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U.S., Morocco to Talk Free Trade

WASHINGTON — Kicking into full swing on the trade front, the U.S. is slated to launch bilateral free-trade negotiations with Morocco next week.<br><br>It will be the second free-trade pact this month initiated by the Bush administration...

WASHINGTON — Kicking into full swing on the trade front, the U.S. is slated to launch bilateral free-trade negotiations with Morocco next week.

It will be the second free-trade pact this month initiated by the Bush administration following the start of talks with five Central American nations. The U.S. hopes to complete an agreement with the moderate Arab nation by the end of the year.

Trade negotiators will be juggling a spate of bilateral initiatives this year, including the soon-to-be launched negotiations with Australia, as well as another with five Southern African Customs Union nations. The U.S. is also involved in intense multilateral negotiations between 144 World Trade Organization member nations and regional trade talks with 33 Western Hemisphere countries, attempting to complete the Free Trade Area of the Americas pact.

But Morocco is up next, as trade officials from both sides meet in Washington the week of Jan. 20. Although a small supplier of apparel and textiles to the U.S., Morocco has a well-developed textile industry, which exports primarily to the European Union.

Located in Northern Africa, its shores are on the North Atlantic Ocean and the Mediterranean Sea, situated between Algeria and Western Sahara. In 2000, the European Union accounted for 74.5 percent of Morocco’s total trade, while the U.S. accounted for just 3.4 percent, according to the U.S. State Department.

For the year ended Oct. 31, 2001, apparel and textile imports from Morocco totaled 17.6 million square meters equivalent, valued at $73.2 million and representing only 0.05 percent of the U.S. import market, according to the Commerce Department.

Apparel accounted for about 90 percent of the U.S. imports from Morocco. Among the top areas were women’s cotton slacks, men’s and boys’ cotton trousers and man-made fiber underwear.

As in any free-trade negotiation, the domestic textile industry and apparel importers and retailers are lining up on opposing sides to attempt to secure beneficial provisions in the pact.

The domestic textile industry is pushing for strict rules of origin, strong customs enforcement language, a textile safeguard mechanism and no allowances for fabric or yarns sourced outside of the U.S. or Morocco.

Importers, on the other hand, are seeking a liberal rule of origin, which allows for flexibility and the use of fabric and yarns from around the world, as well as links to the free-trade agreements the U.S. has with Israel and Jordan.

This story first appeared in the January 14, 2003 issue of WWD.  Subscribe Today.

The American Textile Manufacturers Institute, one lobbying arm of the textile industry, claims Morocco poses a significant threat to the U.S. industry despite its miniscule share of the U.S. import market.

Morocco is already a major exporting nation with $2.5 billion in textile and apparel exports in 2001, according to Parks Shackelford, president of ATMI. Most of the exports were to the EU, which has granted Morocco duty-free access for textiles and apparel.

The domestic industry will seek the yarn-forward rule of origin embodied in NAFTA, which requires apparel and textiles to be made of yarn and fabric sourced within the free-trade area.

However, it still remains to be seen what U.S. trade negotiators will propose, and textile executives have been up in arms over recently completed deals with Chile and Singapore, which allowed for some tariff preference level provisions and the use of a certain amount of fabric and yarn from any county in the world.

The ATMI is also calling for a special textile safeguard mechanism similar to one China agreed to in its accession agreement into the World Trade Organization, but with a longer duration.

ATMI is awaiting a decision from the Committee for the Implementation of Textile Agreements on a request to reimpose quotas on five apparel and textile categories from China, which it claims is hurting the domestic industry.

“Given the sophisticated nature of Morocco’s textile and apparel sector, which employs over 200,000 workers, it is important that an FTA include an effective textile safeguard…,” said Shackelford, in a prepared statement at a hearing in late November.

ATMI is advocating a safeguard that would permit the reimposition of tariffs or the imposition of quantitative restraints in the event Moroccan imports cause market disruption.

Shackelford also said domestic mills won’t have significant export opportunities because Morocco serves “primarily as an export platform rather than a domestic consumer of value-added products.”

But Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel, claimed it would be “inappropriate” to incorporate a special textile safeguard along the line of China’s in this FTA.

“Normally if there is serious damage to an industry, there can be a temporary snap back of tariffs anyway,” she said. “If we want to encourage more business with Morocco, which is quota-free today, we don’t need to worry about special safeguards if it hasn’t happened today and quotas all go away in 2005.”

USA-ITA is seeking liberal rules of origin, such as those embodied in the U.S.-Israel FTA or U.S.-Jordan FTA. The U.S.-Israel FTA is considered one of the most liberal and provides for a substantial transformation standard, a 35 percent value-added requirement and a direct shipment requirement.

The group is also calling for linking the Morocco agreement with that of Israel and Jordan, which would allow producers to use fabric and yarn from all four countries and still receive U.S. duty breaks.

“If the Morocco agreement contains a different rule of origin, such as a NAFTA-like origin rule, then it is highly unlikely that any business will be developed by U.S. importers and retailers,” said Hughes.

Another apparel importer group is not making Morocco FTA negotiations a priority.

“We haven’t even looked at Morocco because we have had to prepare for CAFTA [the Central American Free Trade Agreement],” said Stephen Lamar, vice president of the American Apparel & Footwear Association. “Morocco is very small, and while 16 percent of our imports come from the five Central American countries, so our focus is on Central America.”

He said the AAFA would certainly look at Morocco “down the road.”

In related trade news, President Bush signed an order Friday designating Afghanistan a beneficiary of the Generalized System of Preferences program.

Bush deemed Afghanistan a “least-developed beneficiary,” which will allow the country to export some 5,700 products to the U.S. duty-free. Most footwear, textiles and apparel, watches, electronic products and certain glass and steel products are excluded from GSP benefits.