What is Preferential Trade Agreements

This chapter examines the export performance of clothing assembly industries in the countries of Central America to the US market. It commences with a brief summary of the history of the growth and limited evolution of the Central American and Caribbean Basin garment export industry in the face of evolving trade liberalization. It then examines how China and other Asian countries have eclipsed the region's clothing exports to the USA as they made inroads into the latter's market. It is argued that China's membership in the World Trade Organization commencing in 2001 and the phasing out of quotas under the Multi-Fiber Agreement in 2005 combined to thwart any expansion that Central American clothing exporters could have achieved in the US market. While US Harmonized Tariff System data for both knitted (HTS 61) and non-knitted (HTS 62) apparel and clothing accessory imports were examined, only the former were presented, as they represent a much more significant share of Central America's overall garment exports to the USA. US imports from Central America under HTS 61 are shown to have either declined or remained stagnant in value terms and in value market share throughout the period examined. In order to zero in on specific categories that are important within the context of the Central American garment export industry, a selection, disaggregated into four digit HTS subcategories, was made of knitted or crocheted apparel and accessories from the region to ascertain its performance over the first decade of the new century. These data are reviewed in comparison with similar data corresponding to imports from China in order to ascertain the performance of Central American exporters. Finally, the work is also placed within the context of the Free Trade Area of Central America and Dominican Republic (CAFTA-DR) in an attempt to discern its possible medium- to long-term impact, since specific provisions of the trade agreement aim precisely at boosting the region's garment assembly sector.