El Salvador currently faces a high fiscal debt, with low levels of foreign direct investment leading to increasing levels of poverty. It’s up to our leaders to find sensible solutions to address this issue, and one possible solution is to encourage investments in industries like apparel, which promise economic growth and sustainable jobs. However, to incentivize investment in the apparel industry, we must add more fibers and yarns to the Dominican Republic-Central America Free Trade Agreement’s (CAFTA-DR) short supply list.
CAFTA-DR was created to reduce the tariffs and trade barriers slowing industry growth and job creation within the region by providing duty-free benefits for regional producers. Yet, for apparel producers to receive these benefits, the yarns and fabrics used to produce garments must originate within the region.
Unfortunately, Central America does not produce many of the fibers and yarns that manufacturers need to produce today’s high-demand garments, making it challenging to adhere to this requirement and receive duty-free benefits. As a result, many textile and apparel manufacturers choose not to invest in countries like ours, and El Salvador has had no new apparel investments in well over a decade.
In an attempt to remedy this challenge, the short supply list was created. The short supply list consists of several yarns and fibers not commercially available within participating partner countries. Materials on this list can be used to manufacture garments without disqualifying the apparel article from duty-free benefits. However, this list is very limited, and adding new yarns and fibers is a lengthy and convoluted process.
By expanding the short supply list to include new, sophisticated fibers and yarns from third-party countries, in addition to making the short supply list easier to amend, apparel manufacturers would have the opportunity to create high-end products within Central America. This change would allow manufacturers to access a broader market, incentivizing investment and creating new employment opportunities throughout partner countries. Currently, the apparel industry is responsible for over 70,000 jobs in El Salvador, and by expanding the short supply list, that number could easily double.
Here in El Salvador, women hold the majority of apparel manufacturing jobs. By doubling the number of these jobs, we have the opportunity to bring many more women into the workforce. Many multinational apparel companies also push workers to return to school and give them additional capacity training, providing these women with unique leadership and educational opportunities. This type of investment is more important than ever, as we have seen education rates fall across El Salvador, leaving many Salvadorians behind.
Besides helping countries like El Salvador, expanding the short supply list to encourage regional investments in apparel manufacturing would also bring stability to the entirety of the Western Hemisphere. Over the past few years, the United States has experienced the consequences of regional instability firsthand, as mass migration has threatened to overwhelm the country’s southern border. Economic instability is one of the most prominent factors driving this mass migration, and Salvadorans made up the second-largest group of unauthorized migrants entering the United States in 2019. Providing communities here in El Salvador with more economic opportunities would motivate many to stay home rather than make the long and dangerous journey north.
As President Joe Biden and his administration continue to work with U.S. allies and partners in Central America, they should strongly consider expanding and amending CAFTA-DR’s short supply list. Doing so could drastically change the economic outlook for countries like El Salvador and create long-term stability and prosperity throughout the Western Hemisphere.
Carmen Aida Munoz is the chief executive officer of the American Chamber of Commerce in El Salvador. The views expressed are the author's own.
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