MEXICO CITY — Nicaragua has stepped up pleas for the U.S. to extend its crucial tariff preference-level provision before it expires at the end of the year. Otherwise, its flagship textiles industry could lose 15,000 jobs as a string of U.S. manufacturers jump ship to Asia, said Dean Garcia, director of leading textiles federation Anitec.
“We are hoping Congress will discuss the TPLs renewal during the lame-duck session in November,” Garcia said. “We still need the TPL for parts of our knitwear and woven industries to stay competitive.”
Nicaragua has teamed with several U.S. trade associations to rally Sens. Dianne Feinstein (D., Calif.) and Kay Hagan (D., N.C.), who have introduced bills supporting the extension, to persuade Capitol Hill to debate the issue this fall. The impoverished Central American country wants the TPL to be extended under the Central American Free Trade Agreement’s original terms, Garcia said. However, he noted the sector can survive if at least 50 percent of current benefits are maintained.
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Nicaragua and four other Central American countries conduct free trade with the U.S. under CAFTA, created in 2005. The U.S. handed the 10-year benefit to Nicaragua to enable it to compete in the new trading environment.
According to Garcia, the TPL has helped propel Nicaragua’s U.S. export share by allowing mills to import as much as 100 million square meter equivalents of woven fabric from non-CAFTA members to make export apparel north of the border. U.S. apparel makers sourcing in Central America have also benefited strongly.
According to Garcia, the knit and woven segments account for 30 percent of the sector’s fortunes. He added that U.S. manufacturers, notably Levi Strauss & Co., Wal-Mart Stores Inc. and Under Armour Inc., which make woven and knit trousers and other apparel for sale in the U.S., will suffer without the TPL, encouraging them to shift output to Vietnam and other Asian countries.
Garcia’s concerns come as Nicaraguan sewers, many of them U.S.-owned, are already on tenterhooks from the growing specter that Vietnam could join the Trans-Pacific Partnership agreement without a yarn-forward rule of origin, boosting its competitiveness against Central America.
Jonathan Fee, a trade lawyer and partner at Alston & Bird in Washington, said the TPL renewal’s chances are pretty slim.
“CAFTA legislation did not provide for any extensions,” he said, adding that any changes would require the treaty’s amendment, which other regional countries are unlikely to support. “U.S. textile producers are also largely against it, as this was only a transitional measure for Nicaragua.”
Fee added that Washington is also unlikely to want to give the government of Nicaraguan President Daniel Ortega, with which relations have cooled, any breaks.
According to Fee, the Feinstein Bill, which calls for the TPL to be renewed through 2024, is unlikely to succeed. However, he said the Hagan initiative could funnel through Congress. It calls for a 10-year extension, as well, but is more limited, including only woven trousers and shorts, and has a 50 million SME limit compared to 100 million now.
U.S. apparel manufacturers and importers remain optimistic. Nate Herman, vice president of international trade at the American Apparel & Footwear Association, said, “We are still hopeful and working with other associations to have this negotiated in the lame-duck session,” adding that Feinstein and Hagan have pledged to find “the right window” to press Congress to extend the TPL.