CAFTA benefits fall short.

BYLINE: ALAN M. FIELD

Apparel exports to U.S. fail to meet expectations

When Congress ratified the Central America Free Trade Agreement in 2005, U.S. textile and apparel industry executives hoped it would usher in a new era in which suppliers from Central America played a more significant role than suppliers from China. Quotas on imports of Chinese textiles and apparel had just expired, generating widespread fears of a surge of imports from Asia's largest economy. CAFTA could stem that tide.

It hasn't worked out that way. Despite CAFTA, leading Central American apparel suppliers have continued to capture only a minor share of the U.S. market, said Julia Hughes, senior vice president of the United States Association of Importers of Textiles and Apparel. Hughes said Honduras had only a 5.7 percent share of the U.S. market, compared with a 33.6 percent share for China, according to the latest statistics. That makes China by far the No. 1 supplier in the apparel market.

Until recently, U.S. apparel imports from China were growing much more rapidly than imports from CAFTA countries. Faced with competition from Asia, the output of Guatemala's textile industry declined in 2007, forcing 35 factories to close and about 17,000 workers to lose their jobs.

Now Vietnam is looming as the next major threat to Central America. U.S. apparel imports from Vietnam grew 36 percent last year, while imports from Honduras grew 11 percent.

What's worse, imports from Central America tend to be lower-value, lower-margin products that cost less per unit. The average unit value of Honduran imports was $1.95 last year, compared with $3.66 from Indonesia, $3.60 from India, and $3.42 from Vietnam. The average value of imports from El Salvador was even lower, at $1.82.