Several trade partnerships and agreements providing duty-free access to Central American and Caribbean textiles to the United States pose a threat to the apparel industry from Asia.
A detailed study by UN Conference on Trade and Development (Unctad) experts says that besides these facilities the other factor against the Asian industry was mechanism of production-sharing as well as the geographic proximity of Central to North Americas.
It commended the quality standards of the Asian products that were gained not by cheap labour alone but also its reorganisation into an integrated system covering all phases of production.
The integrated system, the experts said, had boosted the development of a strong regional cluster in textiles and apparel, offering access to a vast supply of fibres, yarn and fabrics. This was in addition to an excess to "diversified export markets".
On the other hand, the competitive advantage of the Central American and Caribbean countries results from a combination of factors: low wages, export processing zones and above all the preferential access to North American markets as well as the product sharing mechanism.
These characteristics, the report said, well suits to final assembly as it caters to a single market. It also provides them to use "expensive US inputs while keeping domestic value-added low".
The proximity to US enables them to deliver goods faster than China, Pakistan and India and also gives them the opportunity to quickly respond to changing patterns in fashion and hence the demands.
The duty-free access to the US markets for textile and apparels under various agreements provided the yarn, fabrics and threads also.
Giving an example, the report refers to last year's Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua and the US signed a free trade agreement (DR-CAFTA). The commercial part of this agreement transforms its unilateral US concessions into preferential treatment by each part for goods imported from any other party. It relaxes the rules of origin by extending the agreement to regional inputs and making it more flexible for some specific products but generally it fails to secure tariff preferences for exports within the Dominican-Caribbean basin that use cloth and materials from third countries outside the region.
The latter would have allowed the region to import competitive inputs, including from Asia, and to compete better with Asian final producers that are no longer restricted by quotas.
These threats will become more potent when the DR-CAFTA is ratified by all signatories and free trade becomes more practical. Until a few months ago only Guatemala and El Salvador had ratified it and others were still processing it.
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