CAFTA and textiles

By Alex Singleton | 15 July 2005

President Bush is in North Carolina today to pitch the case for the Central American Free Trade Area to the textile industry. According to ABC News:

The president comes at the invitation of a local textile executive coalition that supports the Central American Free Trade Agreement. He'll speak in the midst of a region where plants shutdowns have been blamed on the North American Free Trade Agreement.

Harding Stowe, president of R-L Stowe Mills in Belmont, says there's no doubt that textiles came out on the short end of trade deals prior to CAFTA. He says those deals can't be undone and that the textile industry has to look to the future, which means competing against China. Stowe says CAFTA will help the domestic industry do that.

That's an notable last sentence. Mr Stowe recognizes that in the long run protectionism is counterproductive. It encourages sickly, inefficient producers - and that's no way to create a sustainable industry.

Update: The blog EarthByNight says I'm being too generous, pointing me in the direction of Cato's The Case for CAFTA:

Without exception, all apparel products will be duty-free upon implementation of the agreement. However, compromising the potential gains of the agreement is the inclusion of some fairly rigid stipulations that must be met as a requirement of duty-free treatment.

The U.S. textile industry lobbied hard for what are known as "yarn forward" rules of origin. Under those rules, a textile or apparel product manufactured in Central America or the Dominican Republic must be produced from regional textile components in order for the final product to be considered "originating" in the region and, ultimately, to receive duty-free treatment. What renders those rules particularly restrictive is that there is no significant regional textile industry outside the United States. Thus, in order to receive duty-free treatment, a shirt or a pair of pants exported from Central America or the Dominican Republic to the United States must contain U.S. textile components.