decades. Despite this cost differential, apparel producers in the NAFTA, CAFTA-DR, and CBI countries use U.S.-made textiles in products that are exported to the United States because the goods enter the United States free of tariffs. In Central America, virtually all fibers are imported. Among the regional apparel suppliers that have free-trade agreements with the United States, Mexico is the only significant producer of fabric and the only significant source of yarn. For U.S. textile exporters, Honduras, the Dominican Republic, El Salvador, and Guatemala represent the biggest yarn and fabric markets in the CAFTA-DR region (see Figure 4 ). If apparel produced in Asian TPP countries gains duty-free access to the U.S. market, it could displace apparel manufactured with U.S. fabric in the Western Hemisphere, adversely affecting U.S. textile exports. Also, should Vietnam develop a larger textile industry, U.S. textile exports could be hurt, as the proposed TPP allows apparel producers in countries such as Mexico and Peru to use textiles made in any TPP member country and still enjoy duty-free access to the U.S. market. Vietnam's apparel sector imports the majority of its yarns and fabrics from non-TPP nations, including China. Yarn Forward . Only the cutting and sewing of the finished article must occur in FTA member countries, providing maximum flexibility for sourcing. Under the TPP, tariffs on textile and apparel would either be eliminated immediately or phased out in various stages over a decade or more. If the proposed agreement is approved by Congress and foreign governments, the TPP will require that textiles and apparel meet a yarn-forward rule to qualify for duty-free treatment. Several TPP members, including Vietnam, had opposed U.S. demands for a yarn-forward requirement, supporting instead a "cut-and-sew" rule that would allow them to enjoy preferential access for apparel that has been cut and sewn from fabric made in China or other countries not included in the TPP. Since U.S. apparel companies and retailers purchase the bulk of their garments from Asian countries outside the TPP, they favored the immediate elimination of tariffs upon implementation of the TPP agreement and more liberal rules of origin for textiles and apparel. This would allow a limited amount of apparel cut, sewn, and assembled in Vietnam to enter the United States duty-free even if the garments include fabric from China and other non-TPP countries. Whatever the actual effects of the TPP on the U.S. economy, it is imaginable that the proposed TPP agreement could result in apparel made in Vietnam displacing apparel from the Western Hemisphere in the U.S. market, weakening the export markets now served by U.S. textile producers in Mexico and other countries in Latin America and the Caribbean. An alternative scenario is that any TPP member country could over time shift sourcing of textile inputs from the United States to Japan, the one Asian TPP participant that currently has the textile production capacity to supply other TPP producers in this way, or to Vietnam should it develop a robust textile industry, and still enjoy duty-free access to the U.S. market. If the proposed agreement is implemented, those segments of the U.S. textile industry that supply industrial textiles are likely to face greater competition from Japan, the subsector where U.S. manufacturers are most internationally competitive. The largest export markets for U.S. industrial fabrics in 2015 were Mexico and Canada; Vietnam accounted for less than 1% of the $2 billion in shipments of technical fabrics from the United States to the world.
Textiles are a sensitive sector in the Trans-Pacific Partnership (TPP), an agreement that would establish a free-trade zone across the Pacific if it is approved by Congress and foreign governments. Because the TPP includes Vietnam, a major apparel producer that now mainly sources yarns and fabrics from China and other Asian nations, the agreement could shift global trading patterns for textiles and demand for U.S. textile exports. Canada and Mexico, both significant regional textile markets for the United States, and Japan, a major manufacturer of high-end textiles and industrial fabrics, are also TPP members.
U.S. textile manufacturers produce yarn, thread, and fabric for apparel, home furnishings, and various industrial applications. In 2015, the U.S. textile industry generated some $55 billion in shipments and directly employed about 232,000 Americans, accounting for approximately 2% of all U.S. factory jobs. More than a third of U.S. textile production is exported, with the bulk of the exports going to Western Hemisphere nations that are members of the North American Free Trade Agreement (NAFTA), the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), and the Caribbean Basin Initiative (CBI). These free-trade agreements provide that certain exports from member countries may enter the U.S. market duty-free only if they are made from textiles produced in the region. This has encouraged manufacturers in Mexico and Central America to use U.S.-made yarns and fabrics in apparel, home furnishings, and other products. Exports to the NAFTA and CAFTA-DR countries contributed to a U.S. trade surplus of $1.6 billion in yarns and fabrics in 2015.
The proposed TPP would eliminate some tariffs on textiles and apparel immediately, and phase out others over a decade or more. The agreement has the potential to affect U.S. textile exporters in at least three ways:
It could enable some Asian apparel producers, principally Vietnam, to export clothing to the United States duty-free. This would eliminate much of the advantage now enjoyed by Western Hemisphere apparel producers in the U.S. market, and, because Vietnamese manufacturers make little use of U.S.-made textiles, could reduce demand for U.S. textile exports. The TPP would allow Western Hemisphere apparel manufacturers to use yarn and fabric made anywhere in the TPP region and still enjoy preferential access to the U.S. market. Thus, an enlarged Vietnamese textile industry could, at some future time, compete with U.S. exporters in Mexico and Central America. The U.S. manufacturers of industrial textiles may experience more direct competition from Japan, also a leading producer of industrial textiles. On the upside, U.S. exports of these products could increase because the agreement would eliminate tariffs on industrial fabrics that are currently as high as 20% in some TPP countries.
Responding to concerns from domestic textile manufacturers, the proposed TPP agreement includes a "yarn-forward" rule of origin that would allow a garment to enter the United States duty-free only if yarn production, fabric production, and cutting and sewing of the finished garment all occur within the TPP region. However, nearly 190 fibers, yarns, and fabrics in short supply in TPP-member countries could be sourced from outside the region, including China. This provision was a concession to U.S. retailers and apparel brands that wanted maximum flexibility to source yarns and fabrics from non-TPP countries.