WASHINGTON — Senate Finance Committee chairman Chuck Grassley said Thursday that lawmakers are considering revisions in legislation to smooth implementation of the Central American Free Trade Agreement and minimize the impact on U.S. retailers, importers and textile producers.
The changes would be attached to an unrelated bill to end underfunding of employer-sponsored pensions. Grassley (R., Iowa) said the changes are “under discussion” in the conference committee but offered no details. The conferees had not reached a final compromise at press time.
U.S. textile producers and apparel importers have been hurt by slow implementation of the trade accord and at least one unfulfilled commitment to change the rule of origin for pocketing and lining. Top U.S. trade officials told House textile-state lawmakers that they would change the rules for pocketing and linings to a U.S.-only requirement in order to secure their votes for CAFTA.
The House narrowly passed the trade accord last July and the administration has implemented it with four of the six countries, but the pocketing and lining rule was never adjusted. As a result, U.S. textile producers exporting millions of dollars worth of pocketing and lining fabric to the region have lost business and some have closed, industry officials said.
Meanwhile, retailers and apparel importers also have been damaged by the stalled CAFTA implementation. The U.S. has activated CAFTA with Guatemala, Nicaragua, El Salvador and Honduras, but not the Dominican Republic or Costa Rica. The staggered sequence has created more costly sourcing scenarios for companies that are losing duty-free benefits and has complicated co-production in the region.
Ratification of CAFTA has pulled Guatemala, Nicaragua, El Salvador and Honduras out of another U.S. trade preference program, known as the Caribbean Basin Trade Partnership Act. That means apparel made in those four countries using materials from either Costa Rica or the Dominican Republic are now subject to duties that can exceed 30 percent in some cases. U.S. importers are paying these unintended duties and have no guarantee they will receive refunds once Costa Rica and the Dominican Republic officially implement the accord.