Final Presentation Dominican Textiles

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  • Final Presentation Dominican Textiles

    1. 1. Changes in Global Trade Rules for Textiles and Apparel Implications for The Dominican Republic Research Prepared with USAID support under contract PCE I-00-98-00016, Task Order 13 (Support for Trade Capacity-Building Activities)
    2. 2. Changing trade environment <ul><li>The WTO Agreement on Textiles and Clothing (ATC) will eliminate quotas on US imports January 1, 2005 </li></ul><ul><li>Preferential trade agreements are expanding--other countries are joining the club (e.g., AGOA and ATPDEA) </li></ul><ul><li>US free trade agreements are increasing (e.g., Chile, Singapore, Southern Africa, CAFTA etc.) </li></ul>
    3. 3. US imports from the Dominican Republic Total US Imports from the Dominican Republic US$ 4.2 Billion (2002) Source: USITC Dataweb. Apparel is defined as Standard Industry Trade Classification code 84.
    4. 4. US Imports of apparel from the Dominican Republic 2002 (Based in Value) Source: US Department of Commerce Office of Textiles and Apparel (OTEXA). *Synthetics are garment primarily made of man-made fibers such as polyesters and acetates.
    5. 5. Phase-out of Quotas A Major Benefit Will End in 2004
    6. 6. Dominican Republic exports will be subject to more competition US Imports of Apparel From Dominican Republic 2002 Unconstrained 99.9% High Risk 85% Low Risk 15% The Dominican Republic is not constrained by quotas Most Dominican Republic exports are in categories which Asian countries are quota constrained Source: Data from U.S. Department of Commerce. Low-risk exports are products in which the Dominican Republic and other countries are not constrained by quotas. Dominican exports of certain wool suits were constrained by quotas in 2002 but amounted to less than 1% of trade.
    7. 7. Products exposed to a high risk of quota elimination
    8. 8. Tariff equivalents of quotas and tariffs on selected quota constrained countries *Tariff Equivalents of quotas are technically called export tax equivalents, because the quota is applied before the duty is charged in the US, it is not exactly equivalent to a quota.
    9. 9. Impacts of US quota phase-out: assumptions <ul><li>Adjustments are long term (1-3 years) </li></ul><ul><ul><li>Buyers can find new sellers </li></ul></ul><ul><ul><li>Unprofitable producers close </li></ul></ul><ul><li>No trade remedies (antidumping or safeguards) </li></ul><ul><li>No major shifts in exchange rates </li></ul><ul><li>Costs such as labor, fabric and transportation remain the same </li></ul>
    10. 10. Impacts of US quota phase-out: Exports Decline in Baseline 2002 Exports of $759 Million
    11. 11. Impact of quota phase-out: direct employment Lose of 41,528 Direct Jobs Number of Employees
    12. 12. The importance of China <ul><li>China will likely account for up to up to half the impacts of quota removal </li></ul><ul><li>The U.S. may apply China specific safeguards to counter import surges from China </li></ul><ul><li>China safeguards could provide up to a three year window for the Dominican Republic to adjust to competition in a quota free world </li></ul>
    13. 13. US-CAFTA Scenarios: Implications for the Dominican Republic Answer to a Problem?
    14. 14. US apparel imports from Dominican Republic and Central America Source: U.S. Imports of Merchandise Trade 2002. Shares based in value.
    15. 15. US applied duties under the Caribbean Trade Preference Act
    16. 16. US applied duties under the Caribbean Trade Preference Act
    17. 17. Impacts of US-CAFTA and quota phase-out: assumptions <ul><li>Adjustments are long term (1-3 years) </li></ul><ul><ul><li>Buyers can find new sellers </li></ul></ul><ul><ul><li>Unprofitable producers close </li></ul></ul><ul><li>No trade remedies (antidumping or safeguards) </li></ul><ul><li>No major shifts in exchange rates </li></ul><ul><li>Materials costs do not change as a result of new rule of origin </li></ul><ul><li>Non-preferential trade can be converted to duty free </li></ul>
