CAFTA proceeds

CAFTA goes into effect in Guatemala today. Guatemala joins Honduras, Nicaragua and El Salvador as countries where the free trade agreement with the US is fully in effect. The Dominican Republic has not yet adopted implementing legislation and Costa Rica's legislature has not ratified the treaty.

The delay by other countries in implementing the treaty has hurt El Salvador as this article from the Dallas Morning News pointed out:

Apparel with thread or other materials from countries not yet certified to participate in CAFTA, such as Guatemala, faces hefty duties upon entering the United States – even if they contain U.S.-made fabric and were sewn in a CAFTA country.

In one example, the average duty on apparel from El Salvador suddenly jumped to 14 percent in March from 5 percent in February, according to the American Apparel & Footwear Association.

The reason: In March, more of the garments contained materials from countries not yet operating under CAFTA rules, subjecting them to significant tariffs.

"It's been hugely disruptive," said Stephen Lamar, the trade group's senior vice president. "It's very difficult to plan business."

The situation has saddled importers with higher costs, and some companies have shifted production out of the region, he said.

As a result, the amount of textile and apparel imports from the CAFTA countries, measured in U.S. dollars, fell by 16 percent in the first four months of 2006 compared with a year ago.