Wednesday, January 26, 2005

CAFTA And Textiles

My recent post on cotton underwear explained the threat that the expiration of the world system of quotas in the textile industry posed to El Salvador. Some persons have argued that CAFTA is necessary to help El Salvador weather this storm through lowering trade barriers. In an article on the IRC Americas Program web site Todd Tucker argues that the help CAFTA would provide the garment industry in El Salvador is mythical. He points out that China's massive cost advantages dwarf the cost of production in El Salvador even under a CAFTA regime. Although El Salvador is closer to the United States and with lower shipping times and costs, that advantage is narrowing with improvements in super-ships and technology which lowers the the trans-Pacific shipment time to 11 days. Any advantage Central America has by virtue of its location is likely to be insignificant, Tucker argues. In the end, the economic damage to El Salvador from the elimination of the quota system is real, but proponents of CAFTA are wrong to allege that the trade agreement will be the cure for this sector of the Salvadoran economy.

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