CNMI needs to forge agreement with China

Business representatives who attended the May 2005 Marianas Roundtable Economic Summit on Saipan recommended that the CNMI enter into a separate agreement with China on garment.

This should happen when the Headnote 3(a) of the U.S. Harmonized Tariff Code is amended by U.S. Congress, it said. A bill that seeks the Headnote 3(a) amendment was recently introduced in the U.S. Senate. The amendment would allow garment manufacturers in the CNMI to increase the value of imported raw materials from 50 percent to 70 percent. It means that the local value-added content of garments made in the CNMI would be reduced to 30 percent.

“Provided that the Headnote 3(a) amendment pushes through, Saipan should then enter an agreement with China itself,” said the Marianas Roundtable report, which was released by the Saipan Chamber of Commerce Thursday.

In the report, the business group said such an agreement is needed since “Saipan cannot compete with the Chinese advantage of low labor and production costs.”

Chinese textile exports to the U.S. have been growing, prompting the U.S. government to limit the flow by forging ties with China.

Reports said that Chinese garment exports to the United States rose by 50 percent in the first half of 2005 to $17.7 billion. Since 1994, China has reportedly been the world’s largest exporter of garment products.

Meantime, the Marianas Roundtable report said that despite the favorable business climate for Chinese garment manufacturers, they are nevertheless subject to “textile safeguarding” and “antidumping” measures.

It said that the Committee for the Implementation of Textile Agreements has decided to invoke safeguard limits on specific apparel and textile imports from China, which would take effect beginning late this year to end of 2008.

Further, the report said that Article 6 of the GATT allows importing countries to take measure against dumping if it is proven that this process hurts their industry.

“Dumping” occurs if a company chooses to export a product at a price that is lower than the local market price in the home country.

In addition to these limits, “there remains the fact that Saipan is China’s closest duty-free-zone for exporting to the U.S., said the summit report.

It said that a joint CNMI-China agreement would involve the basic production of raw materials and fabric cutting, and component sewing to come from China, with Saipan taking over major assembly and packing. The finished goods will then be imported, duty-free, to the U.S.

“This is expected to at least safeguard the damage done to the shipping industry,” said the summit report.

Meantime, the Marianas summit report said that with an amendment to the Headnote 3(a) and a joint agreement with China, “Saipan will then have access to vital government revenue” through direct government industry profits, safeguarding of employment rates, less excess fabric waste, and improved support for other industries.