Academics Push Congress to Renew Nicaragua TPLs, Strengthen Regional Supply Chains
Lawmakers and the Obama administration need to extend the tariff preference levels (TPLs) for U.S.-Nicaragua apparel trade in order to strengthen both economies, as well as regional supply chains, said the authors of a 2014 Duke University study on U.S. apparel trade with Nicaragua. The TPLs are poised to expire on Dec. 31, and Congress does not seem positioned to push the trade agenda in the lame-duck session following the early November mid-terms (see 1410150064).
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Many supporters of those rules of origin tout the Duke study (here), released in March, as evidence that the TPLs are a boon for both Nicaraguan and U.S. employment, and they play a critical role in bilateral trade. The first textile and apparel industry to vacate Nicaragua after the TPL expiration will very likely be the knit and woven apparel industries because companies in that portion of the supply chain are more global and can easily divert investment elsewhere in the world, said Jennifer Bair, assistant professor at University of Colorado’s Department of Sociology and an author of the study. But there a number of U.S. and Canadian companies operating in Nicaragua that, for a variety of different reasons, are nearly guaranteed to stay in the country even if the TPL expires, said Bair.
The U.S.-Central America Free Trade Agreement, the pact that administers the TPLs, is encouraging investors to set up yarn spinning factors, known as upstream production, despite U.S. domestic industry criticism that the TPLs disincentive that stage of the supply chain, said the authors. A South Korean company is now looking to open a spinning factory in Costa Rica, and if that happens, those yarns would qualify as CAFTA eligible, said Bair.
A U.S. Chamber of Commerce official emphasized during the event the organization’s support for renewal of the TPLs. Gary Gereffi, director of Duke's Center on Globalization, Governance and Competitiveness, also pressed U.S. lawmakers to relax the rules of origin in the TPLs even further to widen the base of those that benefit from the TPLs. “TPL expansion, extension would really make sense for the country. The conditions, how long, I think those are part of what’s being negotiated,” said Gereffi. “A broad-based expansion, extension that wouldn’t limit the ability to decide which products [are eligible] probably is a good move.”