CAFTA has not helped textile industry of Central America

20 Aug '08

4 min read

The Central American-Dominican Republic Free Trade Agreement, commonly called CAFTA-DR was passed by the US in July 2005. The broad based agreement is essentially meant to be a tool for giving a boost to the economy of countries in Central America and the Caribbean.

But has the agreement really helped the Central American countries particularly the textile and garment industry which accounts for a large chunk of the economy of these countries is the moot question. Exports of textiles and apparels to the United States from all the countries within the agreement stood at US $9595.01 million in 2005, slipped to $8931.5 million to further fall down to $8402.21 million in 2007.

So overall exports to the US from the CAFTA signatories plunged by an alarming 12.43 percent in 2007 when compared with figures of 2005.

Honduras is the biggest exporter of textile and garment goods among the CAFTA countries with a share of 30.48 percent by value. Even Honduras has seen its shipments falling in the last three preceding years.

Honduras had exported goods worth $2622.31 million in 2005, which slid to $2440.30 in 2006 but rose to $2510.90 million in 2007 to post a negative growth of 4.27 percent in comparison to 2005.

Another country, Guatemala with a share of 19.28 percent within the CAFTA also saw its shipments drop from $1816.24 million in 2005 to a distressing $1450.58 million in 2007 to register de-growth of a stupendous 20.15 percent.

El Salvador also did not show better perfomance than its neighboring countries in Central America. This small country also witnessed its exports dropping by 8.21 percent in 2007 when corresponded with figures of 2005. Shipments to the US fell to $1486.21 million in 2007 from $1619.19 million in 2005.

The only country of note which managed to reverse the trend set by the signatories to the CAFTA was Haiti. This country was actually able to grow its exports from $406.28 million in 2005 to $449.70 million in 2006 to $452.2 million in 2007. Haiti was able to post a credible growth of 11.33 percent in 2007 when evaluated with figures of 2005.

The most surprising data came from Costa Rica which nearly doubled its textile and garment exports in 2006 in contrast to 2005, but fell with a loud bang in the very next year in 2007 to below 2005 levels. Exports moved to $879.30 million in 2006 from $481.6 million in 2005 to achieve a growth rate of a breath taking 82.74 percent.

But the celebrations within the industry did not last long as in the very next year shipments dropped to a miserable $422.96 million to post a negative growth of nearly 60 percent.

However, the biggest fall was registered by the Dominican Republic. Shipments fell to a low of $1056.52 million in 2007 from $1547.70 million in 2006 which in turn had fallen from a height of $1849.16 million recorded in 2005.

The plunge within a period of three years resulted in a negative growth rate of 16.33 percent in 2006 and an incredible 42.88 percent in 2007 when compared with figures of 2005.

The mission behind the treaty was to help the countries of Central America grow their economies, but that the treaty has failed in totality with regards to the textile and garment industry is loud and clear.

The immediate impact of the treaty was appaently on the vibrant textile and garment industry and was supposed to save roughly 400,000 jobs. But according to the Salvadoran Chamber of Commerce and Industry, the textile sector in El Salvador has suffered an accumulated loss of roughly 25,000 jobs in the past four years.

Far from creating the promised regional textile cooperation in place to offset competition from China, the CAFTA implementation has in fact contributed to a trend, already in place, of Central America losing market share to competitors from Asia.

Fibre2fashion News Desk - India

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