National Textile Association Responds to Report of CAFTA textile "fixes"
Reaffirms Fabric Makers Opposition

BOSTON, July 26, 2005 -- Responding to a press release from Representative Bob Inglis regarding possible CAFTA textile "fixes" affecting pocketing fabrics, implementation of cumulation, and administration of the Nicaraguan TPL, Karl Spilhaus, president of the National Textile Association, said, "We are aware that the Administration is attempting to secure votes by promising improvements that, if they are ever realized, might make CAFTA less objectionable to certain U.S. textile manufacturers, but we have seen nothing that would make NTA withdraw its opposition to CAFTA".

Spilhaus continued, "Despite these proposed eleventh hour improvements, which relate to treatment of pocketing fabrics, cumulation, and administration of tariff preference levels for Nicaragua, the agreement is still loaded with provisions that will allow Chinese and other non-regional fabrics to enter the U.S. in garment form, duty free, at the expense of U.S. manufacturers and U.S. jobs."

Point-by-point Analysis of the Announced CAFTA "Fixes"

The Inglis release states "Pocketing – Portman has secured a letter signed by the Ambassadors from the six CAFTA countries (which he will have counter-signed by the six Finance Ministers) committing the CAFTA countries to subject pocketing to the rules-of-origin typical in the rest of the agreement. This change would mean that pocketing would have to come from one of the countries signing the CAFTA agreement and not China."

  • NTA Notes that this proposed change, which has yet to be formalized as an agreement among the CAFTA parties, would affect pocketing only, not pocketing and linings as some have alleged. Furthermore, there is nowhere in the Harmonized Tariff Schedule a definition of "pocket" or of "pocketing." In order to implement this change --assuming that all the CAFTA members can agree to it and that it can get passed through Congress-- the U.S. and our CAFTA partners will have to negotiate a definition of pockets and pocketing and determine what garments the rule will apply to. Our experience with the "visible lining" rule does not make us hopeful of the outcome. When NAFTA was negotiated we were told that the rule of origin would apply to "visible linings," but when they defined "visible linings" for NAFTA they excluded entirely from the rule many garments with visible linings and excluded many types of linings.

    • The press release also states: "Cumulation - The Administration is revising its letter to include assurances (1) that the USTR would forgo implementation of cumulation with Mexico until their customs procedures are improved and (2) that cumulation will not extend to other countries."

  • In other words, the U.S. admits that we know that Mexico now cheats by using Chinese fabric and calling it NAFTA qualifying, but instead of suspending their use of the NAFTA preference until they clean up, we say Mexico can continue to cheat in NAFTA while the U.S. looks the other way; and we will let Mexico into CAFTA too, provided they just tinker around with the regulations they already willfully violate.

    • Finally, the release says: "Nicaraguan Trade Preference Levels (TPL) - The Nicaraguan government has agreed to the request by the United States Trade Representative to buy one unit of United States fabric each time it buys a unit of fabric outside the region for man-made trouser fabric. Nicaragua has also agreed to phase in a requirement to use US made cotton trouser material over the first five years. As a concession, the Trade Preference Levels will no longer phase out, but will continue at 100 million square meters for ten years."

  • NTA notes that in return for the one-for-one match of U.S. fabric with Chinese fabric under the TPL we gave them an additional 200 million meters of TPL which they can direct at products other than trousers. Also, the one-for-one match appears to apply to only the "essential character" fabric, meaning that this "fix" greatly increases the ability to use Chinese origin and other third-country fabrics for applications such as pocketing In other words the value of the concessions on pocketing is significantly undercut by the increased TPL for Nicaragua.

    • In addition, NTA notes several other problems with CAFTA that are not addressed at all by these "fixes."

  • Brassieres, boxer shorts, and pajamas are entirely exempt from the rules of origin. That means that unlimited quantities of fabrics for those garments may be sourced from China or other countries. This provision is extremely damaging to NTA members who make wide or narrow elastic fabrics in the U.S.

  • The TPL for Costa Rica in wool tailored apparel is a direct attack on the wool textile industry in the U.S.

  • The short supply list includes fabrics, such as polyester/wool blends that are readily available from domestic U.S. sources. And in a complete change from the way that the short supply provisions work in all other free trade agreements and preference programs, this CAFTA places the burder on domestic U.S. producers to prove that their fabrics are not in short supply.

  • While containing loopholes that will permit hundreds of millions of yards of Chinese fabrics and other third-country fabrics, this CAFTA, on the other hand, binds U.S. fabric makers to the use of uncompetitive U.S. yarns if they want to get the benefits of CAFTA.

    • "We opposed this agreement when it was unveiled 18 months ago. This flawed arrangement will cost more American textile jobs," said Spilhaus.

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    NTA, formed in 1854, is the oldest industrial trade association in America. Its members weave and knit fabric in the U.S.; manufacture yarns in the U.S. for the formation of fabrics; and dye, print, and otherwise finish fabrics in the U.S. For more information about NTA, see our website www.nationaltextile.org.