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Washington Outlook Archive

Central American Free Trade Pact Approved

James A. Morrissey, Washington Correspondent

Following a bitter, often partisan debate, the US House of Representatives approved a Central American free trade agreement by a paper thin margin that reflected the split among US textile and apparel manufacturers. The narrow vote of 217 to 215 approving the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) was a result of successful efforts by the Bush administration to woo textile state congressmen who at one time were opposed or undecided. In the end, 23 congressmen with significant textile employment in their districts voted in favor of the measure.

In the weeks and days preceding the vote, administration officials worked on concessions to textile manufacturers that should result in expanded market opportunities in the Central America region. Those fixes, as they were called, were: an amendment to the rule of origin that will require use of US-made fabric in linings and pocketing; a provision that Mexico cannot benefit from the cumulation provision that permits imports from the North American Free Trade Agreement partners until it improves its Customs procedures: This is designed to ensure that fabric from China and other non-participating countries wont be able to get around the agreement and enter the United States duty free; and a special agreement with Nicaragua will require that nation to substantially increase its use of US-made fabric in trousers. Under that agreement Nicaragua must match its use of Asian fabric with US fabric, a requirement that US textile manufacturers say will amount to a 200-percent increase or about $90 million in trade.

US importers and some textile manufacturers hailed the agreement as an opportunity for both US textile manufacturers and clothing manufacturers to share in expanding markets in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic. They also view it as a means to combat a takeover of the US textile and apparel market by China. Kevin Burke, president and CEO of the American Apparel and Footwear Association, said the agreement is critically important to secure jobs within the United States and promote trade within the hemisphere, adding the agreement will provide fresh opportunities for US textile, apparel and footwear companies to remain competitive in partnership with their Central America counterparts. The National Retail Federation issued a statement saying the agreement is going to create important new incentives that will encourage apparel retailers to expand their sourcing operations in the region.

Jim Chesnutt, chairman of the National Council of Textile Organizations (NCTO), a textile trade association that supported DR-CAFTA, said US textile companies will now have a permanent duty-free platform to ship billions of dollars worth of yarns and fabric to the Central America countries. NCTOs support for the agreement could well have provided the margin of victory. On the other hand, the American Manufacturing Trade Action Coalition, which includes in its membership more than 100 textile companies, said passage of the measure was a sad day for US manufacturing workers.

July 2005