SGMA pushes for tariff changes amid US-Egypt trade deal

The new trade partnership between the United States and Egypt, which allows U.S. companies to import duty-free apparel products from the latter’s industrial zones, gives more reason for the federal government to reduce the value-added requirement for apparel coming from the insular areas, including the CNMI.

The Saipan Garment Manufacturers Association yesterday said the new trade arrangement diminishes Saipan’s garment industry’s trade advantage.

However, the American Apparel & Footwear Association welcomed the trade development, saying that the establishment of qualified industrial zones in Egypt would boost the competitiveness of American companies in that country, once quota restrictions on textiles and apparel are lifted beginning Jan. 1, 2005 pursuant to World Trade Organization agreement.

“While SGMA acknowledges the American Apparel & Footwear Association’s stated fringe benefits in Egypt’s new qualified industrial zones as political and in support of the Middle East peace process, we don’t see this, or any other similarly installed preferential trade and tariff treatment for foreign countries, as anything other than another place on earth with a deal with the U.S. that diminishes any advantage we ever had with our own special tariff and trade package,” said SGMA executive director Richard Pierce.

An amendment to the U.S. Tariff Code’s provision regarding the value-added requirement would help Saipan’s garment industry to regain lost advantage, he said.

Pierce said such trade arrangements with foreign countries have placed the CNMI at a disadvantage in the past 20 years. A similar arrangement with Jordan has been in effect since 1998, the AAFA said.

“We only want to level the playing field for our factories that all these free trade agreements, qualified industrial zones and tariff privileges have eroded over the past two decades,” Pierce said.

Saipan’s garment industry wants a congressional amendment of the U.S. Tariff Code, which currently requires that 50 percent of the value of the garment has to be added locally by transformation, in terms of additional labor, packaging or other overhead costs, so that garment products coming from the insular areas such as the Commonwealth could enter the United States duty-free.

The SGMA wants the value-added requirement reduced from 50 percent to 30 percent, which would allow local garment manufacturers to increase foreign content material in garment exports to the United States by up to 70 percent.

The SGMA also wants the federal government to grant petitions that seek to limit China’s growth rate to 7.5 percent annually, when quota restrictions are lifted. It lauded the federal government’s move to extend by 30 days the imposition of certain restriction on China’s garment exports in January 2005, giving more time until the petitions are decided.

According to AAFA, the new QIZ designations in Egypt are authorized by an extension to the U.S./Israel Free Trade Agreement, which provides duty-free access to products made in QIZs subject to certain requirements, including a rule that the goods undergo substantial transformation in the QIZ and that they satisfy a 35 percent minimum value requirement, including the use of Israeli content. It said that a similar successful program with Jordan has operated since 1998.

Under the Egyptian QIZ program, goods manufactured in designated industrial zones in Egypt, which utilize Israeli inputs, will receive duty-free treatment when exported into the United States.

Designated QIZs include those in Greater Cairo, Alexandria, and the Suez Canal Zone.

“These QIZs will help ensure that U.S. apparel and footwear companies in Egypt remain competitive, particularly after quotas are removed on textiles and apparel beginning January 1, 2005,” noted AAFA president and chief Kevin M. Burke. “They will also help strengthen U.S./Israeli/Egyptian trade links in support of the Middle East peace process.”