AMERICA’S TRADE ZONE COULD GIVE U.S. TEXTILE, APPAREL A HUGE BOOST
Byline: Jim Ostroff
MIAMI — The prospect of a new era of profoundly increased trade for American apparel and textile manufacturers was once again extended here on Sunday, when President Clinton and 33 other leaders committed themselves to forming a Free Trade Area of the Americas by 2005.
In addition, Clinton said Sunday that the U.S., Mexico and Canada plan to begin negotiations soon to include Chile in the North American Free Trade Agreement.
The administration also said it will submit legislation to Congress next year to extend NAFTA benefits to Caribbean Basin nations and seek fast-track authority to conduct negotiations with Chile and Western Hemisphere nations.
“Free trade in our hemisphere will yield dramatic benefits in terms of growth, jobs and higher incomes, and permit us to pursue economic opportunities throughout the Americas,” Clinton said while presiding over the concluding session Sunday of the Summit of the Americas. “Our goal is to create a whole new architecture of the peoples of the Americas to ensure each has economic opportunities for growth and investment.”
Little actually was agreed to beyond completing free trade talks by 2005. Trade ministers from all 34 nations will plan to meet next spring to begin negotiations that would phase out all import tariffs.
The landmark GATT agreement that takes effect Jan. 1 will eliminate all import quotas of the 124 GATT member nations by 2005, including those in the Americas. While member nations agreed to reduce import tariffs, even at scaled-down rates, some of the levies will remain prohibitive.
U.S. industry officials specializing in apparel and textile production as well as retailing and importing generally applauded this weekend’s trade initiative.
“This is a bold move, and we welcome it,” said Robert Hall, a National Retail Federation vice president. “We feel that an Americas Free Trade Area will improve our ability to bring our style of retailing to Central and South America.”
Hall added that the pact “might also cause a shift in [apparel] sourcing away from other parts of the world.”
However, he urged the negotiators early on to discuss procedures to insure that shipments don’t hit import snags, due to Customs barriers, as they have with apparel exported to Mexico since NAFTA began in January.
Ronald Sorini, Fruit of the Loom’s international trade senior vice president, said his firm is excited about gaining entry into Brazil’s market of 155 million people, now largely closed due to 35 percent import duties.
Sorini, a former U.S. chief textile negotiator, said his optimism about free trade with Brazil is buoyed by his firm’s experiences in Mexico: “In 1993, we sold less than $500,000 worth of socks there, and this year, sales should be about $4 million.”
“Frankly though,” he added, “we would have liked to see the nations agree to a faster end point than 2005 for concluding free trade talks, because typically you’re looking at a 10-year period to phase out duties, as with NAFTA.”
Larry Martin, incoming president of the American Apparel Manufacturers’ Association, said his organization’s top priority is to see quick enacting of parity for the Caribbean Basin Initiative, and the AAMA is concerned about possible competition from Argentina, Columbia and Venezuela, which — like Mexico — have “economically mature and large textile and apparel industries.”
Martin said he assumes the U.S. industry would seek to have the same yarn-forward origin rule for apparel trade included in the hemispheric free trade pact as is now the case in NAFTA.
It is this same provision that concerns Frank Kelley, Liz Claiborne’s international trade vice president. “Everyone talks about free trade, but at the end of day, this doesn’t include textiles and apparel,” Kelley said, noting NAFTA’s requirement that clothing must be made of yarn and fabric originating in one of the three NAFTA nations and be assembled there, too.
Importers and retailers have strongly maintained that manufacturers should be allowed to use imported fabric and still qualify for NAFTA free trade benefits.
Jeffrey Schott, a senior fellow with the Institute for International Economics, a Washington think tank, agreed: “The future of apparel trade really is tied to how the terms of a hemispheric free trade agreement are worked out.”
He applauded the decision to begin talks with Chile on NAFTA admission but said this is more important in its symbolism. “This reinforces [Chile’s] own economic reforms and shows that it is a good market in which to trade and invest and it’s important in that it is another step in enlarging NAFTA,” Schott said. “But it will not be of major significance for U.S. retailers.” He added that other nations, such as Brazil and Argentina, offer greater potential for U.S. firms.