In October 2000, the Trade and Development Act of 2000 (TDA 2000) went into effect, granting preferential textile trade benefits to countries of sub-Saharan Africa, Central America, and the Caribbean Basin. The purpose of the bill, passed over a year ago, was to promote U.S. textiles while boosting the economies of the Caribbean Basin and sub-Saharan Africa. This article examines how TDA 2000 has affected textile trade patterns - specifically, cotton textile sourcing decisions - in the Caribbean Basin in the seven months since its implementation.

TDA 2000 has two main components, the African Growth and Opportunity Act and the Caribbean Basin Trade and Partnership Act, commonly known as the Caribbean Basin Initiative (CBI). Both provide for duty- and quota-free access to the U.S. market for particular garments produced in each region from U.S. materials. Under the CBI, four main classifications of garments qualify for inclusion:

• Garments cut in the U.S. and assembled in the Caribbean from U.S. fabric and U.S. yarn.
• Garments cut and assembled in the Caribbean from U.S. fabric and U.S. yarn and assembled with U.S. thread.
• Limited quantities (initially 250 million square meter equivalents) of certain garments made from fabrics knitted in the Caribbean from U.S. yarn and garments (excluding socks) knitted to shape in the Caribbean from U.S. yarn.
• A limited quantity of T-shirts (initially 4.2 million dozen) made in the Caribbean from fabric formed in the Caribbean, made from yarns formed in the U.S.

Has the CBI increased the volume of U.S. apparel imports from the Caribbean Basin?

Apparel imports from the CBI region have grown each of the last 10 years; in 2000, they reached $9.5 billion, just over half the value of all goods imported into the U.S. from this region. By April 2001, year-to-date apparel imports from the CBI region were up 6.7% from the same period last year, reaching $3 billion, of which $1.3 billion qualified for duty-free entry under the new legislation. Four of the region's largest suppliers - Honduras, the Dominican Republic, El Salvador, and Guatemala -supplied 88%, or almost $1.2 billion, of the apparel eligible for duty-free entry under the CBI. In particular, Guatemala has enjoyed year-over-year growth in cotton apparel exports to the U.S. of over 28%, or $87 million, and Nicaragua has seen cotton apparel exports rise over 49%, or $35 million.

The import data as of April 2001 suggest that, as the volume of apparel imported from the CBI region has risen faster than in any previous year, the U.S. textile industry has supplied the raw fabric, yarn, and thread for over 40% of the garments shipped back to the U.S. This percentage is expected to increase, ultimately benefiting U.S. mills, as more strategic relationships and joint ventures are formed between U.S. mills and CBI apparel manufacturers to take advantage of the tariff breaks.

Top

Has the volume of U.S. yarn and fabric exports to CBI nations shifted dramatically?

How have U.S. exports of cotton yarn and fabric to the CBI region fared since the CBI was implemented? As of April 2001, year-to-date exports of cotton yarn to the CBI region have jumped 154% from last year, to $34.7 million. For the same four-month period, exports of woven cotton fabric have enjoyed 324% growth, to $136.0 million. These data show strong growth in exports of cotton yarn and fabric to the CBI region since last year, attributable both to lower cotton prices and to the CBI legislation.

From 2000 to 2001, each of the top seven CBI-region markets for U.S. woven cotton fabric - the Dominican Republic, Honduras, Guatemala, El Salvador, Costa Rica, Haiti, and Nicaragua - has increased its purchases for the first four months of the year at least threefold. These countries account for over 98% of the market for U.S. woven cotton fabric in the CBI region. In U.S. exports of cotton fabric to the CBI region, the largest gains have been in the Dominican Republic ($41 million, or 325%), Honduras ($28 million, or 269%), and Guatemala ($20 million, or 561%).

The top four CBI-region markets for U.S. cotton yarn - Honduras, El Salvador, Guatemala, and the Dominican Republic - have increased their purchases for the four-month period by a combined 181%. These countries account for over 98% of the region's market for U.S. cotton yarn. Cotton yarn exports have increased most to Honduras ($8.6 million, or 100%), El Salvador ($8.4 million, or 503%), and Guatemala ($4.7 million, or 1,291%).

The CBI clearly has increased demand and expanded the market for U.S. cotton fabric and yarn exports to the CBI region. If these growth rates are maintained throughout 2001, CBI-region imports of cotton fabric and yarn from U.S. mills will reach a record high. U.S. cotton fabric exports to the CBI region are predicted to reach $400 million, 132% more than ever before shipped to the region in a year. Additionally, Cotton Incorporated projects that U.S. cotton yarn exports to the region will reach $104 million, 65% above the record set in 2000.

Top