CRANE PUSHES CBI PARITY WITHOUT YARN-FORWARD RULE

Byline: Jim Ostroff With contributions from Joyce Barrett, Washington

MIAMI — If Rep. Philip Crane (R., Ill.), the incoming chairman of the House Ways and Means trade subcommittee, has his way, Caribbean apparel makers will get free-trade parity with Mexico next year. And they’ll be able to use foreign fabrics in the bargain.
In an interview here following his talk Tuesday night to the 18th annual Miami Conference on the Caribbean and Latin America, Crane predicted Congress would vote by June to grant Caribbean Basin Initiative countries the same benefits the North American Free Trade Agreement has given Mexico.
He said he favors granting this parity without the yarn-forward rule — a requirement under NAFTA that apparel receiving free-trade benefits be made of fabric originating in North America. This rule, promoted by the U.S. textile and apparel interests, has riled importers and retailers, who say it severely limits the free-trade aims of NAFTA.
However, Crane added, the prospects Caribbean Basin Initiative manufacturers would be exempt from the rule were uncertain.
“I’m not saying I can get a consensus” in Congress for this concession, he said. “As you know, we have special interests here that will go ballistic on that.”
Initial reaction of Washington’s business lobbyists to Crane’s remarks Wednesday indicated his proposal to eliminate the yarn-forward rule would run into the expected resistance.
Larry Martin, incoming president of the American Apparel Manufacturers Association, said he was buoyed by Crane’s prediction of a vote early in 1995, but opposed dropping the yarn-forward rule.
“We support the yarn-forward rule,” Martin said. “It’s called CBI parity, which means the same rules that apply to Mexico apply to the Caribbean. Our interest is to have our Mexican and CBI members operating under the same situation.”
Crane, who will be the second-ranking member of the full Ways and Means committee when the 104th Congress convenes in January, said, “There is a consensus on both sides of the aisle” for enactment of CBI parity (at least parity that includes the yarn-forward rule).
CBI parity is the U.S. apparel industry’s top Congressional priority next year. Apparel firms, who have invested heavily, with government encouragement, in garment-making operations in the region maintain they are now disadvantaged by NAFTA, which gives a lot of Mexican apparel quota and duty-free access to the U.S. market.
Apparel assembled in CBI countries using U.S-cut fabrics is subject to quota and value-added tariffs when imported back into the U.S. Apparel assembled in the CBI using fabric both made and cut in the U.S. has virtual quota-free access, but still is subject to the value-added tariffs.
Crane said he sided with the American apparel firms’ position and noted parity had been attached to a bill enacting the new GATT pact, but was dropped by the White House due to concerns about offsetting tariff revenue losses, as required by Congress. This should not be a problem in the new Congress, he said.
The GOP-controlled Congress, he said, likely would adopt a “dynamic scoring” approach to trade legislation that would offset losses in duty income with anticipated revenue gains from higher exports under free-trade arrangements. The trade subcommittee by late winter should consider a bill authorizing CBI parity, along with renewal for fast-track trade negotiating authority to start talks on admitting Chile to NAFTA, “so we can have it off the table for a vote by June,” Crane said.
U.S. textile and apparel firms insisted on the yarn-forward rule as their price for supporting NAFTA, arguing it is needed to prevent transshipping of Far Eastern apparel and would help bring production back to this hemisphere.
U.S. retailers and importers maintain that unless Mexican and CBI apparel producers are permitted to use Far Eastern fabrics, they will be unable to make many types of apparel and will be forced to continue importing from Asia.
On Wednesday, Crane’s point of view got a thumbs-up from Julia Hughes, divisional vice president of government relations for Associated Merchandising Corp. and chairman of the U.S. Association of Importers of Textiles and Apparel.
“It would be a great opportunity and we would support it,” said Hughes.
However, a spokeswoman for the American Textile Manufacturers Institute said the domestic industry supported parity with the yarn-forward rule as included in NAFTA.
“Our long-standing position has been in support of NAFTA parity to the Caribbean, based on the NAFTA rule of origin and Customs enforcement measures,” she said. The spokeswoman would not comment directly on Crane’s statement that he favored eliminating the yarn-forward rule. “Things are so preliminary. We look forward to working with Congress and the administration next year to draft the bill.”

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