WASHINGTON — President Obama threw his support behind duty-free manufacturing zones in the war-torn Afghanistan and Pakistan border areas as part of a comprehensive plan he unveiled Friday to intensify the military campaign and stabilize the region.
This story first appeared in the March 30, 2009 issue of WWD. Subscribe Today.
Apparel and textile producers remained uncertain about the benefits and risks associated with the manufacturing areas, known as “reconstruction opportunity zones,” that have been proposed in pending legislation on Capitol Hill.
Obama’s new strategy in the war in Afghanistan combines a larger military presence with economic development to wipe out terrorist insurgencies in the troubled region. To that end, Obama lent his support to two bills pending in Congress: one that would create the duty-free manufacturing zones in the border region between Pakistan and Afghanistan, and one that would provide $1.5 billion in economic assistance to Pakistan over five years.
Obama said the proposed manufacturing zones “will develop the economy and bring hope to places plagued with violence.”
While apparel importers are supportive of the concept of the duty-free zones, they argue the limited scope of the legislation will render them ineffective unless the measure is expanded and additional apparel products are included.
The proposed Senate and House bills would exclude 33 of the 34 product categories that were covered by a quota agreement with China from the manufacturing zones. That means high-volume import products, such as cotton knit tops and trousers, which are currently imported from Pakistan to the U.S. with a combined value of $974 million in 2008 and represent 27 percent of the entire amount of Pakistani shipments to the U.S., will not qualify for duty-free treatment.
“We think you would undercut any real benefit if [the legislation] is not expanded,” said Nate Herman, senior director of international trade at the American Apparel & Footwear Association. “We don’t think they would be particularly viable.”
Herman and Julia Hughes, senior vice president of international trade at the U.S. Association of Importers of Textiles & Apparel, said the zones would be viable if products such as cotton knit tops and trousers were included, despite the dangers and security concerns associated with manufacturing in a war zone.
But the U.S. textile industry is opposed to expanding the legislation.
“One of the reasons we opposed including sensitive apparel products [in the ROZs] is that Customs will not even go into Afghanistan to enforce the rules, so it would open up another loophole for illegal activity from China to be transshipped through the region,” said Cass Johnson, president of the National Council of Textile Organizations.