Hurricanes renew hope for CBI bill - Trade View - bill giving Caribbean textile and apparel industries favorable access to the US

Can two hurricanes level the torrential disagreements among Congress and competing interest groups over legislation to provide the Caribbean textile and apparel industries with more favorable access to the U.S. market? Supporters of the various versions of the recurring legislation have their hopes up.

Attempts to pass so-called "CBI parity" bills have been subjected to gale-force debates for more than four years, and differing views within the U.S. textile and apparel industries, and between U.S. producers and U.S. importers and retailers have yet to be resolved. The disagreements have covered both specific provisions and whether the upgraded Caribbean Basin Initiative (CBI) program should be packaged with other trade bills, such as trade benefits for textile products made in sub-Saharan African countries.

However, with the start of the 106th Congress this year, the focus of the CBI debate appears to have shifted to providing relief to the hurricane-torn region. As a result, there is now increased talk of compromise among the various interested players, who all agree on the need to restore investor confidence.

Senator Bob Graham (D-FL) has drafted the Central American and Caribbean Relief Act of 1999 to provide disaster relief and reconstruction aid to the nations seriously damaged by Hurricanes Georges and Mitch. Although the outline of the legislation is broad, covering emergency assistance programs, extension and expansion of debt relief, rescheduling of debt payments and immigration measures, the centerpiece of the Graham bill is its textile and apparel trade provisions.

Debating the Better Bill

This follows developments in the past two congresses, the 104th and the 105th, which have resulted in two sharply divergent CBI textile and apparel provisions. The House of Representatives, and particularly the House Committee on Ways and Means, has generally supported language that would place Caribbean and Central American textile and apparel products on a par with Mexican products under the North American Free Trade Agreement (NAFTA). Thus, the House Committee-approved "parity" bill would have applied to CBI products the same duties applicable to Mexican products under NAFTA, assuming NAFTA-type origin requirements were satisfied.

That bill also proposed to allow duty-free treatment for products assembled in CBI countries from fabrics cut and formed in the United States from U.S. yarns (an "807A-plus" program, if you will). In addition, duty-free treatment was offered for goods cut and sewn in the Caribbean region from fabric formed in the United States from U.S. yarns (often called "809"), and for apparel knit-to-shape in the region from U.S.-formed yarns. All of these products also would have been quota-free. Further, the House bill would have established tariff preference levels (TPLs), under which a limited quantity of products made in Caribbean countries from foreign-origin fabric would have been able to enter the United States at NAFTA-comparable duty rates.

The House version was generally opposed by U.S. mills and unions and supported by large U.S. apparel makers and the importer community.

The Senate, led by the Finance Committee, has previously drafted CBI bills much more to the liking of U.S. mills and one vertically integrated producer - namely Fruit of the Loom. For example, the most recent Finance Committee-approved version of CBI legislation would have provided duty-free and quota-free treatment only for 807A-plus apparel, just as the House bill proposed, as well as for apparel cut and assembled in the Caribbean from fabric wholly formed in the United States from U.S. yarn, as long as U.S. thread was used. (The House bill's 809 provision made no reference to a U.S. thread requirement.)

Under the Senate bill, no benefits would have been provided for any regionally produced fabrics or for products meeting NAFTA-equivalent origin rules, and no TPLs were included for goods made from foreign fabrics. U.S. importers and retailers argued that the Senate language was too restrictive, limiting their flexibility. At the very least, they complained, it didn't offer "parity" with Mexico and therefore was unlikely to entice renewed interest in the Caribbean vis-a-vis Mexico.

True Parity: Wishful Thinking?

In fact, the word "parity" really is not being used anymore and indications are that neither CBI producers nor U.S. importers expect legislation that would grant true parity between Mexico and the Caribbean region. Most of the complete parity demands have been silenced by arguments that NAFTA represents a reciprocal arrangement, under which each of the participants - the United States, Mexico and Canada - made trade concessions. On the other hand, the CBI legislation would provide a unilateral concession by the United States. Actual parity therefore may have to await completion of negotiations on a Free Trade Area of the Americas agreement and the resolution of the CBI negotiators.

