The US wants to renegotiate the North American Free Trade Agreement (NAFTA) with Canada. When NAFTA came into effect in 1994, the Canadian apparel industry took a hit as the terms of the agreement specified only garments made in Canada were considered eligible for free trade across the border. But there is no Canadian manufacturer of denim, so Canadian companies manufacturing denim products have to go abroad to source it.

Thanks to the agreement’s tariff preference levels (TPL), wool, cotton and other manmade apparel made from imported textiles can be exported duty-free to the US. That means Canadian apparel manufacturers can source materials from places like Bangladesh or Sri Lanka, make the products in Canada, and still reap NAFTA's benefits when exporting duty-free to the US.

If NAFTA is fully reorganized or revoked, Canadian apparel companies could lose their competitive edge. Canadians making goods in Canada would then either make goods in the United States or make goods off-shore and further perpetuate the decline of manufacturing in Canada.

Removing the TPL would prevent US companies from enjoying the duty-free shipment of products made with internationally-sourced materials. The only ones who would benefit would be companies that both source and manufacture domestically.