Originally: STATEMENT ON TRADE PREFERENCES FOR HAITI
UNITED STATES ASSOCIATION OF TEXTILES AND APPAREL
Before the Committee on Ways and Means
Subcommittee on Trade
STATEMENT ON TRADE PREFERENCES FOR HAITI
September 22, 2004
The U.S. Association of Importers of Textiles and Apparel, USA-ITA, strongly supports legislation
to provide enhanced trade preferences to apparel manufactured in Haiti, as a means of ensuring that orders are
placed in Haiti after 2004. Given the extraordinary disadvantages Haiti currently faces, it is unlikely that U.S.
importers and retailers will include Haiti in their future business plans, unless significant additional incentives
are provided. Apparel importers and retailers will need a strong and compelling reason to be in Haiti after this
year; the Haiti Economic Recovery Opportunity Act approved by the Senate and under consideration in the
House would give them that reason.
The poorest country in the Western Hemisphere, Haiti is also among the most destitute nations in
the world. With an average life expectancy of 53 and literacy rates at only about 50%, over 80% of Haiti’s
population lives in extreme poverty and, according to official statistics, which could be understated, more 16%
of the population is unemployed. The Haitian economy continues to stagnate after a period of political
upheaval, and its economy grew at an anemic 0.7% in 2003, which resulted in a net per capita loss when one
factors in population growth. However, as a report by the U.S. Agency for International Development recently
stated, “one bright spot is exports (mainly apparel and textile),” with the United States serving as Haiti’s largest
trading partner. Without immediate and meaningful help from the U.S. Congress, that one bright spot is likely
to disappear in 2005.
A program that will effectively entice American importers and retailers to do business in Haiti next
year absolutely must be commercially sound, with rules that do not add prohibitive costs and risks. Simplicity
is key. Rules that are too complicated and too confusing will destroy any incentive for business to go to Haiti.
Simply put, business should not need a Ph.D. to establish a compliant duty-free program; while companies may
have tolerated added compliance burdens while quotas were in place, once those quotas are gone and unlimited
options around the world are finally available, that patience will be gone.
Regrettably, the Caribbean Basin Trade Partnership Act has not served to bring significant new
orders to Haiti; instead, the presence of quotas on other suppliers is probably the primary reason Haiti is
producing any apparel for the U.S. market today, with CBTPA providing some incentive as well. Over half of
what Haiti ships to the U.S. market today is knit shirts — 35 percent of the apparel exports are cotton knit shirts
and 18 percent are man-made fiber knit shirts. Approximately 68 percent of the Haitian-made apparel entering
the U.S. qualifies for duty-free access under CBTPA. Another 20 percent enters the U.S. under other
provisions reserved for goods containing some U.S. content (the so-called “807” provision), thereby qualifying
for a small duty reduction. While U.S. importers therefore have used the CBTPA to produce garments in Haiti,
their willingness and reason for continuing to do so after December 31, 2004, is extremely limited. Once quota
costs are eliminated for other suppliers, producing CBTPA compliant garments in Haiti simply will not be
justified in terms of cost, especially given the simple garments produced there.
Recognizing this reality, the Senate-approved Haiti Economic Recovery Opportunity Act, S. 2261,
and its House counterpart, H.R. 4889, would establish a trade preference program similar to the one established
for the least developed countries of sub-Saharan Africa under the African Growth and Opportunity Act. The
parallel is clearly appropriate. Haiti is as poor as these sub-Saharan nations and the obstacles to its future
success in apparel production are painfully similar. While Haiti has the advantage of a closer location to the
United States and therefore can meet the important speed to market demanded by retailers today, it shares the
lower productivity levels and more limited skills, as well as the lack of adequate and competitive supplies of
essential inputs, including yarns and fabrics. Only with the ability to obtain duty-free treatment for apparel
produced from third country fabrics will Haiti be able to produce garments that are competitive with garments
produced elsewhere in the region or in Asia.
