Trade Policy Priorities for the U.S. Fashion Industry in 2023: IT’S TIME TO EXPAND APPAREL SOURCING FROM CAFTA

USFIA’s 2023 Benchmarking Study supports what we see in the trade data -- most U.S. fashion companies are looking for ways to diversify their sourcing, especially nearshoring in the Western Hemisphere:

“[F]or the first time since we began the benchmarking survey in 2014, as many as three Western Hemisphere countries made it to the top ten supplier list this year, including Mexico (63 percent utilization rate), Guatemala (45 percent utilization rate), and Nicaragua (41 percent utilization rate). These results reflect the growing popularity of near-shoring among U.S. fashion companies, a key trend also suggested by other recent studies.”

“According to respondents, member countries of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) have played a more significant role as an apparel sourcing base in 2023. Over 80 percent of respondents report sourcing from CAFTA-DR members in 2023, a notable increase from 60 percent in the past few years. Also, nearly 30 percent of respondents placed more than 10 percent of their sourcing orders with CAFTA-DR members this year, a substantial increase from only 19 percent of respondents in 2022 and 10 percent in 2021.”

What is clear is that this is the perfect time to take a fresh look at how we can support more sourcing in Central America. The U.S.-CAFTA textile and apparel partnership is a win-win.?Bringing supply chains closer to home helps American textile producers and fosters economic development and employment opportunities in Central America.?

“For example, between 2015 and 2022, apparel products consistently accounted for nearly one-fourth of CAFTA-DR members’ total merchandise exports to the world, contributing around $6 billion in value40 and supporting over half a million jobs in the sector. As estimated, an additional billion dollars of apparel exports to the U.S. could create about 75,000-84,000 more sewing jobs in CAFTA-DR countries.”

How can we help grow the textile and apparel industry in Central America. This year, we asked our respondents to provide additional insight into their CAFTA-DR sourcing practices and suggestions for improvement. More than 80% of respondents only source apparel from CAFTA-DR when it qualifies for duty-free benefits. So, it is time to talk about how to encourage more trade. Fashion sourcing executives are looking for more flexibility and for more capacity. The yarn-forward rules of origin create a barrier for many types of apparel to qualify for duty-free benefits, the overwhelming majority of survey respondents say they would increase CAFTA sourcing if there is more flexibility in the rules of origin.??

USFIA is on the record about the need to update CAFTA-DR?and will continue to advocate for measures that helps build more resilient, sustainable, and humanitarian supply chains in the Western Hemisphere.

Want to learn more? Read the 2023 Benchmarking Study or sign up for Sourcing Trends & Challenges in 2023: Highlights from USFIA's Annual Benchmarking Study, our webinar with study author, Dr. Sheng Lu . Interested in participating in the next study? Contact us to find out more.