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US Stimulus of Dominican Apparel Industry Fails

US legislation designed to stimulate the Dominican apparel industry has lagged far behind originally optimistic expectations.

Spearheaded by then House and Ways Committee Chairman Charles B. Rangel (D-NY), H.R. 6560 was intended to establish a “two for one” textile and apparel allowance program administered by the Secretary of Commerce. Under the Earned Import Allowance Program (EIAP), certain kinds of apparel made in the Dominican Republic using US bottom-weight fabrics will have duty-free entry into the US. For example, for every two square meters equivalent (SME) of apparel assembled in the Dominican Republic using American fabric, the EIAP permits one SME of third-party yarn and fabric from other countries to enter the US duty-free. The program excludes denim.

According to the International Trade Commission, located in Washington, D.C., the program has experienced a steep 50 percent drop for US imports last year. Moreover, US bottom-weight fabric exports have declined by a comparable amount.

The EIAP was initially very successful, announced to great fanfare in 2008. Rangel triumphantly proclaimed, “This is truly win-win legislation. “This long overdue program will create incentives for the purchase of U.S. textiles, supporting businesses and workers here at home while also providing valuable benefits to apparel producers and workers in the Dominican Republic. It is easy to see why industries in both countries have been supportive of this initiative.”

But while twelve Dominican companies have officially signed up for membership in the program, only seven of those have participated in the last year. Many have expressed misgivings about the EIAP’s effectiveness. Some have called for the two-for-one ratio to be revised to a one-to-one, essentially allowing apparel companies to introduce the use of more third-party fabrics.

Originally, the EIAP was designed to help the Dominican Republic’s apparel industry, still in its embryonic stages, to compete against more mature companies in Asia. The Dominican Republic is also a signatory to Dominican Republic-Central American Free Trade Agreement (CAFTA), which already permits  most of its apparel to enter the US market duty-free.

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When the EIAP was first passed, Congressman Jim McCrery (R-LA) spoke to it as an outgrowth of CAFTA. “This important expansion of the U.S.-CAFTA-DR fair trade agreement, fully supported by the U.S. textile industry, is an opportunity to expand U.S. manufactured exports to the region and demonstrates how these agreements can benefit U.S. workers,” he said. “The United States economy has already benefited significantly from CAFTA, and our trade deficit with the region before the agreement went into effect has now become a trade surplus. This legislation will provide another opportunity to grow U.S. textile exports and add to the U.S. trade surplus with the CAFTA-DR region.”