US To Negotiate Central American Trade Pact

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