USTR Supportive of Current CAFTA Apparel ROO
The Office of the U.S. Trade Representative voiced support for the current CAFTA-DR rules of origin as the best way to support the textile industry in the Northern Triangle countries, following an Oct. 29 meeting with a domestic industry textiles group. Imports from Central American countries covered by the Dominican Republic-Central America Free Trade Agreement have been flat since the agreement came into effect 15 years ago and some have talked about loosening restrictive textile rules of origin to boost production there.
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Deputy USTR Sarah Bianchi, after meeting with the National Council of Textile Organizations, said: "The CAFTA-DR rules of origin provide the certainty needed by industry to invest and expand operations in a way that promotes economic opportunity for both U.S. workers and those in the region. Maintaining certainty on the rules of origin and the short supply process in CAFTA-DR is critical to facilitating investments in the region by U.S. and Central American textile producers."
The American Apparel and Footwear Association disagrees. At a panel hosted in April, AAFA Vice President Beth Hughes said that as companies are trying to source outside China to escape Section 301 tariffs and forced labor, they're turning to Asia rather than Central America, despite the tariff-free export opportunity there. “Why aren’t they looking to a region like CAFTA? It should be a logical choice, but it’s not as [cost] competitive as Asia, even with an FTA,” she said.
She said that the restrictive rule of origin on yarn and thread for apparel makes CAFTA unattractive for companies. “If those rules were updated to allow more access to globally produced yarns, we think that would drive investment,” she said (see 2104140047).
Some in Congress have also wondered if changing the rule of origin would be productive, but there was no consensus among Democrats on the House Ways and Means Committee, according to Rep Jimmy Gomez, D-Calif. Gomez told International Trade Today in July: "I’ve been having some discussion [on changing them] but there's no consensus [among fellow members] in Ways and Means [Committee] on that component," he said. "I agree, we have to have a different approach to the Northern Triangle countries to make sure their economies build up. Trade can be a transformative tool, if it's done right." Gomez said he hears from companies that the current apparel rules of origin dissuade them from expanding production in CAFTA countries.
Bianchi and Deputy USTR Jayme White met with U.S. textile executives on Oct. 29 to talk about the possibility of creating economic opportunities in El Salvador, Guatemala and Honduras. The vice president's office was also represented, as it is her duty to try to find solutions to migration to the U.S. from those countries.
Kim Glas, president and CEO of the National Council of Textile Organizations, said, "Onshoring and nearshoring this critical supply chain is essential and, as a result of our meeting today, further investments will be announced soon. It’s an exciting time, and we deeply appreciate the Administration’s support to create economic opportunity in the U.S., Northern Triangle and throughout the region.”