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Imports Under Caribbean Preference Program Down as Energy Demand, Commodity Prices Drop

Wednesday, October 02, 2013
Sandler, Travis & Rosenberg Trade Report

In its biennial report on the impact of the Caribbean Basin Economic Recovery Act, the International Trade Commission found that the overall effect of this trade preference program on the U.S. economy continues to be negligible. CBERA has been in operation since Jan. 1, 1984, and affords preferential tariff treatment to most products of 16 designated Caribbean and South American countries.

The report notes that imports benefiting from CBERA jumped 24.1% in 2011 to $3.6 billion, mostly attributable to the U.S. economic recovery, but then fell to $3.1 billion in 2012 due to factors such as slower growth in commodity prices, a decline in U.S. demand for energy imports, Panama’s October 2012 exit from CBERA when its free trade agreement with the U.S. took effect, and the Dec. 31, 2011, elimination of preferential treatment under CBERA for ethanol. The 2012 import value was higher than the totals for 2009 and 2010 but remained much lower than the all-time high of $12.3 billion in 2005. Of the imports benefiting from CBERA preferences, 75.7% were energy products and another 13.7% were textile and apparel products, almost all of which were apparel. Virtually all U.S imports entered under CBERA were not eligible for duty preferences under any other program.

CBERA has had some positive effects in beneficiary countries, the report states. Several beneficiary countries have developed niche exports to the United States, including polystyrene from The Bahamas, fruits and fruit juices from Belize, and electronic products from St. Kitts and Nevis. In addition, special CBERA provisions for Haiti have had a strong, positive effect on export earnings and job creation in the country’s apparel sector. Investment in this sector increased significantly in 2011-2012 and U.S. imports of textiles and apparel from Haiti rose by 4.1% to $730.1 million in 2012, although Haiti is expected to remain a small U.S. supplier compared to globally competitive producers in Central America and Asia.

The report concludes that the overall effect of imports that could receive tariff preferences only under CBERA on the U.S. economy generally and on U.S. industries and consumers continued to be negligible in 2012 and will likely remain so. Investment for the near-term production and export of CBERA-eligible products is not likely to result in imports that would have a measurable economic impact on the U.S. economy generally and on U.S. producers, and in fact investment in CBERA countries increasingly targets export-oriented services, such as tourism, finance and telecommunications, rather than the manufacturing of CBERA-eligible export goods. In addition, exporting CBERA-eligible goods is a challenge for many beneficiaries because of supply-side constraints such as inadequate infrastructure, shortages of skilled workers, high production costs and inadequate access to investment financing.

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