Background

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 2019 and 2020 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) fell from $6.1 billion in 2018 to $5.6 billion in 2019 (an 8.2 percent drop) and $5.0 billion in 2020 (a 10.7 percent decrease). U.S imports under CBERA increased from $1.7 billion in 2018 to $1.8 billion in 2019 (up 5.0 percent) but then fell back to $1.7 billion in 2020. The ITC primarily attributes both of these decreases to lower U.S. imports of textile and apparel products, which fell 25.6 percent.

In 2020, imports under CBERA of cotton T-shirts, the largest import by value from Haiti, decreased by 29 percent mostly due to demand uncertainty, capacity restrictions for factories, and difficulty in accessing raw material because of the effects of the COVID-19 pandemic. Similarly, methanol imports from Trinidad and Tobago under CBERA decreased by 30 percent. However, imports under CBERA of petroleum products, which came from Trinidad and Tobago and Guyana, increased by 127 percent. This increase was driven by Guyana’s increase in production, which largely offset the value of the decline in methanol imports.

Textiles and apparel accounted for 43.1 percent of U.S. imports under CBERA in 2020, followed by energy products at 48.8 percent, agricultural products at 10.9 percent, and other mining and manufactured products at 5.2 percent.

Effects on Beneficiaries. The ITC states that CBERA continues to have a positive impact on a number of Caribbean Basin countries. Measured by U.S. imports of apparel, Haiti has been the greatest beneficiary of CBERA trade preferences in recent years, largely because Haiti benefits from more flexible rules of origin for apparel than other beneficiaries. In addition, exports of some CBERA beneficiaries to the U.S. have become more diverse, but the degree of diversification shows wide differences among beneficiaries. CBERA also has encouraged the development of niche product manufacturing in several countries, such as polystyrene from The Bahamas, fruit juice from Belize, and electronic products from Saint Kitts and Nevis.

However, supply-side constraints make exporting CBERA-eligible goods a challenge for many beneficiaries. These constraints include inadequate roads, ports, and telecommunications; shortages of skilled workers; high production costs; high energy and telecommunications costs; inadequate access to investment financing; low levels of innovation; and often an underdeveloped private sector. Perhaps more important, many CBERA countries have been orienting their economies more toward the service sectors, making CBERA’s trade preferences for exports of goods relatively less important to the economic future of beneficiary countries.

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 such as T-shirts and methanol.

Copyright © 2021 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.

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