Now is the time to drive investment and nearshore production to the US and Central America
Broken supply chains, canceled orders, exorbitant shipping costs, rising carbon emissions, products tainted by forced labor and genocide are some of the challenges consumers faced during the pandemic. Many can be sourced to America’s overreliance on China for consumer goods.
As the pandemic continues, more global retailers are recognizing the risks of doing business in China. In turn, savvy companies are turning inward to the reliable and underutilized supply chains in their own backyard, and our U.S. producers and neighbors in Central America are poised to reap the rewards.
The foundation for this movement of goods is already established due in part to a trade agreement known as the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). Although imperfect, the agreement’s rules-based textile chapter was a critical cornerstone that has spawned a strong textile and apparel co-production chain with the U.S. that facilitates $12.5 billion in two-way trade and supports more than one million workers in the U.S. and the region.
A viable supply chain in the CAFTA-DR region for textiles and apparel is one of our best counters to China’s global economic influence. It offers more ethical and sustainable sourcing options, speed to market, quick inventory replenishment, reduced shipping costs, and reduced carbon emissions. Most prominently, these supply chains lack the abhorrent human rights abuses sanctioned by the Chinese government.
Notably, the textile supply chain supports essential personal protective equipment (PPE) production needed to protect our public health and national security. This impacts over 8,000 pieces of equipment annually for our armed forces.
The agreement also acts as a stabilizing force in our region, promoting investment and production. Since CAFTA-DR, investments in the U.S. spinning industry to supply our regional market with yarn have been significant.
Most recently, Parkdale Mills, the largest U.S. producer of spun yarn, announced a $150 million-dollar investment in a new yarn spinning facility in Honduras and a substantial investment to support existing operations in Hillsville, Va., which will create and support good paying jobs in both countries.
Further, Unifi Inc., the largest synthetics textured fiber and yarn producer in the U.S. and the region, is currently expanding and upgrading their polyester textured yarn facilities in North Carolina and El Salvador with new capital expenditures. Gildan, an apparel company with 10 yarn spinning facilities in the U.S. employing 2,300 workers, has invested more than $500 million over the past 10 years in its operations in the United States that supply its operations in the region, supporting nearly 40,000 employees.
These are just three examples of the impacts of significant U.S. investments in the region, highlighting its potential for growth. A newly released report by Werner International, conservatively estimates that if apparel exports from the region to the U.S. were doubled, an additional $6 billion in new investment would occur and 2.2 million jobs would be created in the U.S. and CAFTA-DR region.
But instead of committing to increased regional sourcing and taking advantage of this attractive co-production chain, a coalition of brands and retailers are discussing dismantling this agreement in a backdoor boon to China. Changes in the yarn forward rule would cripple our region and further the ongoing race to the bottom.
We understand these importers would prefer to replace U.S. textiles with cheaper materials from non-market economies that rely on cotton grown in the Xinjiang region of China, a hotbed of forced labor and genocide.
While we did not support CAFTA-DR initially due to concerns about American workers, we know it was carefully crafted to provide strong textile rules and considerable flexibilities not available commercially in the region or U.S. It appears the agreement’s mechanisms are functioning as intended.
Weakening CAFTA-DR’s textile rules would devastate the U.S. and Central American textile and apparel industries, displacing an estimated 550,000 workers.
It is critical we develop and promote policies that drive more capital investment and sourcing commitments here at home and across our region. There are proactive policies outlined in the Werner International report that would help unlock more investment in the U.S. and the CAFTA-DR region, including supporting industrial expansion efforts, providing financing and loan guarantees, and other incentives.
By leaning into domestic and regional co-production and sourcing, apparel brands and retailers can avoid the taint of Chinese supply chains that undermine U.S. and regional industries. Also, this would support a strong and resilient textile and apparel production chain that responds quickly to crises, enhancing our public health and military preparedness.
During the current supply chain crisis, the opportunities could not be riper to shift production of textiles and apparel at home and in our region, resulting in a win-win for U.S. and Central American workers, the environment, and our supply chain.
Rep. McHenry represents North Carolina’s 10th District and is Co-Chair of the House Textile Caucus and the ranking member of the House Financial Services Committee. Rep. Pascrell represents New Jersey’s 9th District and is Co-Chair of the House Textile Caucus and a member of the House Ways and Means Committee.
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