Statement of J. Anthony Smith, Central American and Caribbean Textiles and Apparel Council

    Founded in 1993, the Central American and Caribbean Textiles and Apparel Council (CACTAC) serves as the spokesman for the textile and apparel industry of the CBI countries which are beneficiaries of the Caribbean Basin Initiative (CBI) of 1983, enhanced last year through the Caribbean Basin Trade Partnership Act.

    CACTAC appreciates the opportunity to submit written testimony to this Subcommittee on the progress in implementing the Trade and Development Act of 2000 (hereinafter TDA) which includes the Africa Growth and Opportunity Act (hereinafter referred to as AGOA) and the United States - Caribbean Basin Trade Partnership Act (hereinafter referred to as CBTPA).

    CACTAC was active in the effort to obtain both AGOA and CBTPA, and hoped that the passage of CBTPA would allow duty-free, quota-free, access for apparel to the United States and thereby allow the industries and countries in the region to compete with Mexico and Asia. We believed it would allow the CBI region to expand its textile and apparel manufacturing industry and in the process provide improved working conditions and well-paid jobs in the region using U.S. fabric, cotton, yarn, and fiber. By integrating their production, the United States and the CBI region would be more competitive in the world market.

    It has been over fourteen months since TDA was signed into law, in May of 2000, and the promise of TDA, and in our case specifically CBTPA, has not been realized. In fact, conditions have deteriorated. Regulations are not finalized, ambiguities exist and the efforts of some to rewrite the law with intentions to deprive it of key provisions like dyeing and finishing, have severely undermined the expected benefits of CBTPA. U.S. investors and the U.S. import industry, have been unwilling to make the shift in business from Asia to the CBI countries. Instead CBI opportunities are being diverted towards Asia.

    Recent figures demonstrate what is happening. The volume of worldwide apparel exports to the United States, according to the May, 2001, Government statistics, has grown by approximately ten percent. Exports from the CBI region, however, have only grown 1.82 percent. Compared to the double digit increases in the 1990's and the 6.58 percent increase in December 2000, this is losing ground.

    In fact, more than a year after passage, U.S. Customs statistics show that apparel imports from the Caribbean Basin have decreased and that imports from other areas, specifically Asia, have increased substantially due to the failure to implement CBTPA and the hardships that the Caribbean Basin’s industries are suffering.

    For example, Mexico, the largest textile and apparel exporter to the United States, is up four percent and Bangladesh, the world’s third largest exporter to the United States, is up 18 percent. Cambodia’s exports to the United States are up 52 percent, and Burma’s textile and apparel exports have increased to 83 percent. Honduras, however, the second largest exporter to the United States, is up only 1.3 percent. It is clear that Asia’s share of the U.S. market is increasing dramatically.

    Before CBTPA, the textile and apparel industry was fleeing to Asia and Mexico where it did not have to use U.S. fabric, fiber, yarn or cotton to be competitive. In Asia, labor and raw material costs are so low that they can compete with Mexican or Caribbean Basin exports even if they pay customs duties, although the working and environmental conditions often do not meet U.S. standards.

    Rather than witnessing increased trade and new investment in the region, the reverse has happened. Honduras has had eleven plants close over the last few months, leaving approximately 8,000 people unemployed. In the Dominican Republic, it is even worse. Approximately 18,000 jobs have been lost. U.S. companies that opened offices in the Dominican Republic, after the law was passed, have left. In Jamaica, loss of jobs and business has been gradual, but dramatic. This winter, the company responsible for approximately 40 percent of Jamaica’s apparel sector exports, laid off almost half of its workers. In Jamaica, over the last four years, more than 20,000 workers have lost jobs in the textile and apparel industry.

    An example is the effort to rewrite the CBTPA to prohibit dyeing and finishing in the region. This will undermine economic opportunities. It primarily benefits Asia and Mexico. It seriously undermines the future investments and ability of the CBTPA countries to add value in their countries as it eliminates the one open-ended, value-added, commercial opportunity provided for in CBTPA.

    The negative impacts affect U.S. industries as well as the CBI countries. In the U.S. both the cotton and yarn industries, which expected significant new markets in the CBI countries, are experiencing a substantial 17 - 21 percent loss in business. The expected new markets for U.S. fabric, cotton, yarn and fiber just have not been allowed to develop primarily because the implementation problems have had a chilling effect on investment in plants, on sourcing decisions that could have resulted in increased purchases in the region, and in overall trade within the region.

    When Congress passed CBTPA it created a U.S. trade policy that should have encouraged the textile and apparel industry, that had already moved to Asia, to move to the Americas. Not only would this alleviate poverty in the region, but also the negative impacts that result from poverty in the region, such as migration, drug trafficking, organized crime, and political instability. CBTPA was also expected to be an opportunity for U.S. cotton farmers, yarn spinners, fabric and fiber makers and others to open up additional markets in these countries. Properly implemented, CBTPA allows sectors of the U.S. industry to become competitive in the world economy as we approach 2005. None of this has happened. The situation must be changed.

    There are at least six reasons why U.S. trade policy should encourage textile and apparel production in the CBI countries. First, CBI countries use their textile and apparel dollars to buy U.S. exports while the Asians do not. The CBI trade balance for the United States is $2.5 billion positive, while it is negative with the Asian countries. Second, under CBTPA, apparel and textile producers are required to use U.S. cotton, yarn, fibers and fabrics, while almost none of the fabric, yarn, cotton or fiber used in Asia is from the United States. Third, if there are no good jobs in the CBTPA countries, people migrate to the United States to find work. There are millions of people in the United States in this category right now. Fourth, the countries of the Americas are jointly trying to control and eradicate the scourges of narcotics and organized crime. The development of employment opportunities in the region through trade is the foundation of that effort. Fifth, the poverty in the CBI countries and Africa must be alleviated if there is to be long-term political stability and consolidation of fragile democracies. Sixth, and lastly, U.S. consumers benefit by production in the region that produces competitively priced apparel.

    CACTAC urges the Subcommittee to continue its efforts to implement the AGOA and CBTPA as pro-trade legislation in order to reach the goals that were set forth in May of 2000.

    We attach as exhibits to this testimony the numerous letters and position statements which have been presented to the Administration by the Ministers and Ambassadors of our countries urging a pro-trade implementation of CBTPA.

[The attachments are being retained in the Committee files.]