U.S. Trade Representative Susan Schwab signed a customs cooperation agreement Friday with Mexican Secretary of Economy Eduardo Sojo, taking an important step toward integrating apparel trade between North America and Central America.
The pact lays the groundwork for cumulation between Mexico and the countries of the Central American Free Trade Agreement, which would allow producers in Central America to make apparel with Mexican materials and still get duty free access to the U.S. market.
“This has been a high priority for our industry and the industries in the region,” Schwab said in a statement. “I hope that the remaining requirements for the implementation of the cumulation provision will be completed soon.”
Under terms of the customs cooperation agreement, signed on the sidelines of the World Economic Forum in Davos, Switzerland, U.S. and Mexican customs officials will work together to ensure that goods that make use of the cumulation provision are accounted for properly.
The hurdles that remain before cumulation can go into use are significant. Mexico needs to amend or sign trade agreements with the other CAFTA countries — El Salvador, Honduras, Nicaragua, Guatemala, the Dominican Republic and Costa Rica — and then all the countries must implement the changes. Additionally, the Dominican Republic has yet to implement CAFTA and Costa Rica has yet to ratify the pact.
Julia Hughes, senior vice president of international trade at the U.S. Association of Importers of Textiles & Apparel, said these conditions might all be met this year. “This is one of those unusual circumstances where a textile and apparel provision is indeed breaking new ground in trade policy,” said Hughes. “It’s the first step toward what we were calling the North American Platform, or an integrated North American industry that would bring the yarns, the fabrics, the apparel manufacturers all together without barriers between borders.”
In a small way, though an important one for the fashion industry, this begins to tie CAFTA together with the North American Free Trade Agreement, which covers trade between the U.S., Mexico and Canada.
“It’s the first step,” said Stephen Lamar, executive vice president of the American Apparel & Footwear Association. “Ultimately, we’re going to need to see all of those barriers come down between Mexico and the U.S. and Central America.”
Allowing duty free treatment on CAFTA goods using Mexican materials might increase competition for some U.S. textile firms, which count Central America as their most important export market.