The resurgence of U.S. apparel manufacturing has suffered a major setback as Europe started raising tariffs on high-end women’s jeans beginning this month. As of May 1, the European Union raised duties on Made in the USA ladies’ denim trousers to 38% – more than triple of the 12% tax duty on premium quality women’s jeans. The outlook is particularly grim for Los Angeles manufacturers, where about 75% of USA’s premium-denim blue jeans are made.
The California Fashion Association fears the adverse effects of the tax duties to the manufacturing industry. If passed on to consumers in the form of heftier price tags, exports of US-made women’s denim jeans to Europe will slow down. Producers might start moving operations abroad to countries like Mexico and Turkey to cut costs and as a result, the job market is also likely to suffer.
It was reported early this year that garment manufacturing in Los Angeles country provides up to 44,500 people. The figure is much lower compared to an estimated 45,000 jobs in 2012.
With the newly imposed tax duties, other countries will definitely jump at the opportunity to fill in a gap left by US manufacturers in meeting European demand for premium ladies’ jeans. Should a manufacturer decide to move production overseas to cut costs, existing factories in other countries still carry a strict advantage.
In 2012, the Department of Commerce reports that U.S. exports of women’s and girls’ premium denim jeans to Europe amounted to $30.3 million, much lower compared to $44 million in 2011. However, demand for jeans has rebounded led by demand for “premium jeans” – pants that cost $75 up a pair. According to research firm Global Industry Analysts Inc., the women’s premium jeans industry accounts for about 22% of the global jeans market.
The surprising increase on tax duties is seen as a step by the EU against the US for allegedly failing to comply with a 2002 World Trade Organization decision against the Byrd Amendment, a U.S. law that allowed the government to impose additional duties on “unfairly traded goods.” Despite its repeal, its effects are still being allowed to continue. As a result the WTO lets other countries raise tariffs on goods Made in the USA, up to a certain amount, which can vary every year.
Many L.A. jeans brands are extremely competitive in Europe. Observers note that Europe is striking the U.S. “where it hurts,” raising import duties just at a time when American apparel manufacturing is right in the middle of a major resurgence. Most anti-dumping disputes where the US is involved are noted to be about food products and steel.
Apparel and textile trade groups like the California Fashion Association as well as the American Apparel & Footwear Association have sent out petitions to several government officials in hopes of finding help to have the heavy tax duties revoked. They are also rallying the cooperation of local jeans makers to work together to put pressure on Europe to reverse the raised tariffs. Manufacturers have consulted legal firms to help them explore possible strategic options.