WASHINGTON — Five Central American countries and the U.S. launched the start of free-trade talks Wednesday with ambitions to complete a pact this year, but even on the first day, details of textiles and apparel trade surfaced as a knotty issue.

However, trade officials from all sides, joined by a throng of lobbyists and executives, including retailers and apparel importers, celebrated the day with two news conferences, a lunch and a congressional reception.

Jim Jacobsen, vice chairman of apparel giant Kellwood Co., and one of three co-chairs at the newly formed Business Coalition for U.S. Central America Trade, spoke at the reception and set apparel importer goals: a trade pact that encourages full-package apparel production that entices companies to move orders from Asia to Central America.

"It has to be commercially successful…not a rehash of all the limitations and restrictions built into previous agreements [with the region]," Jacobsen told a crowd of about 100 in the Senate’s Mansfield Room.

The agreement would cover Honduras, Nicaragua, El Salvador, Guatemala and Costa Rica, which already enjoy sizeable apparel trade with the U.S., thanks to a series of trade breaks granted by Congress. The five countries supply 12.3 percent of all apparel imported by the U.S.

However, most duty-free apparel trade between the U.S. and the region requires U.S. textiles to be used. Apparel importers are seeking a trade deal in which textiles from U.S. free-trade partners Mexico and Canada could be used, as well as allowances for textiles from other countries.

"This is how I describe the way the [negotiating] process should be: simple and fast and the agreement has to be meaningful," said Kevin Burke, president of the American Apparel & Footwear Association, who attended the reception. "If we get bogged down in textiles rules of origin, what’s going to happen is companies will look for business elsewhere."

To help spur agreement and help build business in Central America, the AAFA in July is planning a summit between apparel makers in the region and their U.S. counterparts.

An issue on everyone’s radar is the political terrain a Central American trade pact will face in Congress, particularly if it’s voted on in 2004, an election year. In past agreements, the U.S. textile industry has flexed its influence to craft trade pacts with textile of origin provisions to their liking."We’re looking for a free-trade agreement without controversy that will pass the House. I also believe in Santa Claus," quipped Rep. Ellen Tauscher (D., Calif.), who is one of a couple of dozen Democrats who largely support U.S. free-trade policies, which have had difficulties in the House over issues like harm caused to U.S. jobs.

The American Textile Manufacturers Institute, is calling for the trade pact to have a strict yarn-forward rule of origin and no allowances for fabric or yarn from outside of the free-trade pact. The American Textile Trade Action Coalition, a mill/labor-lobbying group, is angling for stricter rules of origin involving direct arrangements between the U.S. and each of the countries. If apparel is made in Honduras for example, the yarn and fabric should come either from the U.S. or Honduras.

U.S. Trade Representative Robert Zoellick didn’t appear to have concerns about overcoming negotiating difficulties. He cited already strong growth in U.S. textile exports to Central America as being a plus for forging an agreement.

When global quotas on apparel are eliminated in 2005, Zoellick said a free-trade pact with Central America will be "the best chance our region will have to be competitive with China."

Honduras Minister of Industry and Commerce Norman Garcia said there are incentives to settling differences, since existing U.S.-Central America textile-apparel trade is already "a two-way street, and the fact is we are importing more and more." The negotiations will begin in San Jose, Costa Rica on Jan. 27.

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