The American Manufacturing Trade Action Coalition, an umbrella group of 18 textile associations, has announced its opposition to the Central America Free Trade Agreement and called for a moratorium on it and other FTAs now under negotiation.
AMTAC officials said such a moratorium should also include legislation aimed at further liberalizing existing preferential trade arrangements with all other countries and regions such as the African and Middle East trade liberalization initiatives being pushed by Congress and the Bush administration.
“We are extremely alarmed at the rapid disintegration of our manufacturing base resulting in part from past trade liberalization agreements and legislation,” AMTAC said in a statement.
“The United States has lost a net total of 2.7 million well-paying manufacturing jobs since Jan. 1, 2001, and it is fast losing vital basic manufacturing capabilities that have alarming national economic welfare and national security ramifications.”
U.S. Trade Representative Robert Zoellick and Agriculture Secretary Ann M. Veneman announced the completion of negotiations for the new Central American Free Trade Agreement with Guatemala, El Salvador, Nicaragua and Honduras on Dec. 17.
A number of commodity organizations have indicated they will support the agreement, which must be ratified by Congress.
But AMTAC officials complained that CAFTA will increase the trade deficit, destroy U.S. manufacturing jobs, result in the loss of U.S. marketshare for domestic manufacturers, and encourage illegal transshipping.
“U.S. trade policy is inherently flawed,” said AMTAC Washington Coordinator Auggie Tantillo. “CAFTA replicates the failed policy of negotiating trade deals with countries capable of manufacturing large amounts of consumer goods for the U.S. market but incapable of buying significant numbers of finished U.S. goods in return.”
“Instead of trying to figure out how the United States can decrease its already devastating trade deficit (an expected $550 billion in 2003), the government is once again proposing a trade deal that will make it even higher. Make no mistake, the U.S. government's trade policy of maximizing the trade deficit has got to stop,” said AMTAC Co-Chair George Shuster, CEO of Cranston Print Works of Cranston, R.I.
“Instead of negotiating a flawed CAFTA, the United States ought to have been sitting down with China and hammering out a comprehensive textile bilateral agreement to slow the surge of job-destroying Chinese imports. After quotas expire in 2005, China is expected to quickly capture 75 percent U.S. marketshare and at least 45 percent world marketshare. Not only will this displace 630,000 U.S. textile and apparel workers, but an additional 30 million textile and apparel manufacturing workers from around the world will lose their jobs if the China problem is not addressed,” Tantillo added.
Specifically on textiles, CAFTA includes several provisions that will displace U.S. yarn and fabric exports to the Central American countries, he said. These provisions include cumulation, tariff preference levels, and other rule of origin loopholes.
A cumulation rule of origin exception would allow apparel manufacturers in CAFTA countries to use Mexican and Canadian yarn and fabric and still receive duty-free treatment when they export their products to the United States. This rule would discourage Central American manufacturers from buying U.S. yarn and fabric.
The deal also grants tariff preference levels to Nicaragua. Tariff preference levels significantly damage U.S. textile and apparel industry by allowing CAFTA countries to buy yarns, fabrics and other apparel components from low-cost countries like China that do not have free trade agreements with the United States; use those parts in assembling apparel; and export the finished goods made of non-CAFTA and non-U.S. components to the United States duty free.
In addition, the CAFTA deal carves out an exception that allows Central American countries to manufacture certain products made from non-U.S. components and ship them to the United States duty free in unlimited amounts. The products covered by this loophole will only have to undergo a single-step process of assembly. For example, China could supply 100 percent of the components for a product, have the product assembled in Central America, and then export the product in unlimited quantities to the United States duty free.
“Simply put, cumulation, TPLs and other rule-of-origin loopholes allow for non-CAFTA signatories to receive duty-free treatment for products exported to the United States using their components at the expense of U.S. manufacturers,” said Tantillo.
“U.S. law grants duty-free treatment to apparel assembled in CAFTA countries using U.S.-made yarn and fabric under the Caribbean Basin Trade Partnership Act. Why should a battered industry endorse a deal that would only increase the flood of job-destroying imports made with foreign components?”
AMTAC also believes that cumulation will encourage illegal textile transshipping, making it likely that significant amounts of illegal Chinese components would be used in the production of Central American apparel that would then be shipped to the United States duty free.
Recent press reports have said that Mexican industry leaders estimate that contraband accounts for 60 percent of the country's $16 billion domestic clothing industry. Chinese goods are said to account for the vast majority of the illegal imports.
“The United States and Mexico cannot stop illegal textile transshipments from China right now. AMTAC sees no reason why this negative trend won't continue in the future.”