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Imports Under Caribbean Preference Program Reverse Decline

Friday, October 04, 2019
Sandler, Travis & Rosenberg Trade Report

In its biennial report on the impact of the Caribbean Basin Economic Recovery Act (as modified by the Caribbean Basin Trade Partnership Act and the Haiti HOPE and HELP acts) the International Trade Commission found that in 2017 and 2018 the overall effect of this trade preference program on the U.S. economy continued to be negligible and the effect on beneficiary countries continued to be small but positive. CBERA has been in operation since Jan. 1, 1984, and affords preferential tariff treatment to most products of 17 Caribbean and South American countries.

Imports. According to the report, total U.S imports from CBERA countries (with and without trade preferences) grew from $5.3 billion in 2016 to $5.8 billion in 2017 to $6.1 billion in 2018. In addition, U.S imports under CBERA grew from $875.5 million in 2016 to $1.5 billion in 2017 to $1.7 billion in 2018. The ITC primarily attributes both of these increases, which reverse a years-long trend, to higher U.S. imports of methanol and textiles and apparel.

Textile and apparel imports from CBERA countries (which come primarily from Haiti) increased from $308.2 million in 2016 to $862.8 million in 2017 to $929.2 million in 2018 and accounted for 56 percent of the value of total imports under CBERA in 2018. Cotton T-shirts supplied 30.1 percent of those imports and saw a 33.4 percent increase in 2018. U.S. imports of textiles and apparel entering under CBPTA trade preferences fell from $276.8 million in 2017 to $254.6 million in 2018, but such goods entering under HOPE/HELP trade preferences continued to grow, from $535 million in 2016 to $577.0 million in 2017 to $645.5 million in 2018. Duty-free imports under these preferences accounted for nearly 72 percent of total U.S. duty-free imports of textile and apparel goods from the region in 2018.

Petroleum-related products from CBERA beneficiaries were valued at $503.2 million in 2018, up from a low of $339.7 million in 2016, and accounted for 29.9 percent of the value of imports under CBERA in 2018. Imports of methanol from Trinidad and Tobago supplied 89 percent of such imports and increased 13.7 percent by value in 2018 even though the volume declined slightly. U.S. imports of energy products under CBERA rose from $444.2 million in 2017 to $503.2 million in 2018.

Other major imports under CBERA included agricultural products (including yams, prepared foods, sauces and preparations, and fresh guavas and mangoes), which totaled $133.6 million and represented 7.9 percent of imports from CBERA countries, and other mining and manufactured products (including polystyrene, melamine, electrical transformers, and urea resins), which totaled $104.6 million and represented 6.2 percent of imports from CBERA countries.

Effects on Beneficiaries. CBERA has encouraged several beneficiary countries to develop niche exports to the U.S., including polystyrene from The Bahamas and fruit juice from Belize. Haiti has also been a significant beneficiary of CBERA trade preferences in recent years, largely because it benefits from more flexible rules of origin for apparel than others. However, exporting CBERA-eligible goods is a challenge for many beneficiaries because of supply-side constraints such as inadequate infrastructure and an increasing focus on the export of services.

 

Investment in the production and export of CBERA-eligible products in most CBERA countries was limited during 2017 and 2018. This low level of investment appears to be attributable largely to two factors: (1) CBERA countries are relatively small global producers, small exporters, and small suppliers of U.S. imports; and (2) investment in many CBERA countries is directed much more to services, such as tourism and financial services, than to goods eligible under CBERA preferences.

Effects on U.S. CBERA has little impact on U.S. industries, primarily because U.S. imports under the program comprise only 0.07 percent of total U.S. imports. U.S. consumers likely paid slightly lower prices for products imported from CBERA beneficiaries in 2018; e.g., 0.8 percent lower for cotton T-shirts and 0.9 percent lower for methanol.

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