CAFTA won't save Central American textile industry

Myth vs. Reality: CAFTA Cannot “Save” Central American Textile/Apparel Industry or Safeguard the U.S. Industry After WTO/MFA Quotas End
Public Citizen

MYTH 1: CAFTA will grant new competitive advantage for Central American textiles/apparel over products from China and the few other nations expected to dominate the quota-free market.

FACT: Textiles and apparel produced in the CAFTA countries already enter the U.S. duty-free under the Caribbean Basin Initiative and its successor programs.

MYTH 2: CAFTA will help Central America maintain its U.S. market share after quota elimination.

FACT: Central America will lose market share because China and India can produce the same goods more cheaply than Central America, even after shipping, and CAFTA cannot remedy this fact.

MYTH 2-redux: CAFTA will help Central America maintain its U.S. market share after quota elimination.

FACT: Central America will lose with or without CAFTA because “correction” of the unsustainable U.S. trade and current account deficits will shrink the overall size of U.S. import market.

MYTH 3: Proximity to the United States will allow Central America to beat China by filling a niche as a just-in-time provider for large U.S. retailers after quota elimination.

FACT: Location is not everything. Central American industry doesn’t have the scale, productivity or skill level to provide this kind of niche service.

MYTH 4: Because China may impose export taxes and the United States is considering “safeguard”measures 24 against some Chinese textile and apparel products, passing CAFTA quickly will allow Central American countries a chance to get a “head start” for successful competition for a zero-protection era.

FACT: Even with the proposed tariffs and safeguards, nothing in CAFTA would make Central American export prices competitive with that of Chinese exports.