January 8th was the deadline for comments about the Biden Administration’s 301 Investigation of Nicaragua’s Labor Rights, Human Rights, and the Rule of Law. USFIA was one of the 80 organizations that filed comments with USTR on the economic impact of potential Section 301 tariffs on the U.S. economy; on whether USTR’s investigation would achieve its stated objectives; and on the legal appropriateness of utilizing Section 301 to redress USTR’s worthy objectives.
Here's the summary from our comments:
USFIA strongly condemns the ongoing violations of labor rights and human rights in Nicaragua, and strongly condemns the erosion of the rule of law within the country. As it conducts a Section 301 investigation into the activities of the Government of Nicaragua, USFIA would urge USTR to understand the importance of an integrated Central America textile and apparel supply chain – a supply chain that is important to the health of the U.S. textile and apparel sectors. USFIA would also urge USTR to consider whether tariffs on Nicaraguan-origin apparel would punish the Ortega regime or, in fact, would have the opposite effect of weakening independent institutions within the country. Finally, USFIA would urge USTR to consider whether other statutory authorities would be more appropriate and effective at promoting change for the people of Nicaragua.
The comments filed by other groups paint a picture of the main question facing USTR: Will this investigation target the CAFTA textiles and apparel supply chain?
Here are some of the industry highlights.
Gildan says they are likely “the largest apparel producer in the Western Hemisphere.” In their comments they highlight that Nicaragua is the primary sewing location within their CAFTA-DR regional supply chain. They point out that there is uncertainty that other CAFTA-DR countries could “absorb the repositioning of apparel production presently in Nicaragua.” Gildan has invested heavily in yarn spinning in Nicaragua, which consumes “exclusively U.S.-spun yarns made from U.S.-grown cotton.”
Miliken Textiles is the largest domestic textile manufacturer in the United States. They are concerned about Chinese investment in Nicaragua.
The Chinese-owned and Chinese-invested companies in Nicaragua are operating both at the behest and with the endorsement of Nicaraguan authorities. Based on our analysis of margins and raw material costs, we suspect many of these companies are purposely operating at a loss to deliberately harm US industry, thereby eliminating competition from US companies.
They recommend tariffs on Nicaraguan apparel and textile products:
When imposing remedies at the conclusion of this Investigation, we believe the President should consider imposing tariffs on Nicaraguan imports to the US, specifically on textiles and apparel products.
NCTO provided substantial comments and recommended six steps that the Administration should take, including tariffs against products that do not meet the CAFTA rule of origin. This is a bit surprising, since, as USFIA members know, there are many CAFTA products that do not claim, or qualify for, duty-free treatment but still use U.S.-made yarns and fabrics.
1. Take aggressive action on Nicaragua and its government;
2. Protect CAFTA-DR duty-free qualifies goods from Nicaragua that contain U.S. and regional inputs so as to not create economic harm more broadly;
3. Forcefully sanction or tariff CAFTA non-qualified textile and apparel goods from Nicaragua;
4. Sanction/embargo all Chinese owned textile and apparel investment; and
5. Create a substantive enforcement mechanism that requires a “blacklist” of all companies who are found to be cheating textile/apparel enforcement and/or facilitating labor and human rights abuses.
6. Immediately close the Section 321 de minimis tariff loophole that allows imports to bypass current and future enforcement actions. Unless de minimis is addressed, any trade actions against Nicaragua will be ineffective.
The Nicaragua Solidarity Coalition points out that USTR’s 2023 and 2024 Special 301 Report made no references to “unreasonable or discriminatory foreign government practices that burden or restrict U.S. commerce” in Nicaragua.
It is therefore surprising and disturbing that the USTR should suddenly launch an investigation into Nicaragua, given that it was not on its “watch list” of countries and it appears to hold no evidence of problems that would warrant an investigation.
The Coalition also urges USTR to confine its investigation to “trade and business issues of interest to the US” and not stray into “wider political issues relating to Nicaragua.”
Some of the companies supporting the Coalition are:
- Apex Mills
- Coalition for Apparel Supply Chain Resiliency in Central America
- Cupid Nicaragua
- Darlington Fabrics
- Hornwood, Inc.
- McComb Industries
Council of the Americas (COA)took a strong position to eliminate CAFTA benefits for Nicaragua. COA writes:
It is unseemly that the United States would maintain free trade privileges with Nicaragua. For that’s at bottom what a free trade agreement is: privileged economic status with the United States. And by maintaining such privileges for dictatorial, oppressive Nicaragua, the United States undermines the most basic philosophical underpinnings of bipartisan US trade policy.
