Vice President Kamala Harris recently traveled to Honduras for President Xiomara Castro's inauguration. The ceremony provided an opportunity for the Biden administration to demonstrate its commitment to working with our allies in Central America to address the root causes of the ongoing migration crisis. One strategy we hope this administration will strongly consider implementing involves empowering the economic relationship between the United States and Central America. Through smart trade policies, we can promote investment in the region's most promising industries and create sustainable civil societies where opportunity can flourish.
Two industries with the potential to positively impact the economic future of Central America are textiles and apparel. By encouraging further investment in textile and apparel manufacturing within the Western Hemisphere, while protecting existing manufacturing, we can provide communities with higher wages and long-term stability, mitigating the need to migrate.
The time to support this strategy is now. The movement of people migrating north from Central America is not the only shift occurring. The Uyghur Forced Labor Prevention Act, which Congress passed late last year, bars the importation of products made from forced labor in China's Xinjiang region, which is accelerating a migration of sourcing and supply chains out of China.
But while that act is a strong policy message for brands and retailers to diversify their sourcing out of China, there is no comparable trade policy signal to bring that business to the Western Hemisphere.
Unfortunately, the current agreement governing trade between the United States and Central America, the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), lacks the necessary incentives to draw the kind of apparel investment needed to seize the moment and move sourcing to Central America. As a result, while companies diversify out of China, the vast majority are finding it hard to move that production to the Western Hemisphere.
CAFTA-DR does provide duty-free benefits for regional producers, but this access is conditioned on meeting strict rules of origin that require most of the yarns and fabrics used to produce garments to originate in the region. In theory, this model should attract more investment. But in practice—as demonstrated during the 18 years that CAFTA-DR has been in existence—this has not been the case. Many companies simply cannot access the yarns and fabrics they need to manufacture the garments in demand by today's consumers while adhering to the existing rules of origin. Thus CAFTA-DR's promise to create jobs is unfulfilled.
While the current rules work well for some companies, there is not enough regional textile production to support and sustain the needs of the industry.
To truly take advantage of the sourcing opportunity that is now available, the region must attract more cut and sew jobs—garment manufacturing—to create enough employment to slow the migration crisis. This would also increase demand for more regional yarns and fabrics that can stimulate even more textile investment across the Western Hemisphere, including in the United States.
While any conversation about textile preferential rules of origin stirs up deep emotions, it is time to put that rhetoric aside so all stakeholders can come together and forge a path forward. Together, we can make sure we do not undermine existing or proposed investment, or hold the region hostage to an economic model that predates the era of e-commerce. If we are successful, we will create a long-term demand signal and bring sourcing that currently goes elsewhere into Central America. If we are not successful, the region will never reach its potential to be a major sourcing destination for American brands and retailers.
As the Biden administration continues to search for answers to the mass migration occurring at our southern border, we hope that promoting investment in the region's most promising industries, such as textiles and apparel, remains top of mind. The key to doing so is to introduce flexibilities to CAFTA-DR's textile and apparel rules of origin.
Now is the time for lawmakers and business leaders to seize the moment and come together so we can literally move the needle to build more resilient, sustainable and humanitarian supply chains in the Western Hemisphere.
Stephen Lamar is the president and CEO of the American Apparel & Footwear Association.
Julia K. Hughes is the president of the United States Fashion Industry Association.
The views expressed in this article are the writers' own.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
