As of Thursday, May 11, 2023
It’s World Trade Month—and a great time of reflection for the U.S. Trade Representative, Ambassador Katherine Tai.
During her confirmation hearings to be the USTR ambassador, she told members of Congress and the public that she can walk, chew gum and play chess at the same time. But in the two years since that remark, Ambassador Tai has left U.S. companies, ranchers and farmers scratching their heads. There has not, in fact, been a lot of action in the form of trade progress.
USTR has been working on a worker-centric trade policy to include climate-change measures and improvements to workers’ rights as well as protecting underserved communities. In the process, however, USTR started to ignore how the benefits of trade can help us achieve these important goals, and so much more. While other countries are signing and implementing new trade agreements to reduce costs for their consumers and families, and to create more opportunities for their workers, the U.S. has yet to even renew key trade programs like the Generalized System of Preferences.
GSP—which provides duty-free treatment for certain U.S. imports from eligible developing countries—was allowed to expire at the end of 2020. Before expiration, the 50-year-old bipartisan program allowed American businesses to use the duty savings to compete internationally, lower costs for American families, employ more American workers, and invest in new products. GSP was also an effective enforcement tool to open foreign markets, protect intellectual property and improve workers’ rights. By allowing GSP to lapse for so long, U.S. companies are forced to rethink their supply chains and possibly even move production back to China.
It seems likely that a similar fate awaits two other critical trade programs. The African Growth and Opportunity Act will not expire until September 2025; however, continued certainty in this region is critical now more than ever. Companies are poised to diversify out of China now, and Africa is a logical place for many of them to go. Decisive actions intended to signal continued U.S. engagement with African countries are necessary now to provide the industry with a predictable and stable environment. Failure to renew AGOA well before the end of 2023 could cost tens of thousands of jobs in Africa.
The Haitian Hemispheric Opportunity Through Partnership Encouragement Act and the Haiti Economic Lift Program Act provide duty-free access to the U.S. market featuring practical rules of origin that support responsible and sustainable sourcing. The U.S. apparel industry now provides jobs for more than 50,000 formal Haitians and, by some estimates, supports another 450,000 Haitian citizens.
But the fact that GSP has been expired for more than two years tells industry that renewal of Haiti HOPE/HELP is by no means guaranteed. If Haiti HOPE/HELP is allowed to expire, what should be an opportunity will instead mean the loss of tens of thousands of jobs for an economy that is already suffering.
Meanwhile, USTR is not pursuing new free trade agreements or improving existing free-trade agreements.
One great example of this is the U.S./Central America—Dominican Republic Free Trade Agreement. The U.S. faces a huge migration crisis. That crisis is in large part driven by the lack of economic opportunity in Central America. The apparel industry is one of the biggest employers in Central America yet has failed to realize its full potential.
CAFTA-DR was created to grow this industry, in a unique way, by incentivizing the growth of the industry but also incentivizing the use of U.S. inputs. But CAFTA-DR has not been implemented fully to enable the region to adapt to an ever-changing competitive environment. As a result, despite the industry’s exodus from China, U.S. apparel imports from and U.S. textile exports to Central America have stagnated, with U.S. textile exports maintaining a large share of an ever-shrinking pie. And, just as important, more and more migrants arrive at the U.S. border every day.
The American Apparel & Footwear Association leads a coalition that is urging USTR and the Biden administration to fully utilize a mechanism built into CAFTA-DR from day one, the short-supply mechanism. This mechanism, if implemented fully, provides the region with the flexibility to source materials that have never been available in the U.S. or the CAFTA-DR countries to move into new product categories and become more competitive, which in turn will grow U.S. apparel imports and give U.S. textile exporters a larger share of a growing pie. Most importantly, it will breathe more economic opportunity in the region, undercutting a major driver behind the migrant crisis. USTR has been unwilling to budge on short supply for more than two years, which begs the question: What kind of chess game is USTR playing? The U.S. economy is not winning. American workers are not winning. American families are not winning. And developing countries are not winning. China is winning.
It is incumbent upon President Biden, Ambassador Tai, and Congress to work together and support swift renewal of these trade programs and lift current barriers to smart trade that impact the very Americans they are trying to help. In turn, they would:
1) Revive confidence in new business and investment opportunities for U.S.-based companies,
2) Allow America and our neighboring trade allies to compete more immediately with our largest economic
3) Stem the crisis of migration at our southern borders.
This adds up to a triple win—the trifecta.
Beth Hughes is vice president, trade and customs policy, at the American Apparel & Footwear Association, where she oversees AAFA’s Trade Policy Committee and AAFA’s Customs Group. She is also chief spokesperson for the Coalition for Economic Partnership in the Americas, launched in November 2021. Before joining AAFA, Hughes served for six years as senior director, international affairs, at the International Dairy Foods Association.
Follow on LinkedIn and Twitter @BeffRae