USA-ITA appreciates the Committee’s desire to identify whether there are alternative origin rules
that would encourage apparel manufacturing orders to be maintained or added in Haiti. However, our
members’ review of the suggested alternatives concludes that it is highly unlikely that anything less than a
single transformation rule — allowing the use of third country yarns and fabrics — would result in serious
consideration of Haiti as a source for apparel after 2004. Efforts to “tweak” existing programs, such as
CBTPA, will not be sufficient. With that in mind as well as with a strong understanding of the ways in which
companies are restructuring in response to the elimination of quotas, USA-ITA has two recommendations
beyond the Senate-passed bill.
First, it is worth considering the idea of a single transformation rule for “certain apparel.”
However, USA-ITA urges the Committee, if it proceeds with the idea of a single transformation rule for
“certain apparel,” it must not burden such a rule with separate product-by-product caps or with additional
paperwork burdens. Such complications will only destroy any incentive for U.S. importers to explore that
option, The program must include those products Haiti is capable of producing and any cap on duty-free
access must be based upon commercial reality and viability; a level that is too low creates a risk that companies
will not participate at all.
Second, although clearly not as attractive to U.S. apparel importers and retailers as a more straight-
forward third country fabric provision, application of the Generalized System of Preferences program to
apparel would be a possibility. The idea is not new or unique; the European Union includes apparel within its
GSP program. USA-ITA members advise that a value-added rule based upon the GSP program, namely 35
percent value added plus substantial transformation plus direct shipment to the U.S. market, with other
countries in the region and U.S. inputs allowed to help make up that 35 percent threshold, might provide a
small incentive to place some orders in Haiti. Expressly placing Haiti apparel under the GSP program also
carries with it the conditions and standards that are part and parcel of the U.S. GSP program, including
affording internationally recognized worker rights.
USA-ITA also urges the Committee not to perpetuate an inappropriate distinction between apparel
made of knit and woven fabric. As a practical matter, only knit fabrics are produced in the Caribbean and
Central American region; wovens are virtually non-existent. The more limited benefits for woven apparel
under CBTPA, requiring that the fabrics be formed in the U.S. from U.S. yarns (while knit apparel can use
fabric woven in the region from U.S. yarns), has effectively undermined any incentive for investment in such
mills in the region. Continuing that distinction would only serve to eliminate the ability of Haiti to shift into
other products. Creating an incentive for investment in woven fabric production now, by providing benefits for
apparel made from fabrics woven in the region, while noble, is truly too late, particularly in light of the amount
of production capacity already in place in the world.
Adjustments in the caps on benefits under CBTPA would be largely tantamount to rearranging the
deck chairs on the Titanic. While Haiti might benefit from its own non-underwear t-shirt cap, if it were set at a
commercially viable level, it is not the caps that will prevent Haiti from maintaining the interest of U.S.
importers or winning more orders from U.S. buyers next year. With Haiti accounting for only 0.67 percent of
the apparel imported into the United States in one year period ending July 2004, and the overall CBTPA cap
never filling, it is apparent that other issues are behind the trends. Only the non-underwear t-shirt cap fills
early. Ultimately, the issue is how to make apparel, including more types of apparel, produced in Haiti
competitive. The way to do that is to allow it to reduce costs sufficiently to offset its lower productivity levels.
USA-ITA does commend the concept behind H.R. 1031, which would encourage U.S. free trade
agreement partners and unilateral preference partners to use inputs produced in any of these countries and
regions. While our members do not yet view this as a viable option for Haiti, because too few of the U.S.
partners produce sufficient quantities of cost competitive yarns and fabrics or have the logistics in place to
allow timely movement of inputs from one location to another, the goal of integrating productive capabilities
among our preferential trade partners is clearly the right direction. At some point in the future, when our
preference regions include more yarn and fabric producers, the inclusion of such cumulation benefits could be
a winning business plan.
USA-ITA respectfully urges the Committee to quickly approve legislation that will give U.S.
importers a real reason to do business in Haiti. With very little time left for legislative action, we ask the
Committee to pass meaningful and substantive legislation. Time is of the essence. Haiti is already losing
business as the end of the decades of quotas nears. The most recent trade data shows that the month-to-month
and quarter-to-quarter data are falling much faster than the year-ending data. That signals that orders are
moving, primarily to other Central American countries, and portends the difficulties Haiti will face unless the
Congress acts now to provide substantial benefits to justify the placement of business in Haiti.