TARIFF PARITY BILL FOR CBI NATIONS SNAGGED IN HOUSE
Byline: Joyce Barrett
WASHINGTON — The new bill to give the Caribbean free-trade benefits on a par with Mexico under the North American Free Trade Agreement ran into rough waters at its first hearing Friday before the House Trade Subcommittee.
The center of controversy was a provision that would permit apparel using Far East fabrics to qualify for duty-free treatment if shipped into the U.S. through one of the 24 Caribbean Basin Initiative nations.
Many associations representing textile and apparel interests lined up to either laud or lambast the bill, sponsored by Subcommittee Chairman Phil Crane (R., Ill.). Retailers, importers and manufacturers were the most eager to lend their support to the controversial provision, dubbed tariff preference levels (TPLs).
The domestic textile industry, organized labor and — perhaps most importantly — the Clinton administration, criticized the TPLs as inappropriate for the region. The American Apparel Manufacturers Association, which has been one of the biggest advocates of broadening Caribbean trade benefits since NAFTA went into effect more than a year ago, took no position on the tariff preferences, and instead AAMA president Larry Martin said he was still weighing it.
An interim trade program for the Caribbean unsuccessfully pushed last year by President Clinton did not include the tariff preferences, and Deputy U.S. Trade Representative Charlene Barshefsky told Crane’s panel that the administration planned to submit amendments that would strike them.
“There is little economic rationale for TPLs for the Caribbean Basin Initiative countries,” Barshefsky said. “Mexico negotiated TPLs to grandfather certain of their established trade in non-originated products. To date, Mexico has exported almost nothing under its TPLs.”
However, in an interview during a break in the lengthy hearing, Crane said he was not inclined to go along with the administration’s attempts to strike the TPLs. He noted his goal in writing the broad bill was to encourage additional development in the region so the U.S. could avoid giving it costly foreign aid. To limit the broader trade benefits would ultimately limit development, he said.
Crane’s measure would grant tariff treatment equivalent to that accorded Mexico under NAFTA for six years pending the accession to NAFTA of the Caribbean nations. It is aimed at ameliorating any disadvantage that Caribbean exports, particularly apparel, may have against Mexican exports, which, under NAFTA, have duty-free access to the U.S. market.
The TPLs are included to allow NAFTA-like benefits to those fabrics not available in the U.S. In addition, Crane’s bill would expand free trade with the Caribbean to cover various other products, from footwear and handbags to canned tuna.
Currently, apparel exports to the U.S. from the Caribbean are liable for value-added duties under the 807 program. That difference in costs could convince some apparel makers to move to Mexico, said Howard Vine, U.S. representative for the Central American and Caribbean Textile and Apparel Council. He estimated such operations in the Caribbean could be moved to Mexico in six to seven weeks.
“Free access for Mexico’s exports of these products gives the Mexican exporter anywhere between an 8 to 25 percent cost advantage over competitors in the Central American and Caribbean beneficiary countries,” Vine said.
In the first nine months of 1994, U.S. apparel imports from CBI countries grew 10 percent, compared to a 45 percent jump in apparel imports from Mexico, Peter Johnson, executive director of Caribbean/Latin American Action, testified. “The Caribbean Basin faces not only loss of trade but loss of investment,” he said.
John Ermatinger, vice president of North American operations and sourcing for Levi Strauss & Co., testified that the parity bill would enable his company to shorten production cycles by making them more vertically integrated, with sewing, finishing and packaging consolidated at a single location.
Also, the tariff preference levels, he said, would give U.S. apparel companies “the necessary flexibility to meet future competitive needs…once the Multi-Fiber Agreement quotas have been phased out.” These quotas are to be phased out over the next 10 years under the GATT Uruguay Round agreement for liberalized worldwide trade.
Retailers and importers also would benefit from the tariff preference levels, said Robert Hall, vice president and government affairs counsel for the National Retail Federation, because it would enhance the competitiveness of CBI countries as suppliers.
Julia Hughes, chairman of the board of the U.S. Association of Importers of Textiles and Apparel, testified that the tariff preference levels should be strengthened even further to instruct — rather than just authorize — the USTR to establish them.
Carlos Moore, executive vice president of the American Textile Manufacturers Institute, said the domestic industry favored NAFTA-like benefits for the Caribbean but opposed the TPLs: “We urge that TPLs not be authorized until the countries in the region become full-fledged NAFTA partners.”
Thomas W. Mason, president of Virginia Apparel Corp., Rocky Mount, N.C., an independent contractor that makes khakis for L.L. Bean, said that if the Caribbean were given NAFTA-like benefits, he could be forced to close his plant, eliminate 260 jobs and move to the Caribbean.
“Putting the mechanisms in place that would allow CBI beneficiaries to achieve NAFTA parity and subsequent NAFTA accession would raise the current competitive disadvantage we face to an insurmountable level,” Mason said. “I believe that this legislation, in combination with NAFTA and GATT, will mean certain death for the American apparel contractor.”
Organized labor also opposes the NAFTA parity plan, said Jay Mazur, president of the ILGWU. He especially criticized the tariff preference level for encouraging “increased use of CBI countries by South Korea and others as a way of selling into the U.S. market without quota or tariff restrictions on exports from South Korea itself.”
— Fairchild News Service