By  on September 27, 2005

SAN PEDRO SULA, Honduras — In the heart of Central America, the implementation of a freshly minted free-trade agreement with the U.S. has enormous political and economic implications, but the ebullient outlook is punctured by a plethora of issues.

It has been 59 days since the U.S. Congress narrowly passed the Central American Free Trade Agreement, and the global retail, apparel and textile manufacturing industries are sorting out its potential benefits and drawbacks. For a large contingency of U.S. and regional apparel and textile sourcing executives who convened in San Pedro Sula last week, the post-CAFTA future is oblique at best.

Uncertainty surrounding the implementation of the pact, unresolved side apparel and textile deals reached in the 11th hour to secure votes in the House, rising oil prices and the impact of the quota-free environment cast a veil of anxiety over the 270 or so companies attending a conference dubbed "El Foro" and sponsored by the Sewn Products Equipment Suppliers Association, TC2 and the Honduran Apparel Manufacturers Association.

In the realm of apparel and textile production, CAFTA is a colossal agreement that could boost trade in many of the fledgling democracies so desperate to climb their way out of poverty and generate economic and social growth.

The six CAFTA countries combined exported about $9.5 billion worth of apparel and textiles to the U.S. during the 12 months ended July 31, according to Commerce Department figures. Together, the trade bloc accounts for 18 percent of the U.S. apparel import market — second only to China, which controls 22.6 percent of the U.S. apparel import market. Three of the six countries, including Honduras, El Salvador and the Dominican Republic, are among the top 10 apparel suppliers to the U.S.

Conversely, the region is the second largest export market for U.S. fabrics and yarns, which totaled $4.2 billion in 2004, although it is unclear whether U.S. producers will be able to maintain their existing business under CAFTA, which loosened the rule of origin for importers and retailers, allowing them to use more regional and third-country fabric and yarns.

The CAFTA countries are ramping up to take advantage of its implementation, targeted for Jan. 1 by investing in apparel training and development centers, schools, roads and more vertical operations — all in an effort to attract new foreign business.

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