WASHINGTON — Nicaragua’s legislature approved the Central American Free Trade Agreement Monday night, leaving Costa Rica as the only signatory nation that has not ratified the accord.

U.S. trade officials have said CAFTA will go into effect in the countries that have approved it, including El Salvador, Honduras, Guatemala, the Dominican Republic and now Nicaragua, as well as the U.S.

Congress approved CAFTA at the end of July after a battle in the House, where it had a two-vote margin. Opposition ran deep and the Republican leadership leaned heavily on GOP loyalists — many from textile manufacturing states — to push the pact across the finish line.

Proponents contend the treaty will slash the remaining barriers to trade between the U.S. and the six countries. Opponents argue that it will strip business from textile and sugar producers, lead to more job losses in the U.S. and hurt Central American economies trying to compete with U.S. exports.

Negotiators from the U.S. and the CAFTA nations are trying to resolve implementation and other issues as they move toward launching the treaty by Jan. 1.

The six countries account for 18 percent of the U.S. apparel import market, second only to China, which controls 22.6 percent. It is also the second largest export market for U.S. fabrics and yarns, which totaled more than $4 billion in 2004.

Industry representatives from the U.S. and Central American countries are monitoring discussions to resolve CAFTA apparel and textile amendments that were crafted outside of the original agreement and will require legislative action. The Bush administration made the commitments to House members who represent textile-producing regions in order to secure enough votes for passage, including one that seeks to preserve pocketing and lining business and another intended to protect U.S. cotton and man-made trouser fabric business in Nicaragua.

This story first appeared in the October 12, 2005 issue of WWD. Subscribe Today.

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