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Apparel production

Monday, January 9, 2017

Investment in Central American apparel production could get a boost, given the low likelihood of a reduction in entry barriers to the United States market for goods sourced in Southeast Asia.

Imports from Mexico for their part might face special duties.

The Trump administration meanwhile is unlikely to change the conditions of Cafta-DR, a free trade agreement between the United States on one hand, and on the other the countries of Central America – except for Panama – as well as the Dominican Republic.

The region’s exports have only a small impact on employment in the United States, since they represent less than 1% of total imports.

Poor infrastructure is a factor, which may hinder the growth of investment in Central America’s apparel sector.

On the other hand, transport distances and times are short, while labor rates are generally competitive.

Costa Rican production costs more than that of other countries in the region, but offers skilled labor.

Apparel exports to the United States from several Asian countries – especially Indonesia, Malaysia, Philippines and Vietnam - may continue to increase, based on production efficiency.

On the other hand, they are unlikely to get a boost from a reduction of import duties, as Trump has indicated that he will not approve the Trans-Pacific Partnership, a proposed free trade agreement.

Imports from Mexico for their part could be affected, if the new American administration imposes safeguard duties, which it could do under current rules.

Trump in addition indicated during the election campaign that he wants to renegotiate Nafta, the free agreement among the United States, Canada and Mexico.

Several major apparel producers already operate in Central America, including Delta, Fruit of the Loom and Gildan.