The Administration believes that the enactment of a U.S.-Caribbean Basin Trade Enhancement Act (CBTEA) would enable the countries of Central America and the Caribbean to strengthen their economies in the wake of the destruction caused by Hurricanes Mitch and Georges last fall. Such legislation would also fulfill repeated commitments over the past 4 years by the President, the Vice President, the U.S. Trade Representative and the Secretary of State to provide Caribbean Basin countries trade benefits additional to those they now receive under the Caribbean Basin Initiative (CBI). It would provide substantial benefits to both the United States and the Caribbean Basin countries.
Major Provisions: CBI trade enhancement legislation would provide CBI beneficiary countries certain trade benefits similar to Mexico's under the North American Free Trade Agreement (NAFTA). Because of the differences between the CBI and NAFTA, the CBI countries have experienced some disinvestment and slower growth of their exports to the United States than in the pre-NAFTA period (prior to 1994).
Under a new CBTEA, apparel manufactured in eligible CBI countries from U.S. yarns and fabric, as well as non-textile products currently excluded from the CBI legislation, would enter the United States free of quota and duty. The eligibility criteria would require the President to take account of the beneficiary country's movement forward in a number of areas important to the United States, such as worker rights, intellectual property, environmental protections and cooperation against illegal drugs.
Benefits to Caribbean Basin Countries: Such legislation forms part of the Administration's comprehensive response to the enormous damage caused by Hurricanes Mitch and Georges to Central America and the Caribbean, which dramatically increased unemployment and the requirements for foreign exchange. By helping the CBI countries to create new jobs and earn additional foreign exchange from exports, this legislation would speed reconstruction and development of this region in the long run.
The Caribbean Basin taken together is the largest supplier of apparel to the United States, with 1998 shipments amounting to $8.4 billion. About 80% of these apparel products are made from U.S. fabric. Current US tariffs average 5.7% on apparel made from U.S. fabric, and 15.8% for apparel made from CBI regional and other non-U.S. fabric.
Benefits to the United States: Democratic stability and economic growth in Central America and the Caribbean benefit the U.S. economy and society by increasing opportunities for U.S. exports and reducing the incentives for illegal migration and crime -- including the drug trade -- in the region. U.S. merchandise exports exceeded $19 billion to Caribbean Basin countries in 1998, more than to France, Brazil or China. The U.S. maintains a trade surplus with the CBI region of around $2 billion.
Opportunities for the U.S. Economy: Important parts of the U.S. apparel, textile, cotton and related industries support CBI enhancement as a way of maintaining the competitiveness of U.S. industry vis-a-vis Asian producers. As a result of the Agreement on Textiles and Clothing, the United States will phase out by 2005 quotas on imports of textiles and apparel from countries that are members of the World Trade Organization (WTO). These U.S. producers want to strengthen their strategic partnership with CBI countries in order to reduce their costs and prepare for a more open market after 2005.
Their strategy is to combine highly efficient U.S. cotton/yarn/textile manufacturing with U.S. design/financing/ marketing industries and with Caribbean Basin low-cost sewing/assembly operations. They are concerned that without such a partnership, substantial parts of all these sectors will move to low-cost and technically efficient Far East producers.
CBI Beneficiaries: Twenty-four countries and territories in the Caribbean and Central America benefit from the existing CBI program, and are potential beneficiaries of the CBTEA. These are: Antigua, Aruba, The Bahamas, Barbados, Belize, British Virgin Islands, Costa Rica, Dominica, Dominican Republic, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles, Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago.
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