This is good news for Central American textile manufacturers. We will have to wait and see what other protectionist measures will be implemented by President Trump.
The possibility that the United States buys textiles from Vietnam at lower prices than those paid by textile manufacturers in Central America seems to have now disappeared, however, in order to measure the true impact of the Trump protectionist policy on trade between US business and the region we will have to wait to see what other decisions on international trade deals are take by the new administration.
If the United States withdraws from the Transpacific Agreement, there will be less risk of competition from Asian countries for the Central American textile industry.
If the US does eventually abandon the Trans-Pacific Partnership Agreement (TPP), as promised by President-elect Donald Trump, the Central American textile industry could benefit from the elimination of the possibility that the US, its main market, will buy textiles from Vietnam at lower prices.Since the start of negotiations for the TPP, the Central American textile industry has tried to negotiate bilaterally with the US in order to minimize the negative effects that the TPP could have on the industry in the region.
Despite the challenges facing the Central American textile industry with the coming into force of the TPP and Asian competition, projections are that there will be growth of 8% in 2016.
The main reason is the decision of the US government to extend for ten years the tariff advantages enjoyed by Nicaraguan exports to the northern country, supporting them against the entry into force of the Trans-Pacific Economic Partnership Agreement (TPP).
Efforts are growing to minimize the impact of the possible signing of the Trans-Pacific Partnership Agreement, and a tariff reduction program with long deadlines for sensitive products has been proposed.
As negotiations proceed to sign the Trans-Pacific Partnership Agreement (TPP), the textile industry in El Salvador is stepping up its efforts to maintain the conditions of the CAFTA treaty and minimize the impact that the TPP will have on the sector in the long term. One of the main risks is that "... Vietnam could introduce products from China and then export them tariff-free to the United States, which would give them a huge competitive advantage. "
The "fast track" granted to the trade agreements currently being negotiated by the USA, increase the urgency of Central America raising productivity and competitiveness of their businesses, particularly against Asian countries.
From now on, the US government will be accelerating adoption of Trans-Pacific Partnership Agreement (TPP), which would affect exports from Central American countries as they compete directly with the products sold by Asian nations.
The government is seeking US support in order to improve conditions in the negotiation of the Trans-Pacific Partnership to minimize the impact it will have on sectors such as textiles.
From a statement issued by the Ministry of Economy of El Salvador (MINEC):
The Minister of Economy, Tharsis Solomon Lopez began a series of meetings in Washington DC with Senators, Congressmen, trade officials from the US Government and private entities, in order to present the position of the Salvadoran government in the negotiations for the Trans-Pacific Partnership, known by its acronym TPP, in relation to the impact it could have on Salvadoran exports carried out under the Free Trade Agreement with the United States, known as CAFTA-DR.
Analysis of the impact of the Trans-Pacific Partnership on the region.
The competition which sectors such as textiles could face is one of the elements raising questions among employers in the region, compared to the real benefits that could be accrued if Central America participates in the Strategic Economic Trans Pacific Partnership (TPP).
The presence of direct competitors, such as countries like Vietnam, in the textile sector, and the possibility of losing dominance in the American market due to trade rules that TPP countries must meet, is unsettling the productive sectors in the region and forcing a reckoning of the pros and cons of a possible entry to the block to be undertaken.
The president of the Dominican Republic has warned the U.S. government about the impact the Trans- Pacific treaty in the textile sector in the region.
From a statement by the Ministry of Foreign Affairs of the Dominican Republic:
On November 27, President Danilo Medina sent a communication to the President of the United States, Barack Obama, in which it reiterated its concern expressed during the meeting held in San José, Costa Rica, in May, in connection with the negative impact which could come from the Trans- Pacific Economic Partnership Agreement (TPP) on the textile and clothing industry in the signatory countries of the DR -CAFTA and the region, if certain special concessions that could cause changes in the management and values of hemispheric trade, and on a worldwide level.
The entry being prepared by the government into the Pacific Alliance will bring more market opportunities but also the requirement for more competition.
Currently the country is an observer of the Pacific Alliance and it is possible that at some point it will become part of the block, but that will not happen anytime soon.
"One requirement for participation is that all countries that are within the alliance must have signed a free trade agreement between them... but we are interested in following the Pacific Alliance closely," said Deputy Economy Minister Mario Roger Hernandez. Of the countries in the initiative, Peru is the only one that does not have an FTA with El Salvador, but Hernandez said he is in the process of negotiation.
The Trans-Pacific agreement being negotiated by the U.S. could authorize Vietnam to get threads from China and export duty-free textiles to the North American nation.
The Ambassador of El Salvador in that country, Ruben Zamora, has already raised concerns with officials from the U.S. trade office (USTR). Zamora affirmed that representatives from textile companies have visited the U.S.
The inclination of Latin American governments when deciding which commercial block to join, is clearly marked by their ideological distinctions.
Editorial
While describing the launch of the Pacific Alliance as a "successful exercise in media diplomacy" in an analysis of the issue in his article in Lanacion.com.ar, Alejandro Rebossio highlights the features of this block and those of Mercosur, noting that in just one year of existence, the Pacific countries have achieved more in institutional and commercial integration, than the Atlantic block.
The Pacific Alliance is now operating and producing results which are favorable to the development of the nations which compose it, and it is a natural environment for Central American countries to be integrated into.
Editorial
The very apt comparison made by analyst Andres Oppenheimer between the economic blocs Mercosur-Argentina, Brazil, Paraguay, Uruguay and Venezuela-, and the Pacific Alliance-Chile, Colombia, Mexico and Peru (soon to also include Costa Rica) - shows the major conceptual differences between one group and another, and the concrete results generated for the development of their people.
The members have unanimously accepted the integration of Honduras as an Observer Member of the Pacific Alliance along with Ecuador, El Salvador, France, Paraguay Portugal and the Dominican Republic.
From a press release by the National Government of Honduras:
Chile, Colombia, Mexico and Peru agreed unanimously on Honduras' integration as an Observer Member of the Pacific Alliance, as announced by the President of Colombia Juan Manuel Santos, who became President Pro Tempore of the Agency, at the end of the VII Summit held on May 23 in the city of Cali.
If Asian countries like Malaysia and Vietnam get access for their textiles to the U.S. under the same conditions granted in the DR-CAFTA, the Central American textile sector will be at risk.
The Salvadoran Chamber of Textiles, Clothing and Free Zones (CAMTEX), warns of the risk posed to the sector if the Trans Pacific Partnership Agreement (TPP) comes into effect.