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US To Negotiate Central American Trade Pact

James A. Morrissey, Washington Correspondent

The U.S. Trade Representative and ministers from five Central American countries have announced plans to negotiate a free trade agreement that they hope to conclude by the end of this year. The countries involved, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, currently account for some 16 percent of US imports of apparel.

In announcing the agreement, U.S. Trade Representative Robert B. Zoellick said: "The Central American Free Trade Agreement (CAFTA) will give Americans better access to affordable goods and promote US exports and jobs, even as it advances Central America's prospects for development."

US importers of apparel were enthusiastic in their endorsement of the pact. Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association (AAFA), called it "an historical event in US/Central American trade relations" that will build on the "successful partnerships" created by the 1980 Caribbean Basin Initiative and the Caribbean free trade agreement of 2000. Burke also expressed the hope that the agreement would be free of restrictive rules of origin.

On the other hand, the American Textile Manufacturers Institute (ATMI) has urged government officials to establish a separate textile and apparel negotiation group, and to insist on a yarn forward rule of origin with no allowances for yarn or fabric from outside of the free trade area. In connection with recent trade agreements, there is a yarn forward rule of origin, but a limited amount of imports using fabric or yarn from countries other than the participants, also qualifies for the special treatment.

Importers are likely to press for an expansion of the previous country of origin rules and seek to have inputs from Mexico and Canada included.

The industry/labor coalition ATTAC has insisted that eligible trade should only be between the U.S. and individual countries.So, as has been the case in previous trade agreements, the rule of origin will be a major bone of contention.
January 2003