    18. 18. Impacts of US-CAFTA and quota phase-out: exports
    19. 19. Impacts of US-CAFTA and quota phase-out: direct employment Number of Employees
    20. 20. Impacts of US-CAFTA: rules of origin determine material inputs <ul><li>Fabric can comprise 50% or more of trousers’ factory gate price </li></ul><ul><li>Regional fabrics (Central American or local) could reduce material costs and provide a broader input base </li></ul>
    21. 21. Impacts of US-CAFTA and quota phase-out: exports With Assumed Ten Percent Reduction in Dominican Republic Trouser Material Cost
    22. 22. Adjusting to the New Trade Environment
    23. 23. The post quota market for apparel <ul><li>What will the post quota world look like and how can the Dominican Republic prepare for it? </li></ul>
    24. 24. The post quota market for apparel <ul><li>According to a survey by the Department of Commerce, U.S. apparel buyers plan to reduce by half the number of producers from whom they source apparel soon after quotas end </li></ul><ul><li>Buyers are indicating that they require the value-added services of large apparel firms such as design shops, floor-ready merchandise and full-package production </li></ul>
    25. 25. Adjustment strategies <ul><li>Clustering of small and medium sized firms </li></ul><ul><li>Improving knowledge of regional fabric sourcing </li></ul><ul><li>Diversifying products away from categories with significant quota protection to products with significant tariff protection </li></ul>
    26. 26. Adjustment strategies <ul><li>Insuring new customs regulations are efficiently implemented (24 hour rule, Container Shipment Initiative, Customs Trade Partnership Against Terrorism) </li></ul><ul><li>Engaging in free trade negotiations and ensuring that negotiated provisions benefit the Dominican Republic </li></ul>
    27. 27. Adjustment strategies <ul><li>Insuring new customs regulations are efficiently implemented (24 hour rule, Container Shipment Initiative, Customs Trade Partnership Against Terrorism) </li></ul><ul><li>Engaging in free trade negotiations and ensuring that negotiated provisions benefit the Dominican Republic </li></ul>
    28. 28. US applied duties by fiber and fabrication The average applied duty on Asian suppliers for the products exported by the Dominican Republic is 18.7 percent US Average Duties on all Apparel Products
    29. 29. Selected US imports with high duties
    30. 30. Dominican Republic Apparel Export Performance Answer to a Problem?
    31. 31. US import market shares: cotton trousers Source: US quota categories 347/348. Market shares in SME. The US imported $730 million from the Dominican Republic of cotton trousers in 2002.
    32. 32. US imports of cotton trousers 1997-2002 Square Meter Equivalents
    33. 33. US imports of cotton trousers 1997-2002 Average Unit Values
    34. 34. US Import Market Shares: Cotton Underwear Source: US quota categories 352. Market shares in SME.
    35. 35. US import market shares: synthetic trousers Source: US quota categories 647/648. Market shares in SME.
    36. 36. US import market shares: cotton knit shirts Source: US quota categories 338/339. Market shares in SME.
    37. 37. Effects of Quota Elimination on Support Garments Answer to a Problem?
    38. 38. US Imports of support garments <ul><li>Brassieres, girdles and other body support garments were integrated into the WTO in 1998, so constraining quotas were removed principally from South East Asian countries (Thailand, Indonesia, Malaysia, and Singapore) </li></ul><ul><li>Quotas remained on China up to January 2002 when they were removed </li></ul>
    39. 39. US imports of support garments 1997-2002 Quotas on South Asian countries eliminated Quotas on China eliminated (Million Units)
    40. 40. US import market shares: support garments Source: US quota category 649. Market shares in SME.
    41. 41. US imports of support garments 1997-2002 Quotas on South Asian countries eliminated Quotas on China eliminated (Average Unit Values (US$/SME)

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