TRADE AND DEVELOPMENT ACT OF 2000: A FLORIDA OPPORTUNITY

  
On May 18, President Clinton signed the “Trade and Development Act of 2000.” Included in this act was the Caribbean Basin Trade Partnership Act (CBTPA, or Title II) and the Africa Growth and Opportunity Act (Title I). The measures had previously passed the Senate and the House by wide margins, with the differences worked out in conference committee. The legislation, especially Title II, has been a goal for the Florida public and private sectors for over five years. It represents an obvious opportunity for the 25 CBI countries to increase their trade with the United States, but it also offers potential for Florida to benefit from increased trade—both exports and imports—with its CBI neighbors.

CBTPA enjoyed broad support as a means of providing NAFTA parity for certain import groups, especially the textile and apparel “drawback” (maquila) industries. This was a crucial consideration for the CBI members—all small developing countries, many of which are still recovering from Hurricanes Mitch and Georges. CBI enhancement is considered a vital form of aid to these countries, in conjunction with debt relief and development assistance.

US imports from the CBI countries in 1998 totaled $7.7 billion (US content $4.9 B), rising to $8.1 billion (US content $5.2 B) in 1999. Five countries account for 91% of this trade: the Dominican Republic, Honduras, El Salvador, Costa Rica and Guatemala. CBTPA gives eligible CBI countries additional preferential tariff treatment through September 2008 (or before, if the FTAA or another relevant trade agreement enters into force first). It provides immediate tariff reduction to NAFTA levels for imports now excluded under CBI, such as canned tuna, petroleum and petroleum products, footwear, handbags, luggage, flat goods, work gloves and leather-wearing apparel.

CBTPA provides for duty-free, quota-free treatment of some apparel:

• Apparel cut in an eligible CBI beneficiary country from fabric wholly formed in the United States from yarns wholly formed in the United States, if assembled in that country with thread formed in the United States;
  
• Certain apparel knit to shape plus knit apparel cut and wholly assembled in a CBI beneficiary country from fabric formed in any beneficiary or the United States from yarns wholly formed in the United States. A cap of this category would start at a level equivalent to 250 million square meters in the year starting October 1, 2000, increase 16% each year through September 2004, and stay at that level through September 2008;
  
• T-shirts, other than underwear T-shirts, up to 4.2 million dozen in the year beginning October 1, 2000, increasing 16% each year through September 2004 and staying at that level;
  
• Certain other articles, including handmade and folklore goods.

There are exceptions regarding the use of a de minimis amount of fabric originating in a third country (the legislations permits up to 7% non-US fibers or yarns), with the exception of certain fabrics made from elastometric yarns. Other exemptions take into consideration the use of fabric and other components in the manufacture of certain undergarments and for use as findings and trimmings on apparel. In addition, Israeli, Canadian and Mexican nylon filament yarns are granted the same benefits as US yarn, and 75% of the value of brassiere components must be textile components made in the US (findings and trimmings excepted).

Florida Senator Bob Graham, a strong supporter and sponsor of the legislation, issued a statement from his office declaring that “no state will benefit more than Florida as a result of CBI enhancement legislation.” Total Florida trade with the CBI countries in 1999 was $22.8 billion, and more than 40% of total American exports to Latin America and the Caribbean passed through Florida. Four of Florida’s top 10 trading partners are CBI countries (8 are in Latin America), and five of the state’s top 10 trading partners in Latin America are CBI countries: the Dominican Republic, Costa Rica, Honduras, Guatemala and El Salvador. These same five countries have taken the most advantage of opportunities for sewing and assembling apparel under the provisions of the original CBI legislation.

These same countries are in a good position now to increase their production of apparel items under the CBTPA. Four of the countries of the Central American Common Market have taken advantage of the opportunity created by the original CBI legislation. The exception is Nicaragua, which was held back by 11 years of economic ruin under the Sandinista regime. However, this history can no longer explain Nicaragua’s failure to secure a larger part of the apparel and other export markets that its neighbors have so quickly entered. The table below shows a few of the major categories of apparel production from beneficiary countries. Countries with very small production are not shown.

The Africa Growth and Opportunity Act (AGOA) also represents an opportunity for Florida businesses. Africa does not traditionally figure in the marketing or production plans of Florida businesses. However, the AGOA may slowly change this. The AGOA grants duty-free and quota-free treatment to apparel from sub-Saharan countries made of US fabric with US yarn. The same benefits apply to apparel made in Africa from regional yarn and fabric with an annual cap starting at 1.5% of the SME of global apparel imports into the US, growing to 3.5% over eight years. The same benefits are extended for four years to apparel from the least developed African countries using third country fabric.

USITC US Department of State Office of Sen. Graham www.floridabusiness.com