CAFTA Won't Stem Flow Of Cheap Chinese Clothes, Labor Groups Say

by Emad Mekay

(IPS) WASHINGTON -- A trade deal between the United States and six Latin American nations was sold to lawmakers on the false premise that it would benefit U.S. textile workers and curb the flow of cheap imports from China, a leading pro-labor group said Wednesday.

The Washington-based Economic Policy Institute says that promises of more textile jobs under the controversial Central American-Dominican Republic Free Trade Agreement (CAFTA) are in fact "a pipe dream" because of the dramatic surge in Chinese textile exports to the United States after the expiration of a global quota system on the last day of 2004.

CAFTA, a pact that eases trade barriers between the United States, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic, was signed by Pres. George W. Bush at the beginning of August after its narrow passage in the House of Representatives late in July.

Some lawmakers who initially opposed the deal changed their positions after the administration argued that CAFTA would benefit the U.S. textile industry, providing a key margin of victory. Supporters say the deal gives manufacturers a permanent duty-free platform to ship billions of dollars worth of yarn and fabric to Central America.

Many say that the industry needs this agreement to compete against China because clothing imported to the U.S. from Latin America contains about 70 percent U.S. raw materials, while apparel imported from China has less than one percent.

"Our best hope, in at least trying to compete against China until the U.S and our global partners can force them to implement economic reforms, are through these regional trading relationships," Missy Branson, senior vice president of the National Council of Textile Organizations (NCTO), an industry group, told IPS.

NCTO says that Chinese exports of apparel to the United States have increased by over 800 million garments in just the first five months of the year. It blamed China, in part, for an acceleration of U.S. textile and apparel job losses, with 26,000 decent- paying jobs lost and 19 textile plants closed.

The U.S. Trade Representative (USTR) says that under CAFTA, garments made in Central America will be duty-free and quota-free "only if they use U.S. or regional fabric and yarn, thereby supporting U.S. jobs."

The administration also said that CAFTA would in turn "provide regional garment-makers -- and their U.S. or regional suppliers of fabric and yarn -- a critical advantage in competing with Asia."

Proponents of CAFTA also argue that it will boost apparel industry employment in Central America by 283,000 jobs, or 41 percent.

But EPI's new analysis says that similar claims were made for the North American Free Trade Agreement (NAFTA), a prototype for CAFTA-DR, yet new figures show that the U.S.-Mexico textile and apparel complex has not yet been able to compete with the flood of imports coming into the United States from China.

EPI found that since 2000, Mexico's share of U.S. apparel imports has fallen 4.9 percent, and total apparel imports from Mexico have declined by $1.5 billion.

New data also seem to undermine arguments that U.S. yarn exports to Central America will increase. The EPI analysis finds that as U.S. apparel imports from Mexico have fallen over the last four years, U.S. exports of fiber, yarn, fabric, and textiles to Mexico have declined 1.4 percent, or by about $50 million between 2001 and 2005.

"The 64-million-dollar question is whether, given CAFTA, the U.S. and Central America can compete with China," said Robert Scott, an international economist with the EPI.

"At the moment the answer is clearly no. This year's imports coming from Mexico and other countries we tried this with are falling sharply, and from the rest of the world they are falling sharply. And there's no reason to believe that the result with Central America is going to be any different at all."

The report says that since July 2000, over 500 factories and 90,000 apparel jobs have disappeared in Mexico's export processing zones.

Nor did NAFTA boost jobs in the United States. Although the U.S. industry currently employs nearly a million people and is the world's third largest exporter of textile products, it lost, in the same period, 212,000 textile jobs and 305,000 apparel jobs. "(CAFTA) is based on a model that is driven only by changes in tariff and non-tariff barriers, and it ignores the role played by the enormous surge in China's exports," says the analysis. "Those who believed that this treaty will save U.S. textile jobs or build up these industries in the CAFTA countries will be badly disappointed."

Textiles have long been a friction point between the United States and China. The U.S. textile and apparel industry has lobbied the Bush administration to impose measures temporarily limiting certain categories of textile and clothing imports from China.

A group chaired by the U.S. Commerce Department, called the Committee for the Implementation of Textile Agreements (CITA), will decide by Aug. 31 whether a surge in textile imports from China is disrupting the U.S. market.

In May, the committee imposed short-term quotas on imports from China in seven categories. There are also discussions about re-imposing quotas on China.

"When you have that kind of uncertainty in the marketplace, these retailers are going to have to diversify their sourcing strategy and that is where we maintain that CAFTA can give us a leg up," said Missy Branson of NCTO.