San José, Costa Rica, since 1956

Region Braces for End of Asian Textile Quotas

TUGUCIGALPA – As a single mother,Fani Fuentes supported her three childrenon a salary of less than $200 a monthworking at Honduras’ Gildan Activewareclothing-assembly plant.She was even able to stretch her modestsalary to “get ahead” in life, she says.All that changed last September, whenGildan closed its plant in Honduras to relocateto cheaper foreign markets, leavingFuentes and 1,800 other apparel workerswithout jobs.Personal pride has made Fuentes loatheto accept the less-skilled, lower-payingjobs at other companies, as recommendedby counselors Gildan hired to help relocateits ex-employees.But now that she’s without a job,Fuentes is worried about how she’ll pay forthe back surgery doctors say her six-yearoldson needs.“I regret that the factory closed,” shesaid. “The situation (since) has been verydifficult.”STORIES similar to Fuentes’ maybecome increasingly common in CentralAmerica, following this week’s end to textilequotas that regulated apparel-exportsfrom China and India.The Multi-Fiber Agreement (MFA), a30-year-old system of textile quotas onAsian markets, has given Central Americaan artificial advantage for decades.The quotas were put into place in 1974to protect textile industries in Europe andNorth America from third-world competition.The protectionist measure was laterdeemed by the World Trade Organization(WTO) as a hindrance to free trade, andhas been gradually phased out since 1995,under the organization’s Agreement onTextiles and Clothing (ATC).The phase-out period ended Jan. 1.The World Trade Organization estimatesthat by the end of this year, China, with itslower-wage workforce, will represent 50%of U.S. textiles imports. Central Americancountries that have benefited from the quotas,meanwhile, could take a hit.IN Central America, there are currentlysome 400,000 employees – or, 3% of thetotal labor force – working in 1,000 textileplants.Textiles represent 12% of CentralAmerica’s total exports to the UnitedStates, growing in volume from 512 millionsquare meters of material in 1992, to2.7 billion square meters in 2002.Although each country in CentralAmerica has different wages, on average,hourly wages in China ($.88) and India($.71) are lower.The math is worrisome for some.“The elimination of the quota is a cataclysm,an atomic bomb for the textileindustry,” said Tatiana Remy, executivedirector of Costa Rica’s Council of TextileQuotas. “It is creating great uncertainty.”YET not all Central American countriesare as concerned about the end of thequotas.In Nicaragua, 55,000 employees workin the textile sector at the “most competitive”(i.e. lowest) wages in CentralAmerica.The country’s competitive edge has ledseveral apparel companies operating inother Central American countries – includingthe same Gildan that closed recently inHonduras – to relocate to Nicaragua,according to Bernardo Callejas, an advisorwith the investment promotion groupProNicaragua.“Our costs are approximately the sameas China’s, but with the great advantage ofbeing close to the United States,” Callejassaid.OTHER market analysts agree thatCentral America’s proximity to the UnitedStates will help offset the Chinese factor.Lead time for production in China canbe up to six months, whereas CentralAmerican manufacturers can have ordersback on retailers’ shelves within a matterof weeks.And under World Trade Organizationrules, tariffs will still be allowed, and antidumpingrules will be enforced, both ofwhich may mitigate the rate at which Asiacan increase its market share, analysts note.THE pending U.S.-Central AmericanFree-Trade Agreement (CAFTA), whichwas ratified by El Salvador Dec. 17 and isexpected to follow suit in other legislaturesin the coming months, could help, too.“During the multilateral negotiationsfor CAFTA, the United States was wellaware of the upcoming end to the (quotas),and therefore tried to structure an agreementthat will make it easier for textile andapparel assembly plants in Honduras andthe rest of Central America to compete,”said a U.S. government economic officialat the U.S. Embassy in Honduras.The idea that CAFTA will help CentralAmerica unite to take the edge off China isbeing repeated up and down the isthmus.In El Salvador, where textile plantsaccount for 90,000 jobs and 60% of thecountry’s merchandise exports, YolandaMayora, Minister of the Economy, referredto CAFTA as “a fundamental tool toachieve strategies and a tactical plan tolessen the impact of (the end to thequota).”BUT even with CAFTA, the rules of“free trade” are different for each country.For example, “Trade PreferenceLevels” stipulated by CAFTA allowNicaragua to import 100 million metersof cloth from outside the United Statesand Central America duty free each year.ProNicaragua’s Bernardo Cajellasexplains that Nicaragua is the onlyCentral American country to receive thispreferential rule-of-origin benefit underCAFTA.For the other Central American countriesunder CAFTA, duty-free treatmentwill be extended only to include certainkinds of cloth produced in Mexico andCanada, as well as to certain fabrics andmaterials deemed to be “in short supply” inthe United States and Central America.STILL, many remain hopeful.In Honduras, where the apparel industryrepresents the country’s second greatestsource of income ($463.2 million in 2004)after remittances from the United States,most textile companies haven’t jumpedship yet.“While it is likely true that some U.S.companies will consider moving productionto Asian countries after 2005, it isimportant to note that Honduras has seennew investments in the textile and apparelsector from U.S. companies in 2004, andexpansions of investments by companiesalready present here,” said the officialfrom the U.S. embassy.Even Gildan Activewear plans to opena new facility in Honduras in 2005, accordingto a company spokeswoman.FOR Central America to remain competitivein textiles, the region will have toincrease its competitiveness, analysts say.As the situation is, wages are low, workschedules are exhausting and unions arenot allowed, said Evangelina Argetas,coordinator of textiles organization for theGeneral Workers’ Union of Honduras.Increased competition will make companyowners try to squeeze even more out workers,she warned.Some textile companies have discoveredthe best way to increase competitivenessis through improving product quality,not slashing wages and worker benefits.The Cooperativa MaquiladoraMujeres Nueva Vida Internacional, theworld’s first worker-owned free-tradezone, located in Nicaragua’s CiudadSandino, north of the capital, is convincedits 45 worker/owner operation will be fineeven now that the quotas have been lifted.“All of (our) clients are concernedabout the hidden costs in cheap products –bad working conditions, environmentaldamage, etc – and are, therefore, not verylikely to jump from the cooperative-madeproducts to Chinese-made products for thesavings of a few cents per item,” said MikeWoodard, of the Nicaraguan-based JubileeHouse Community, which helped form thewomen’s textile cooperative.(Tico Times reporters Tim Rogers andKatherine Stanley contributed to this article)

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