The textile and apparel industry is in transition, moving from a regulated quota regime to global free trade, allowing retailers to make sourcing decisions based on their business model and customer needs as opposed to managing quotas.
One major event was the removal of quota restrictions in January 2005, as mandated by the Uruguay Round of trade negotiations and recently the signing of a Customs Cooperation Agreement between the U.S. and Mexico as mandated by the U.S. trade pact with the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua, commonly known as CAFTA-DR. This represented the first step toward integrating apparel trade between North America and Central America.
Under the new Customs Cooperation Agreement signed on January 26, 2007 at the World Economic Forum in Davos, Switzerland, apparel produced in Central America incorporating Mexican materials will qualify for duty-free treatment when exported to the U.S. under the CAFTA-DR. The agreement also provides for sharing of information and documents, procedures for production verification, including unannounced plants visits, and penalties in the event of inaccurate claims. However, before the so-called cumulation provision can take effect, Mexico and each of the CAFTA-DR countries need to amend or sign trade agreements in order to grant reciprocal treatment to goods made in those countries that incorporate U.S. textile materials and subsequently implement the changes in its domestic law.
Supporters of CAFTA-DR and the recent Customs Cooperation Agreement hope that such agreements can help integrate production in the region as a counterbalance to Asian producers and improve long-term social, political and economic development. Concerns remain, however, over the negative effects on certain sectors and employees of the U.S. economy. Only time will tell if a balanced outcome, increased trade and regional stabilization may be achieved.