The Coalition for Economic Partnerships in the Americas (CEPA), a new group of major American companies and manufacturers dedicated to promoting regional trade and job growth, launched last week.
CEPA brings together companies, trade associations, think tanks and other stakeholders focused on addressing the humanitarian, security and economic crisis in the Americas by dedicating resources, experience and expertise toward creating enduring humanitarian, worker-centric and sustainable solutions that work for the United States and Central America.
“For far too long, the U.S.-Central America economic relationship has failed to reach its full potential, suppressing employment, investment, economic growth and shared regional prosperity,” said CEPA spokesperson Beth Hughes, who is also vice president of trade and customs policy for the American Apparel & Footwear Association (AAFA).
Among the other members of CEPA are Gap Inc., Hanesbrands, Levi Strauss & Co., the National Retail Federation, the Retail Industry Leaders Association, the United States Fashion Industry Association and VF Corp.
“President Biden, Vice President Harris, and Ambassador Tai have an opportunity to do what previous administrations ignored–to structure trade to support investment in the United States and our allies in Central America,” Hughes said. “In order for our economy to thrive, we must eliminate the bureaucratic red tape that hinders production and investment in the region. We look forward to working with the Biden-Harris administration and Congress to advance common sense policies that put regional economic prosperity first.”
CEPA cited a recent economic study conducted by the Mosbacher Institute for Trade, Economics and Public Policy at Texas A&M that found the U.S. can address the root causes of instability in Central America by creating jobs, reducing poverty and contributing to economic growth through international trade.
CEPA, Hughes told Sourcing Journal, aims to share its experience creating large-scale employment in sustainable, growing industries, and shift away from historical zero-sum thinking to realize an inclusive economic model that broadens the circle of winners, puts workers first, promotes women’s empowerment, and supports greener supply chains.
The group will also continue and build partnerships with U.S. and regional companies to grow and realize the full potential of Central America’s apparel industry, learn from the history of global value chains and the Covid supply chain crisis to leap-frog Central America into a hub of resiliency and growth; establish incentives to diversify and grow supply chains with America’s trading partners; partner with technology and innovation leaders in the Americas and invest in cutting-edge innovation, flexibility, and scalability, and foster the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) to ensure it fulfills its purpose for investors, workers and communities.
“We know that jobs in apparel production …are high paying jobs, they often go to women, and so if we can increase those jobs, we thought that would help with some of those migration issues,” Hughes said. “In the last couple of years, we’re seeing the administration, this one and the previous one, as well as Congress, really encouraging and urging folks to diversify their supply chains to move away from China. What better place [than to start in] your backyards and also, really dealing with [a] major shipping crisis. So, all of these things, sustainability issues, speed to market, all those things kind of fit nicely into this idea of making the hemisphere and specifically Central American, the Northern Triangle, more competitive and bring some of that investment and jobs here.”
Hughes said CEPA plans to work with the U.S. government, the domestic textile industry and with the countries and other trade associations and companies in Central America. The organization hopes people stop saying that the status quo is working and good on its face.
“It’s not good enough,” she said. “We need everyone at the same table, and so we were talking with members of Congress because we know that the dynamic and the folks that are in Congress today aren’t the same folks that were there and that sentiment around that really hard vote for CAFTA-DR is not necessarily the same that it was 15-plus years ago…What Ambassador Tai is trying to do with making sure that China is no longer this bad actor on so many different fronts, this worker-centric trade policy. Well, that’s not just America.”
“We’re talking to everyone,” she added. “We think if we can all get around the table–it’s not going to be easy, but we can do something, but if we have people saying no and we can’t do it, it’s too hard. Okay, but we’re just going to be in the same predicament that we’ve been in.”
On key sticking point between apparel manufacturers and U.S. textile companies is the “yarn-forward rule of origin” in the CAFTA pact. Apparel makers and AAFA want to see the rule amended to allow for more third-party fabrics and the National Council of Textile Organizations, which represents the domestic textile industry and is not part of CEPA, wants to see the rules stand firm.
Hughes noted that currently, Central America is mostly a source for basics like cotton T-shirts, underwear and socks, and “we really want to do more.”
“We want to do more performance wear, athleisure, leggings, all sorts of garments,” Hughes said. “They just don’t have printed fabrics that you need in the region right now to make those things and to have that product coming in duty free under the agreement. It’s still more competitive to do business in Asia, so not just China, but Vietnam and other countries as well. So, we definitely see a lot of potential and we want to bring that investment and those jobs to the region…But just we don’t have that access to…yarns and fabrics to be able to kind of get that investment where it needs to be and start producing the different kinds of apparel.”
Kim Glas, president and CEO of the NCTO, noted that CAFTA-DR and U.S. co-production for textiles and apparel supports more than 1 million jobs and $12 billion in two-way trade.
“This supply chain has been a critically important and deeply impactful agreement economically for both the U.S. and the region, despite headwinds from China’s increased access to our markets during the agreement’s existence,” Glas told Sourcing Journal. “This is due to a key element of the agreement called the ‘yarn forward’ rule of origin. This unique investment-based rule provides lucrative duty-free access to the U.S. market and our consumers while ensuring investment in yarns, fabric, and cut-and-sew production in this critical coproduction chain between the U.S. and the region. Simply put, it means the agreement requires that the signatories of the agreement gain the job benefits of the agreement.”
She noted that onshoring and nearshoring are happening, with key CAFTA-DR countries seeing exports up anywhere from 33 to 56 percent, outpacing even major Asian exporters, “a clear sign that the trade agreement’s existing rules are effective and continue to spur investment and manufacturing employment in the U.S. and the CAFTA-DR region.”