Administration gets behind NMI garment industry

With the lifting of quota restrictions on apparel entering the United States now in effect, Saipan’s garment sector leaders met with the Babauta administration this week to hammer out a plan to keep the industry’s viability amid tougher international competition.

Industry officials met with Gov. Juan N. Babauta and other administration officials on the possible fate that awaits the CNMI’s garment sector—the biggest contributor to the government’s revenue—with the new World Trade Organization setup.
Saipan Garment Manufacturers Association executive director Richard Pierce said that the Babauta administration pledged to enhance the local apparel industry’s competitiveness, as world players await possible restrictions on Chinese exports to the United States.

Local industry players, like domestic U.S. players and foreign countries, fear that China would further dominate the U.S. market—the world’s largest market for apparel—with the lifting of quota restrictions. With its cheap labor cost, China produces apparel at substantially lower cost than other countries and territories, including the CNMI.

“We can always get our goods to America, but we just don’t know if we can meet other countries’ price offers. Our selling prices have dropped 20 percent in the past four years, and we expect that the U.S. consumer will expect another 5-10 percent drop within a year. Without ‘reworking’ our tariff formula, there’s really no other way to get our prices down, barring paying less salary or eliminating local taxation, which is something no one really wants to think about,” Pierce said.

“Price advantage and the ability to compete brought us to Saipan, and it is the inability to compete in pricing that will slowly move the industry elsewhere,” he added.

Pierce said the SGMA board led by its chairman, James C. Lin, met with Babauta, attorney general Pamela Brown, governor’s legal counsel Steven Newman, and other administration officials last Monday and Tuesday.

Part of the discussions include the garment industry’s request in seeking amendment to the U.S. Tariff Code and local labor regulations, as well as assistance in addressing retail shops on Saipan selling stolen goods from Saipan factories.

Saipan’s garment industry wants a congressional amendment to the U.S. Tariff Code so that garment products coming from the insular areas such as the Commonwealth could enter the United States duty-free.

SGMA also wants the federal government to grant petitions that would limit China’s growth rate to 7.5 percent annually. 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.

“It’s paradoxical, even ironic, how things are working out for us in our quest for industry survival here in the CNMI,” Pierce said. “We are a part of the United States of America, yet we are competing with foreign countries for a ‘market share’ of American consumer purchases in apparel, when, as foreign countries, their access to the U.S. marketplace, through their new quota and tariff treatment, now threatens our existence as a business in one of America’s insular areas.”

For instance, new trade partnerships between the United States and Egypt, which allow U.S. companies to import 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 SGMA earlier said.

The new qualified industrial zones 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.

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 Suez Canal Zone.

A similar trade partnership with Jordan has reportedly been in existence since 1998.