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CAFTA: Cutting-Edge Or Job-Cutting

The announcement of the Central American Free Trade Agreement has attracted both supporters and critics from the textile industry.

Carmen Pang, Senior Editor

A fter one year and nine rounds of negotiations, the Office of the United States Trade Representative (USTR) announced in mid-December that the United States and El Salvador, Guatemala, Honduras and Nicaragua have agreed to enter into a comprehensive Central American Free Trade Agreement (CAFTA). The agreement would have included Costa Rica as well, but the country dropped out during the final rounds of negotiation to conduct more internal consultation. Talks between the United States and Costa Rica are set to resume this month.

According to the USTR announcement, the draft text of CAFTA will be released this month, and if it is approved by Congress, President Bush is expected to sign the agreement early this year.

Hailing it as a "cutting-edge" agreement, USTR Robert B. Zoellick said CAFTA will "support regional stability, democracy and economic development." According to Zoellick's office, combined total goods trade between the United States and the four Central American nations is $15.4 billion. Furthermore, according to the latest numbers released by the US Department of Commerce, Central America is the largest apparel exporter to the United States. Imports from the region increased 6.4 percent in the first 10 months of 2003, compared with the first 10 months of 2002.

The Supporters
Upon the announcement of the agreement, Wilbur L. Ross, chairman of Burlington Industries Inc., Greensboro, N.C., issued a statement saying that CAFTA is "good news for the job security of Burlington's 4,400 employees." Burlington Industries is part of a group of textile retailers and apparel and textile companies that made proposals to the CAFTA negotiating parties. According to Ross' statement, many of the proposed provisions were accepted and included in the agreement.

In addition to operations in the United States, Burlington Industries also has manufacturing facilities in Mexico, which, some industry experts say, will benefit from the agreement because yarns and fabrics from Mexico and Canada used for woven trousers and wool apparel will enjoy "rule-of-origin exception" treatment.

The Arlington, Va.-based American Apparel and Footwear Association (AAFA) also supports the Central American trade agreement. In a statement issued by the group, Kevin M. Burke, president and CEO, said, "We are pleased that the agreement included several key provisions we sought relating to textiles, apparel and footwear." However, he added AAFA is disappointed about some other elements of the agreement, including the dropping out of Costa Rica.

The Critics
The announcement of the agreement also drew vociferous complaints from others in the US textile sector. The Board of Directors of the Washington-based American Textile Manufacturers Institute (ATMI) voted to "vigorously oppose" the agreement and to "urge its defeat in Congress."

ATMI released a statement that described CAFTA as a "job-destroying" agreement because it contains "side deals that give away US jobs." Central to ATMI's complaint are what the organization calls "loopholes" in the agreement that will cost the US textile sector thousands of jobs. According to ATMI, these include:
•    a provision that allows Mexican and Canadian yarns and fabrics to be used for woven trousers and wool apparel;
•    a provision that allows Asian yarns and fabrics to be used in brassieres, woven boxers and woven nightwear;
•    a provision that allows use of Asian yarns in apparel made in Nicaragua;
•    the lack of a "kick-out" clause for countries that do not enforce the agreement rules;
•    the raising of "de minimis" levels from 7 percent to 10 percent;
•    the inclusion of duty breaks retroactive to January 2004 for retailers and importers;
•    the inclusion of duty drawback and duty-free treatment for products made with Asian pocketings, linings, waistband interlinings and trim; and
•    a provision that allows use of Asian yarns in wool apparel.

According to ATMI, throughout the CAFTA negotiation process, the Bush administration did not consider the industry's proposals that would safeguard American textile jobs and ensure a beneficial agreement. The group now vows to mobilize textile workers and seek labor alliances to block the agreement.

ATMI is joined by the American Manufacturing Trade Action Coalition (AMTAC), Washington, in its criticism of CAFTA. Describing US trade policy as "inherently flawed," Auggie Tantillo, AMTAC's Washington coordinator, said, "CAFTA replicates the failed policy of negotiating trade deals with countries capable of manufacturing large amounts of consumer goods for the US market but incapable of buying significant numbers of finished US goods in return."

The criticism voiced by manufacturing trade groups such as ATMI and AMTAC, as well as labor groups such as the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), Washington, and their vows to block passage of CAFTA in Congress, already have seen results. Representative Richard Burr (R-N.C.) issued a statement criticizing the agreement as one that was concluded "in a rush to get a deal in 'under the wire." However, Burr did not publicly say whether he will vote against the agreement. Many political analysts believe the Bush administration will face some resistance in Congress, especially from those who represent textile manufacturing states such as the Carolinas and Georgia.

ATMI Announces New Chairman
chesnuttATMI recently announced that James W. Chesnutt, president and CEO of Washington, N.C.-based National Spinning Co., has taken over the post of chairman. Chesnutt, formerly the group's first vice chairman, succeeds Willis C. Moore, who resigned from ATMI member company Unifi Inc., Greensboro.

Chesnutt has been involved with the textile industry for more than 30 years. He has served as president of the American Yarn Spinners Association in 2002 and as a past president of the North Carolina Manufacturers Association.

January 2004