CAFTA-DR Partners Agree To Fix Technical Flaws In Agreement

The Dominican Republic-Central America-United States (CAFTA-DR) Free Trade Commission has approved
several changes to CAFTA-DR rules of origin that are expected to benefit the Western Hemisphere
textile/apparel supply chain. The changes include, among others, a correction to the definition of
sewing thread that adds single multifilament yarns used as sewing thread to the category — a move
supported by both the National Textile Association (NTA) and the American Manufacturing Trade
Action Coalition (AMTAC) — and an increase in cumulation limits that the commission says will
“encourage greater integration of regional production through limited reciprocal duty-free access
with Mexico and Canada to be used in Central American and Dominican Republic apparel.”

“Today’s fix is a job-creating win-win for U.S. sewing thread producers and their DR-CAFTA
counterparts,” said Auggie Tantillo, executive director, AMTAC. “With the closing of this
unintended loophole, we believe that U.S. thread producers can begin to recapture market share in
the important DR-CAFTA market, leading to more jobs.”Under the original agreement, regionally
produced sewing thread must be used for all products, including apparel and home furnishings, that
would qualify for duty-free treatment. However, under the original definition of sewing thread,
single multifilament yarns used as sewing thread are not included in that requirement, allowing
such yarns to be sourced from thread suppliers from outside the CAFTA-DR region.

The U.S. Trade Representative reports that in 2010, U.S. textile and apparel exports to the
CAFTA-DR region rose by 25 percent, surpassing export growth to the world of 19 percent, and
represented $3 billion or 16 percent of total U.S. textile and apparel exports. The region ranks
third, after Mexico and Canada, in export market size for U.S. textile and apparel products. U.S.
textile and apparel imports from the CAFTA-DR region totaled $7 billion in 2010, a 14-percent
increase over 2009. The region ranks second after China as a textiles and apparel supplier to the
United States.

March/April 2011