WASHINGTON — Turning to the safeguard provision of the Central American Free Trade Agreement for the first time, the Bush administration will consider imposing tariffs on imports of socks from Honduras.
The safeguard provision is designed to help domestic producers when the elimination of duties under CAFTA results in an import surge that causes "serious damage" or a threat to companies making competing products. According to International Development Systems, Honduras was the third largest importer of cotton socks to the U.S. for the 12 months ended May 31, with a 54 percent increase in shipments to 18.4 million dozen pairs, valued at $70 million.
Tariffs from Honduras, which were eliminated when CAFTA went into effect in March 2006, could rise to as much as 18.8 percent and last for three years. CAFTA also includes El Salvador, Nicaragua, Guatemala and the Dominican Republic. Costa Rica is also part of the accord, but has yet to ratify it.
The Commerce Department, which chairs the interagency Committee for the Implementation of Textile Agreements, plans to release an official notice soon requesting public comments on the issue, said a spokesman. The issue will likely take months to be decided.
Rep. Robert Aderholt (R., Ala.), who pushed for protections for the U.S. socks industry during the 2005 CAFTA debate, welcomed the decision.
"Imports have been on the rise while domestic production has declined," Aderholt said in a statement. "A sock safeguard represents one way to ensure that our manufacturers are given an opportunity to adjust to new market conditions and compete on a level playing field."
Julia Hughes, senior vice president of international trade for the U.S. Association of Importers of Textiles and Apparel, called the decision "precedent-setting."
"For retailers and importers who are weighing whether to place orders in the CAFTA region or not, this sends a bit of a chill," said Hughes. "It's kind of standard language [for trade agreements] that's never been used before. If it's successful in this case, there may be other domestic producers who might be interested in trying to use it against other products."
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