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Nafta Parity: Certain Restrictions Apply

"The Greater Caribbean This Week"  (1)

Norman Girvan>
About ACS>

In 2000 the US Congress finally enacted the Caribbean Basin Trade Partnership Act (CBTPA), known as the Nafta Parity Bill, after years of lobbying by Central American and Caricom countries and the US apparel industry.

The CBTPA extended Nafta-type benefits to apparel and to certain other products that had been excluded from the original Caribbean Basin Economic Recovery Act (CBERA), of 1983. US imports under CBERA had fallen from $3.2 billion in 1998 to $2.6 billion in 2000; or from 19 percent to 12 percent of all US imports from Caribbean Basin countries. The goal of CBTPA was to reverse this trend.

2001 was the first full year of operation of CBTPA and a recent report to the US Congress by the Office of the US Trade Representative (USTR) provides an opportunity to evaluate its impact so far.

It is clear that exporters from the region are making extensive use of CBTPA provisions. In the first 8 months of 2001 CBTPA shipments to the US were running at about twice the rate of the previous year under CBERA, about 24 percent of all US imports from Caribbean Basin countries.

But the USTR Report attributes much of this to the shifting of existing exports of apparel from previously excluded to the new trade preference categories. It notes that the overall volume of U.S. apparel imports from the Caribbean Basin actually declined in the first 8 months of 2001.

One reason for this is the product eligibility criteria of the CBTPA. To qualify for the new duty-free and quota-free provisions, apparel exported from the region must be made from US fabrics formed from US yarns and cut in the US. If  cut into parts in the region, the fabric must be of US origin and must be sewn together from US thread.

Regionally manufactured fabric can also be eligible, but only if manufactured from US yarn and these products are subject to a growth limitation of 16 percent per annum.

In other words, certain restrictions apply. As a result, some Caribbean-Basin apparel exporters have merely been re-sourcing their fabric imports to the US to qualify for CBTPA treatment.

Another restriction is the requirement that Caribbean Basin countries adopt Nafta-type customs procedures in the processing of exports, resulting in problems in «the application of certain statutory provisions in the technical rules governing imports », to quote the Report. Up to late 2001 there were still 10 countries out of 24 that had not yet been designated as fully eligible under CBTPA.

The USTR Report shows that the Dominican Republic and the five Central American countries accounted for 82 percent of CBERA/CBTPA exports to the US in the first 8 months of 2001. 

Within Caricom Trinidad and Tobago is the leading CBERA/CBPTA exporter, with methanol as the principal product. Rapid growth has continued, with exports totalling $445  million (US) in the first eight months of 2001, more than in all of 2000.

Jamaica, with its apparel exports, is the only other significant Caricom exporter. But it is not clear whether use of the CBTPA by Jamaican exporters has stimulated the desired revival of the garment sector.

This pattern helps to explain the interest of Central America and the Dominican Republic in a free trade agreement with the US and the relatively limited impact of the CBERA on the region’s exports so far.

April 1, 2002

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Professor Norman Girvan is Secretary General of the Association of Caribbean States. 

  The views expressed are not necessarily the official views of the ACS. Feedback can be sent to mail@acs-aec.org.

 

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