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Washington Outlook Archive
James A. Morrissey, Washington Correspondent

Controversy Surrounds Central American Pact

James A. Morrissey, Washington Correspondent

A lthough the proposed Central American Free Trade Agreement (CAFTA) is not likely to reach Congress before summer — or maybe after the November elections — the battle lines already are being drawn. US textile manufacturing interests are flatly opposed to it; importers of textiles and apparel see it as a way to have more sourcing flexibility; agricultural interests are split; and the associations representing a broad range of manufacturers are strongly in favor of it.

The National Textile Association, American Textile Manufacturers Institute (ATMI) and the American Manufacturing Trade Action Coalition are strongly opposed to the pact and have announced plans to launch an election-year grassroots effort to convince members of Congress to reject it. While the agreement includes a basic yarn-forward provision the textile industry supports, it also includes provisions that will permit inputs from non-participating countries under certain circumstances. The domestic industry sees those provisions as major loopholes that will cost production and jobs. ATMI Chairman James W. Chesnutt says defeating the agreement will be a “top priority” for the US textile industry and its workers, adding, “[we] will energize our workers, conduct trade forums and continue to expand our voter registration campaign.” The textile manufacturers say they will work with unions, and manufacturing and environmental groups that are opposed to the agreement.

On the other hand, textile and apparel importers would like to see CAFTA work. They believe that permitting some inputs from non-participating countries such as Canada, Mexico and the Caribbean nations will give them “flexibility” and nearby sources for products that could enable them to avoid becoming too dependent on Chinese and other Asian suppliers. American Apparel and Footwear Association CEO Kevin M. Burke says a swift conclusion of a “commercially meaningful US/Central American trade agreement is critical to the survival of the US textile industry and its customers, the apparel industry in Central America.”

US Trade Representative Robert B. Zoellick praised CAFTA as a “historic and comprehensive agreement” that will strip away barriers to trade and open markets for all of the participating countries. His agency has published a list of supporters that includes the National Association of Manufacturers, the US Chamber of Commerce, the Business Roundtable and a number of agricultural organizations. However, the powerful sugar lobby has expressed major reservations about the agreement, and a number of labor unions — including the Union of Needletrades, Industrial and Textile Employees — are opposed to it.

The agreement will be considered by Congress under the so-called “fast track” procedure, which in reality is not all that fast. Fast track establishes a flexible timetable that could almost be open-ended, but it does not permit any amendments to an agreement once it reaches Congress. The best guess in Washington is that CAFTA is unlikely to be considered until late summer at the earliest, and if the administration does not feel the political climate is right, it could put off sending it to Congress until after the November elections and maybe even until after the new Congress convenes next January.

Importers Claim Benefits Of Quota And Tariff Removal
US importers of textiles and clothing have stoutly defended the removal of quotas and tariffs, saying a quota- and tariff-free world will provide significant benefits for US and overseas manufacturers and American consumers. A comprehensive report prepared for five of the major trade associations representing retailers and other importers charges that quota and tariff policies that have been in place for more than four decades cost American consumers $80 billion a year.

Since there has been some discussion of continuing textile and apparel quotas beyond the planned phase-out, they also are pressing for a tariff phase-out as soon as possible. The report charges that “quotas and tariffs are raising prices and soaking American families,” but not saving jobs. It says that for decades, as employment in the US has steadily grown, the number of jobs has dropped in high-tariff and -quota industries such as textiles and apparel.

The importers say removal of textile and apparel quotas will require “special attention” to problems domestic textile manufacturers will experience as a result of removing quotas. They recommend trade adjustment assistance for workers displaced by imports and tax breaks, and other financial assistance that will help make US manufacturers more competitive. They also support eliminating tariffs on apparel imports made from US yarn and fabric.

The report concludes by saying: “Two administrations, of different parties, have now committed the country to a new track —one which, at little cost, will ease life for American families generally and the poor in particular. This is the right track, and we should follow it to the end.”

How long and how far the administration stays on that “track” will be determined in large measure by the congressional and presidential election campaigns.

US/China Textile Quota Negotiations Start
The Bush administration has taken two steps designed to control the burgeoning growth of Chinese textile and apparel imports, but the outlook for a more comprehensive approach to the problem is not very likely. The interagency Committee for the Implementation of Textile Agreements (CITA) requested consultations with China and imposed quotas on brassieres, dressing gowns and some knit fabrics, limiting import growth in 2004 to 7.5 percent above current trade levels. About $700 million in trade is involved. The action was taken under the safeguard mechanism in the US/China bilateral trade agreement that permits the imposition of quotas on products where it can be demonstrated they are disrupting or threatening to disrupt US markets.

The action was taken in response to a petition from the domestic textile industry, and last November CITA announced it would start the clock running on negotiations with China.

The safeguard petition was strongly opposed by US textile and apparel importing interests, which contended CITA’s decision was based on politics, not facts.

While the negotiations will address the three product categories, Commerce Department officials say they do not necessarily have to be confined to those products. The US industry has been pressing for a new comprehensive agreement with China. They point to the huge growth of imports in recently decontrolled product categories as a harbinger of things to come after 2005. US negotiators may propose a broader agreement, but no one expects China to be very excited about one. If a comprehensive agreement is not reached, domestic manufacturers can be expected to seek relief through a series of safeguard petitions as imports threaten to disrupt markets. Importers of textiles and apparel are opposed to any additional safeguard petitions at this time and say there is no need for a comprehensive agreement. Instead, they are looking forward to the time when they can operate in a quota-free world.

  March 2004