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Tariff Preferences Paying Off in Caribbean Nations, Report Shows

One of the nation’s critical trade initiatives continues to bear fruit in a region in need of an economic boost.

Tariff preferences on imports to the U.S. under the Caribbean Basin Initiative (CBI), a trade benefit umbrella program, increased to $1.2 billion in 2020 from $1.1 billion in 2019, according to the Office of the U.S. Trade Representative’s (USTR) 14th biannual report to Congress on the Caribbean Basin Economic Recovery Act (CBERA).

The CBI continues to have a positive impact on a number of Caribbean Basin economies, including encouraging the development of niche product manufacturing, such as polystyrene from The Bahamas and fruit juice from Belize, said the report.

In 2020, CBI beneficiary countries supplied $5.1 billion of U.S. imports, ranking 49th among U.S. import suppliers. U.S. imports from CBI beneficiaries decreased for a second consecutive year from $6.1 billion in 2018 to $5.6 billion in 2019 and $5.1 billion in 2020, which represented declines of 8.2 percent and 8.9 percent, respectively. This is largely attributed to disruptions caused by the Covid-19 pandemic.

U.S. imports under the CBI tariff preferences increased to $1.2 billion in 2020 from $1.1 billion in 2019 and $1 billion in 2018. The increase in 2020, 7.7 percent, was preceded by a gain of 11.6 percent in 2019. The rise in 2020 was primarily driven by a higher value of U.S. imports of petroleum products from Guyana, and Trinidad and Tobago, to $547.5 million, an 86.7 percent increase from $293.3 million in 2019.

Total apparel and textile imports from CBI countries for the first 11 months of this year increased 37.3 percent to $940.88 million from $685.49 million in the prior-year period, according to the Commerce Department’s Office of Textiles & Apparel (OTEXA).

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“The Biden-Harris administration strongly supports CBERA, which encourages the development of strong democratic governments and builds economic ties with our valued trading partners in the Caribbean region,” deputy USTR Jayme White said. “The program provides opportunities for economic recovery and inclusive trade, and USTR is committed to encouraging its greater use by beneficiary countries.”

U.S. total goods trade–total exports plus general imports–with the CBI countries was $16.2 billion in 2020. The U.S. goods trade surplus with the CBI countries reached $6 billion in 2020.

The report said while the effect of CBI on the U.S. economy generally was negligible during the 2019-2020 reporting period and is likely to remain so, CBI continues to have a positive impact on a number of Caribbean Basin economies.

Haiti’s apparel exports to the United States maintained one of the highest utilization rates of CBI preferences. Approximately 95 percent of Haitian exports to the U.S. are apparel exports. Private sector associations estimate that, thanks to the CBI preference programs, more than 54,000 garment factory jobs have been created in Haiti as of the end of calendar year 2020.

Imports from Haiti under trade preference programs grew 36.6 percent to $915.16 million year to date in 2021 from $669.94 million the same period in 2020, according to OTEXA data.

CBERA launched the U.S. trade preferences programs for the Caribbean and Central American region in 1983. CBI benefits were expanded through the enactment of the Caribbean Basin Trade Partnership Act (CBTPA) in 2000, relevant provisions in the Trade Act of 2002, the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 (HOPE Act), the HOPE II Act of 2008, the Haitian Economic Lift Program Act of 2010 (HELP Act), and the Trade Preferences Extension Act of 2015.

CBERA and CBTPA cover close to 5,800 tariff lines at the HTS8 level for products from Antigua and Barbuda, Aruba, The Bahamas, Barbados, Belize, the British Virgin Islands, Curacao, Dominica, Grenada, Guyana, Guatemala, Haiti, Jamaica, Montserrat, Nicaragua, Netherlands Antilles, Saint Kitts and Nevis, Saint Lucia, St. Vincent, the Grenadines, and Trinidad and Tobago.

In connection to the report, The American Apparel & Footwear Association (AAFA) advocated for the increased flexibility of rules of origin under the CBERA/CBTPA to enable meaningful growth of the apparel industry in the Caribbean. AAFA cited concerns over diminishing trade under CBERA/CBTPA due to more flexible rules of origin permitted by the HOPE/HELP and Central American Free Trade Agreement (CAFTA) programs.

AAFA also stated that the CAFTA-DR is not sufficiently flexible to maintain trade and investment levels, which has led to trade permanently shifting outside the region. AAFA requested that the Biden-Harris administration ramp up distribution of excess U.S. vaccines to Caribbean partner countries, particularly focused on populations critical to economic growth, to aid in recovery and stability efforts.

The National Council of Textile Organizations (NCTO) expressed its support of CBERA and CBTPA in their current form and noted that the programs have helped create a valuable two-way trading system in the textile and apparel sector, along with other FTAs and preference programs in the Western Hemisphere. NCTO said preference arrangements must be made on sound rules of origin ensuring benefits are reasonably accessible for regional manufacturers of all components of the production chain.

NCTO also expressed concern and opposition toward any efforts to extend CBTPA with non-germane tariff circumvention measures such as the general system of preferences (GSP). The organization claimed that extension would severely damage FTAs and preference-based manufacturing and would hinder U.S. ability to negotiate improved marked access for U.S. made products in future FTAs.

In addition, NCTO said it strongly opposed Section 321 exclusions, as it undermines existing U.S. FTAs and preference programs, as duty-free benefits are made available without considering the source or regional origin requirements.