Nicaragua fears the Trans-Pacific Partnership (TPP) will bring huge losses to its apparel sector, which accounts for 10 per cent of its GDP. This is because Vietnam, already the US' biggest garment supplier and a formidable competitor, could enter the 12-nation free-trade bloc without a yarn forward rule of origin. If this happens as part of negotiations to strike a landmark agreement, Chinese yarn and fabric suppliers could flood Vietnam and the US. Without this yarn-forward rule, Nicaragua fears the market will be flooded with Vietnamese clothing made from Chinese yarns and fabrics.
The prospect of a yarn forward rule is actually helping to increase textile investment in Vietnam, which would further shore up the country's competitiveness in the trade pact. Nicaragua benefits from a tariff preference level program that matches apparel exports made from fabrics and yarns from any country on a one-for-one basis with those that use certain US fabrics and yarns.
Even if the US, which is leading the TPP talks, orchestrates a favorable deal, Nicaragua must rush to bolster foreign investment to raise output and move into higher-price export niches. The garment sector in the country employs 50 per cent of Nicaragua’s industrial workforce.