AFRICA-CBI IS A GO: BIGGEST BREAKTHROUGH SINCE NAFTA/WTO
Byline: Joanna Ramey
WASHINGTON — It was a momentous day for importers Thursday on Capital Hill.
The Africa-Caribbean Basin trade bill — dropping duties on select apparel imports in two regions seen as fertile sourcing grounds — cleared Congress Thursday after the Senate voted overwhelmingly in favor of the measure.
President Clinton, a big backer of the bill, is expected to sign it into law in the coming days.
The Senate voted 77-19 in favor of the legislation, following the 309-110 House vote a week ago. The bill represents the most important free-trade law since Congress passed NAFTA in 1993 and the World Trade Organization enabling legislation was ratified in 1994 as a culmination of the Uruguay Round of GATT talks.
The measure represents a mix of benefits for the apparel, textile and retail industries and, for organized labor and small-to-medium-size U.S. garment makers, another threat to their existence from global competitors.
However, U.S.-based, multinational companies, domestic textile mills and retailers have fought for the Caribbean Basin portion of the bill since 1992.
“We’ve been working for years getting one commitment at a time on that bill,” said Larry Martin, president of the American Apparel Manufacturers Association.
As a result of the bill, duty savings over five years on apparel imports from the region will be about $1.42 billion, according to a congressional estimate based on 1998 shipments. Martin expects the savings to surpass this number, as select production is moved to the region from Asia, as well as from the U.S.
For textile mills, the prospect of increased sales to the Caribbean and Central America means boosting the U.S. work force and giving the industry a competitive edge in the region once global textile quotas for World Trade Organization members are eliminated in 2005.
Enactment of the legislation “is an important step in extending North American Free Trade Agreement-type benefits beyond Mexico and Canada to the Caribbean,” said Roger Chastain, president of the American Textile Manufacturers Institute, who is also president of Mt. Vernon Mills, based in Greenville, S.C.
However, Chastain criticized the Africa portion of the bill as threatening U.S mills since some apparel made of non-U.S. textiles can receive duty-free benefits.
“Within these limits, Africa is free to target individual apparel product categories, which will greatly increase the potential damage of this bill to U.S. textile jobs and production,” Chastain said.
U.S. retailers are looking to benefit from both aspects of the bill, despite limitations on non-U.S. textiles.
“Overall, I think the bill will be positive for the retail industry,” said Erik Autor, vice president and international trade counsel with the National Retail Federation.
Autor said he was particularly pleased to see Congress finally pass a trade bill 5 1/2 years after WTO ratification. During this gap the House rejected a stand-alone Caribbean Basin measure and a bill renewing the President’s trade deal negotiating authority.
The legislation affects 48 African countries and 25 Caribbean Basin nations and is the result of extensive negotiations between the House and Senate, as well as lobbying by apparel companies, textile mills, retailers and importers. No one got all they were angling for, and in the end, the measure is closest to a Senate version requiring that duty breaks be limited to apparel produced from U.S. fabric only.
The exception to the U.S.-textile-only rule for sub-Saharan African would allow countries in the region to use their own textiles in apparel receiving duty-free treatment in amounts up to 1.5 percent of total U.S. imports. That number would increase to 3.5 percent during the eight-year life of the bill. The poorest countries in the region could use fabric from anywhere, but shipments would be counted against the 1.5 percent to 3.5 percent caps.
A limited amount of knit apparel produced from textiles made in the 25 Caribbean and Central American countries would also receive duty-free treatment.
The 292-million-square-meter equivalent knit textile exception would largely benefit underwear and knit shirt manufacturers in Honduras and El Salvador, where most textile manufacturing in the region is focused.
House negotiators pressed for exceptions to the Senate U.S.-textile-only rule, arguing that broader fabric benefits were needed to develop economies of the poor countries in each region, particularly in Africa.
Other exceptions were also carved out, the result of various interests lobbying their causes. One furthered by retailers will allow shipments of merino wool and cashmere sweaters knit in sub-Saharan Africa to enter the U.S. duty free. Brassieres made in the Caribbean Basin can contain up to 75 percent non-U.S. fabric, calculated on a per company and annual basis, a provision pushed by bra makers like VF Corp. and Warnaco.
Israel even got a special exception to the U.S.-only-yarn rule for the Caribbean Basin for its nylon yarns, a benefit extended to all other countries with which the U.S. has a free-trade agreement. DuPont was able to secure a U.S.-only spandex rule for Caribbean Basin imports covered in the bill.
Ann Hoffman, legislative director for UNITE, the apparel and textile union, called the various compromises reached in the bill, several secured a day before the House voted, “a terrible way to do trade” legislation.
“It’s really just an importer- and retailer-oriented” bill, she said.
The next key trade-oriented action in Congress is expected in the next couple of weeks, when a vote is planned on granting China permanent normal trade status, which is seen as necessary for that country to become a WTO member.