The Biden administration is seeking to simultaneously address the root causes of outward migration from Central America while bolstering economic prosperity for American workers and those in the hemisphere. Textile and apparel manufacturers have a vital role to play in the endeavor.
Onshoring and nearshoring the production of consumer products and such critical items as personal protective equipment (PPE) is an essential part of the solution.
The collective textile and apparel industries in the United States and Central America provide labor opportunities that in turn provide economic security for workers and mitigate the flow of migration from the region to the U.S.
According to the most recent U.S. data, the U.S. textile and apparel industry made $1.85 billion in capital expenditures in 2020, supporting hundreds of thousands of jobs at home and in Central America through a vital co-production chain.
Another nearly $1 billion in similar investment is expected this year alone. This investment is predicated upon the preferential benefits afforded by the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), which is responsible for $12.5 billion in annual two-way trade in this sector, and $1 billion in existing textile and apparel investments in Central America.
The success of these industries in the U.S. and Central America is inextricably linked, and the foundation for that success lies in the CAFTA-DR “yarn forward rule of origin.” This rule requires apparel made in the region to contain U.S. or regional yarn and fabrics to qualify for duty-free treatment—a driving force behind investment and job growth across the Western Hemisphere.
The rule, designed so the benefits and jobs created by the agreement go to U.S. and Central American workers, is a key tenet of the Biden administration’s “worker-centric trade policy,” and that’s why we laud the administration’s support for this essential rule.
We are at a critical juncture that could spark a new era of nearshoring. The elongated supply chains for apparel and consumer products from China and Asia have broken down, driven by the global pandemic, rising freight costs, labor shortages and critically important U.S. legislation banning consumer products made with forced labor in Xinjiang, China.
These global pressures have forced companies to turn to the reliable, though underutilized supply chains in their own backyard. Apparel exports from the CAFTA-DR region were up 40% in 2021 from 2020 and are on course to have one of the best years ever.
We also have seen massive investment in textile and apparel production in the region, driven in part by growing demand from U.S. consumers to have consistent access to more reliable, sustainable products on store shelves. This is a win for U.S. workers and those in the region and creates real, substantial economic opportunity. Such investment also stems outward migration from Central America by providing wage opportunities that can sustain workers in their home countries.
In fact, if we doubled apparel exports to the United States from the current 7%, it would create 2.2 million jobs and $6 billion in new investments, according to a recently released independent study conducted by Werner International.
Expanded apparel exports from the region would help mitigate environmental concerns linked to high levels of greenhouse gas emissions produced by the Asian supply chain by moving the manufacturing and transportation of critical products closer to home. Our U.S. producers and workers and neighbors in Central America are poised to be part of this solution.
However, despite the sourcing possibilities that exist within Central America, certain retailers and brands remarkably are seeking to dismantle the U.S.-CAFTA-DR agreement textile rules to give China and other third-party countries backdoor access to the region and the United States.
Weakening the trade agreement’s textile rules through so-called proposed “flexibilities” would devastate the existing U.S. and Central American textile and apparel industries, displacing a combined 550,000 workers while also hurting other U.S. trading partners in the hemisphere, such as Haiti and Mexico, according to the Werner report’s findings.
To that end, Congress and the Biden administration must reject out of hand any proposals aimed at tearing down a free trade agreement that has provided economic opportunities to textile workers in the region and those in the heart of the U.S. textile industry for the past 18 years.
We believe it is time for a comprehensive manufacturing plan that supports our nation and the entire hemisphere. We need targeted, high-impact investments and competitive loans to upgrade infrastructure to help reshore and nearshore critical production chains.
The tide is starting to turn; we can seize on this moment together to bring even more manufacturing back to the Western Hemisphere from China and other Asian countries.