Feb. 14, 2005

As Global Quotas End, CAFTA Will Not Save Central American Textile and Apparel Industry

WASHINGTON, D.C. – New research disproves the argument that the Central America Free Trade Agreement (CAFTA) would act as an economic lifeboat for Central American countries whose textile and apparel industries are expected to be devastated by the Jan. 1, 2005, lifting of World Trade Organization (WTO) textile and apparel quotas, Public Citizen said today. Public Citizen has released a compilation of this research in a new policy brief, “Myth vs. Reality: CAFTA Cannot ‘Save’ Central American Textile/Apparel Industry or Safeguard the U.S. Industry after WTO/MFA Quotas End.” 

“Because the public and policymakers have a negative impression of NAFTA’s effects on the United States, supporters of the CAFTA-NAFTA expansion are seeking to create a story about how the pact, for which there is limited congressional support, would help Central American countries,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “But when you compare the research data to the claims about CAFTA’s ability to ‘save’ Central America’s textile and apparel industries and jobs from the devastation of the ending of global textile and apparel quotas, the argument totally unravels.”

For example, CAFTA supporters claim that the agreement is essential to Central America maintaining its U.S. market share despite the elimination of WTO quotas. The reality is that CAFTA does not provide new tariff cuts for Central American goods that already enter duty free under an existing Caribbean Basin Initiative trade preference program. With the removal of the WTO quotas that have protected Central American products from competition with Chinese and Indian textile and apparel goods, Central American producers’ market share will be lost to China and India – with or without a CAFTA – because these countries have such extreme cost advantages. Even though shipping from China costs more than shipping from Central America, the total cost to produce a garment for American consumption in China is still dramatically less. Public Citizen’s policy brief includes tables that demonstrate the relative costs of Central American and Chinese goods.

“The myths – from the notion that proximity to the United States will give Central American textiles an edge over China to the idea that CAFTA somehow will grant additional tariff cuts for Central America – have combined to create an erroneous belief among CAFTA supporters that the agreement is a panacea for the Central American textile and apparel industry. Rather than being distracted by bad information, we must work on alternatives to CAFTA that will actually support Central American economies,” said Global Trade Watch Research Director Todd Tucker, who compiled the data.

The policy brief includes a summary of the findings of an array of studies that explore the assumptions underlying the myth that CAFTA provides special benefits that will protect the Central American textile and apparel industry from serious losses because of the elimination of the WTO quotas.

The lifting of the global textile and apparel quota system, known as the Multifiber Arrangement (MFA), is widely expected to lead to major job losses in Central American – as well as in the textile and apparel manufacturing sectors in small Asian countries, Africa, the Caribbean and Middle East. CAFTA proponents are aggressively advancing their misleading arguments, with a spokesperson for the pro‑CAFTA lobby even telling reporters on Jan. 25 that, “If this agreement is not voted on sooner rather than later, [Central American apparel] jobs increasingly are in jeopardy.”

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