CBI Region Looks Ahead to 2005
The recent passage of the Caribbean Basin Trade and Partnership-Development Act (CBTPA) and implementation of the Caribbean Basin Initiative (CBI) have spurred interest by U.S. companies in producing in the Caribbean and Central American regions. One indication of that interest: The CBI Apparel Sourcing Show in Guatemala just wrapped up its 11th annual run on May 17 with record attendance of 4,130 visitors and exhibitors taking up 192 booths on the show floor. California Apparel News manufacturing editor Claudia Figueroa spoke with Natalie Hanson, International Development Systems trade policy director, and Marcio Cuevas of Guatemala’s Association of Exporters of Non-Traditional Products (AGEXPRONT), organizer of the show, about the region’s apparel industry and the possibility of free trade in the Western Hemisphere in 2005.
Has apparel business increased in CBI regions since the implementation of CBTPA?
Cuevas: I think everyone has been improving—not by having new investment coming in, but expanding their already established operations around the country. We have seen investment come in from Korea, especially to Guatemala.We see most of the American investment in textile and apparel in Honduras, Costa Rica and El Salvador.
How much of an increase has there been in Guatemala’s production as a result of CBTPA?
Cuevas: When CBTPA was approved we saw some flow come to the area, but not as much as we were expecting, probably because nobody knew the rules and the procedures of operating under the new program. In the second year we have seen more work under CBTPA, but less work in other categories that we used to have work in before, especially in cotton pants, shorts and dress shorts. In the wool categories we also have been seeing a decrease. That means that CBTPA has been helpful, but probably not as much as we would like.
In what ways has CBI improved working conditions in Guatemala’s apparel industry?
Cuevas: Everyone involved in Guatemala’s apparel industry has worked together as a whole to make it a better industry. Our association, Vestex [the apparel division of AGEXPRONT], has a labor code that we established seven years ago as a monitoring system; it was the first one in Latin America. We just received the Presidential medal to the sector because they have seen improvements that all of us who are involved in this business have made to the living conditions of the people who work with us—not only to the workers, but also to their families. Many companies provide medicines, child care, dental programs and pharmacies. There are also programs that [teach] workers how to write and read.
What kind of full-package programs are businesses offering in your region?
Cuevas: In Guatemala we have seen it in the knit programs, which involve not only underwear, but polo shirts, which have become our No. 1 product in Guatemala. Twenty-five percent of Guatemala’s exports are cotton knit shirts for the past year.
Hanson: The difference between Guatemala and the other CBI countries is that Guatemala is not relying as much on the new benefit programs, which means they’re doing more of the full package already. Guatemala is one of the few countries, not just in the CBI region, but [of] all of the world suppliers, where their exports actually increased; everyone else has been on a slight decrease or holding steady at best. A lot of that has to do with the U.S. market and the downturn in the economy, but also the fact that there was some frustration over the implementation of the CBTPA benefits.
What is currently being done to include dyeing and finishing in CBTPA?
Hanson: U.S. customs is still working with interim regulations; they have not yet issued their final rules. So although dyeing and finishing of U.S. fabric [in CBI countries] is allowed under the interim regulations, there has been quite a fuss made in the U.S. Congress by those who would like to take that away from the CBI region. And, the uncertainty of what’s happening there has kept investors away, so I’m not sure that there’s been any real capital flows to that area. Of course, it is only U.S.-made fabric that is affected by the current political debate.
Here at the CBI Apparel Sourcing Show there has been a lot of talk about Free Trade 2005. What is it exactly and what is the status?
Hanson: At the Summit of the Americas in December 1994, the U.S. and the heads of state and government of 33 other Western Hemisphere countries, including Mexico, [Caribbean and Central American countries], agreed to work toward the establishment of the Free Trade Area of the Americas [FTAA].Under the FTAA, all barriers to trade and investment are to be progressively eliminated. Negotiations were formally launched after the Fourth Ministerial meeting in San Jose, Costa Rica, in 1998. The target date for completing negotiations is 2005. Currently, there are a series of “working groups” on topics such as market access, labor and environment, and each has the task of drafting the text of the proposed agreement. Once completed, the FTAA will be the largest multilateral free-trade area in the world. [For a complete list of the countries, see www.ftaa-alca.org/alca_e.asp.]
What will FTAA’s impact have on importers?
Hanson: Specifically in the area of textiles and apparel, the completion of the FTAA will mean the elimination of all import duties and guarantee of a quota-free environment for the trade of textiles and apparel. Although, separately, under the World Trade Organization’s agreement on textiles and apparel all quotas will be eliminated on Jan.1, 2005.
Do you think FTAA will have a positive impact on U.S. manufacturers and textile makers?
Hanson: I think the creation of a free-trade area for the entire Western Hemisphere will be a positive force for the apparel industry. The size of the market should increase demand for yarns, fabrics and apparel from all of the participating countries.