Just before Christmas, representatives of U.S. producers and retailers reportedly reached general agreement on possible compromised apparel provisions for the CBI legislation in the 106th Congress. That compromise would parallel the Finance Committee-approved language from the 105th Congress - the 807A-plus and 809 provisions - and add duty-free and quota-free treatment for apparel made in the Caribbean from fabrics formed in the Caribbean from U.S.-made yarns and sewn together with U.S. thread.

However, not all U.S. producer and importer interests were parties to that discussion. Nor, of course, were CBI producers. Moreover, U.S. unions are unlikely to be persuaded to forego their opposition to any liberalization plan.

From another angle, the Central American and Caribbean Textiles and Apparel Council (CACTAC), which represents producers in the regions, has recently gone on record as seeking a one-year moratorium on duties and quotas on its textile and apparel exports to the U.S. market.

In late November, CACTAC sent letters to Bill Archer (R-TX), chairman of the Ways and Means Committee, and Ambassador Charlene Barshefsky, the U.S. Trade Representative, proposing legislation that would provide quota-free and duty-free treatment for CBI imports into the United States for 1999. In addition, CACTAC suggested a number of administrative measures - which do not require congressional action or approval - to help find new jobs for workers displaced by Hurricanes Georges and Mitch and to secure existing jobs. Among the proposed administrative measures were:

* Including within guaranteed access levels (GALs, or 807A) apparel cut and sewn in the region from U.S. formed fabric (809 goods);

* Providing GAL-like treatment (that is, quota-free) for apparel made from fabric produced in the region;

* Allowing foreign findings and trimmings to account for a larger percentage of the value of 807A merchandise (it now is limited to 25 percent of the cost of the components); and

* Providing "special flexibilities" on existing quotas so that quotas can be adjusted upward by borrowing larger amounts from underutilized categories and from future years.

In pressing for quota-free treatment for apparel made from regional fabrics, CACTAC noted that "approximately 90 percent of raw cotton consumed in the CBI has U.S. origin and a great deal of yarns as well." Does that mean CACTAC would support the apparent U.S. producers/retailers compromise on legislation? That is hard to tell, but even if it does not, members of Congress can be expected to be swayed by constituents more than by foreign producers.

So far, U.S. officials have not indicated their willingness to grant CACTAC's requests for the new administrative measures. Generally speaking, the Committee for the Implementation of Textile Agreements (CITA) has opposed requests by exporting nations for increases in existing quotas, including increased flexibilities, such as greater shift or swing among categories or carryover/carryforward between quota years. In those few cases in which CITA has granted such requests, it has exacted a payment, in the form of new quotas in other categories or greater reductions in future quota periods.

However, the good news is that Caribbean producers probably do not have to worry about new quotas being established on their apparel exports, last October, the U.S. government initiated action to establish new quotas on Cambodia on categories in which some Caribbean and Central American producers are exporting even larger quantities than Cambodia. Shortly thereafter the chairman of CITA, Troy Cribb, indicated that CITA is disinclined to seek new restraints on Caribbean exports. But so far it is not known whether this also means that CITA would be more responsive to CBI requests for increased flexibilities.

Clearly, interest in assisting the CBI textile and apparel industries, which have always been strong, has gained momentum in the wake of two devastating hurricanes. And relief bills, as Senator Graham's bill is framed, have tended to move more quickly through Congress than trade bills.

It goes without saying that the Senate would be interested in moving the Graham relief bill, without tying it to trade legislation, such as fast-track authority for the president to negotiate new trade agreements or benefits for sub-Saharan Africa. That is exactly what the Senate wanted to do last year. But House leaders rejected that plan, determined to also move the Africa bill. House proponents still may not be willing to address the CBI alone, which will surely slow down the process. Count on a whirlwind of lobbying in any event.

Brenda A. Jacobs is Counsel in the Customs and Trade Group of Powell, Goldstein, Frazer and Murphy LLP, in its Washington, D C., office. She may be reached at tel.: 202-347-0066, by e-mail at bjacobs@pgfm.com or on the Web, at www.pgfm.com.

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