CARIBBEAN BASIN INITIATIVE: TRADE ENHANCEMENT LEGISLATION

In the post-NAFTA period, the 24 CBI countries have experienced slower growth in exports and a drop off in investment. Extensive flooding from Hurricanes Mitch and Georges caused severe damage to some CBI countries and their economies. In an effort to promote long-term growth in the region, the US House of Representatives Ways and Means Committee approved a bill that would give rough parity to CBI countries compared to NAFTA.

The bill did not pass on the floor of the House because of objections to provisions giving duty-free treatment to foreign cloth. Meanwhile, an Africa bill, which received little attention, passed the House and was sent to the Senate. A key senator added CBI provisions to the bill to allow quota and duty-free treatment for certain items, including apparel made from US yarn and fabric and certified handicrafts. The Africa bill includes GSP and Trade Adjustment Assistance extension, although CBI countries would have to meet eligibility criteria to qualify.

The State Department and the administration are officially pushing for early passage of this bill in 2000, including a possible House-Senate conference to work out the differences (which mostly involve the inclusion of CBI provisions in an Africa bill). To date, however, the bill lacks strong political support. The chairman of the Senate Trade Subcommittee wants a broader bill for the CBI, other congressmen want more for Africa, and still others oppose substantive provisions of the Africa part of the bill.

The Caribbean Basin would benefit from the new legislation. It would generate new employment and foreign exchange, giving a major impulse to reconstruction and development efforts. Caribbean countries exported $8.4 billion in apparel to the US in 1998; they would benefit even more if allowed to export their own cloth duty free.

The US would benefit in turn by promoting economic and political stability among its neighbors. CBI trade enhancement would complement US and other OECD countries’ economic development strategies for the region. Ongoing efforts involve helping some of the poorer Basin countries with bilateral debt deferral and forgiveness (HIPC) through the Paris Club, and channeling debt payments through the Central American Debt Trust Fund. The aid also includes pledges of new assistance to Central America in the wake of Hurricane Mitch. Growing prosperity in this region would generate more purchases of American exports. The CBI already purchases $19 billion in US products (1998), more than China or Brazil. For its part, the US imports about $17 billion in goods from CBI countries each year.

The US textile and apparel industry supports the pending legislation. Industry leaders believe that the synergy of having neighboring countries sew US manufactured and cut fabric will help the industry compete with Asian producers. Moreover, the industry is under pressure from the Agreement on Textiles and Clothing, which requires the US to allow quota-free access to WTO member countries by 2005.

Even though Florida—and especially South Florida—would be the biggest US beneficiary of increased trade and tourism with the Basin countries, the CBI Trade Enhancement Legislation has yet to attract much attention locally.

(www.state.gov/www.issues/economic.html ) (State Department sources)