WASHINGTON — The Bush administration presented Congress with two proposals to fix a glitch in the Central American Free Trade Agreement that has frustrated producers in the region and kept the accord's promise of duty-free trade out of reach.
The seven countries in the deal were expected to start implementing it simultaneously, but so far only the U.S. and El Salvador have done so.
Ratification of CAFTA pulled El Salvador out of the Caribbean Basin Initiative, a U.S. preference program that also offers reduced duties. That means goods made in El Salvador using materials from other countries yet to join CAFTA — Guatemala, Honduras, Nicaragua, the Dominican Republic and Costa Rica — are subject to duties that exceed 30 percent, in some cases.
That is the opposite of the accord's intended effect. Honduras and Nicaragua might be ready to fully implement CAFTA next month, changing again how duties are applied to some goods from those or other countries in the region.
"It's going to take a legislative fix," said Scott Quesenberry, special textile negotiator in the office of the U.S. Trade Representative.
Quesenberry discussed two possible legislative changes with staff members from key Congressional committees via conference call Tuesday. One plan would amend CAFTA so that countries in the agreement get rebates on duties paid in the interim. This retroactive treatment now applies only to countries in the Caribbean Basin Initiative until they join CAFTA. This option has the advantage of being clearly retroactive, but does not become effective until a country enacts CAFTA, Quesenberry said.
The other solution would be to go back into the Caribbean preference program and change the definition of where countries may get materials and still qualify for duty-free treatment.
"That [fix] has the advantage of being able to be done immediately," Quesenberry said. "The disadvantage is we will have to make it clear in the legislation that this is meant to have a retroactive effect."
The problem won't truly go away until the legislatures in all the CAFTA countries implement the deal — a goal complicated by Costa Rica, which has yet to even approve the pact.
Wilbur L. Ross, chairman of International Textile Group, which includes Burlington Industries and Cone Mills, put plans for a denim plant in the region on hold because of the uncertainty about implementing the pact. Ross had hoped to start construction on a denim mill in Nicaragua or Guatemala in January and had not ruled out building plants in both countries.
A Stella McCartney sketch of a custom dress made from protein-based silk in partnership with biotech lab Bolt Threads. The dress will be displayed at The Museum of Modern Art's upcoming design exhibition, "Items: Is Fashion Modern?"