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 2015 and 2016 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) declined from $8.5 billion in 2014 to $7.1 billion in 2015 to $5.3 billion in 2016, mainly due to lower U.S. imports of energy products and textiles and apparel.
U.S imports under CBERA fell 25 percent in 2015 to $1.5 billion and another 43.2 percent in 2016 to $875.5 million. This decline was driven primarily by declining imports of energy products, specifically crude petroleum and methanol, from Trinidad and Tobago. Energy products accounted for 39.3 percent of total imports under CBERA in 2016 (down from 62.0 percent), with Trinidad and Tobago supplying 99.9 percent. Textiles and apparel (supplied mainly by Haiti) accounted for another 34.9 percent of CBERA imports (up from 19.8 percent), followed by agricultural products with 14.4 percent (up from 7.6 percent) and other mining and manufacturing products with 11.4 percent (up from 10.7 percent).
Most imports under CBERA (90.7 percent) could not have received tariff preferences under any other U.S. program. These imports accounted for 14.9 percent of the value of total U.S. imports from CBERA beneficiaries. The top five CBERA-exclusive imports in 2016 were methanol, knitted cotton t-shirts, light crude petroleum, knitted cotton sweaters and pullovers, and polystyrene.
The value of U.S. imports of textiles and apparel entering under CBERA trade preferences fell from $396.8 million in 2015 to $308.2 million in 2016, a 22.3 percent decrease that was greater than the 6.4 percent drop in overall U.S. imports of textiles and apparel. Although total textile and apparel imports from Haiti dropped to $848.5 million in 2016, U.S. imports from Haiti under the HOPE/HELP provisions increased by 7.5 percent to $535.0 million. More than 60 percent of duty-free imports of textiles and apparel from Haiti now utilize the HOPE/HELP preferences rather than the older but more narrowly defined CBTPA preferences.
Effects on Beneficiaries. CBERA has encouraged several beneficiary countries to develop niche exports to the U.S., including polystyrene from The Bahamas, fruits and fruit juices from Belize, and electronic products from St. Kitts and Nevis. 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.
Apparel assembly is Haiti's largest manufacturing activity and largest source of manufacturing jobs and CBERA (enhanced by the CBTPA and the HOPE and HELP acts) has been an important factor in promoting apparel production in Haiti and apparel exports to the U.S. market. The outlook for the apparel industry in Haiti remains strong with investors from Hong Kong, Taiwan, South Korea, and Sri Lanka recently announcing plans to open new or expand existing facilities and operations. Nevertheless, Haiti is a small U.S. apparel supplier compared to globally competitive producers in Central America and Asia and economic factors such as its low port capacity and inadequate infrastructure limit its ability to expand its production significantly.
Investment in the production and export of CBERA-eligible products in most CBERA countries was limited during 2015-16. 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. Following the global economic downturn in 2009-10, foreign direct investment in most CBERA countries recovered in 2011. After leveling off during 2012-13 it increased again in 2014 but fell substantially in 2015.
Effects on U.S. CBERA has little impact on U.S. industries because the value of U.S. imports under the program is small and continues to fall. Consumer impact is also negligible; leading welfare gains included $24 million from cotton t-shirts from Haiti and $12.9 million from methanol from Trinidad and Tobago. The program also continues to have little effect on the U.S. economy generally as well as U.S. industries producing articles like or directly competitive with imported articles.