Jasmin Malik Chua | January 13, 2025

America’s largest domestic textile manufacturer is in a state of acute distress. It claims that it’s been “especially harmed” by what it alleges is Nicaragua’s abuse of a free trade agreement that it says allows goods made with Chinese forced labor to enter the Dominican Republic-Central America market duty-free, lowering prices, hurting competition and “ultimately decimating” U.S. businesses. 

Writing to United States Trade Representative Katherine Tai earlier this month, Milliken & Company said it has lost more than $50 million in sales—the equivalent of 61 million square yards of fabrics—over the past two years. This loss of business, coupled with “strong macroeconomic headwinds” in the textile industry, it added, has resulted in a 29 percent decline in its apparel volumes, a 15 percent reduction in its textile workforce and the closure of three plants—again, within a span of 24 months. 

Tai had put out a request for public comments in December after initiating a first-of-its-kind Section 301 investigation into “acts, policies and practices” relating to Nicaragua’s handling of human and labor rights. She said that the government was concerned that the Central American nation’s Ortega-Murillo regime was engaging in “repressive and persistent” attacks on the rule of law, including politically motivated arrests, religious repression, extrajudicial killings and restrictions on freedom of expression that could undermine U.S. commerce and destabilize the region. ...

Julia Hughes, president of the United States Fashion Industry Association, questioned if Section 301 was even the right vehicle for human and labor rights and rule-of-law sanctions. There are other statutory authorities that “explicitly” penalize bad actors, such as the Global Magnitsky Act. The Nicaragua Investment Conditionality Act, signed by President Donald Trump in 2018, prevents Nicaragua from receiving additional multilateral loans until it holds free, fair and transparent elections.

“Since Congress enacted Section 301 more than 50 years ago, Section 301 has never been employed in an attempt to address a general degradation of the rule of law in a trading partner, including violations of human rights and labor rights,” she said. “This may be because a despot undertakes his or her deplorable activities because they would like to rule as a despot—not because they are attempting ‘to burden or restrict U.S. commerce’ as required by Section 301.”

Meanwhile, while Tai’s office “accurately recounts” the many “unacceptable” transgressions of the Ortega-Murillo regime, including rewriting the national constitution to centralize power in the presidency and nullifying the independence of the legislature, it’s unclear how it restricts or burdens U.S. commerce, Hughes said.

“USFIA would simply urge USTR to strongly consider whether Section 301 authorizes tariffs or other trade restrictions to counter the stated activities of the Ortega regime,” she said. “By ‘stretching’ its statutory authorities beyond what Congress intended, USTR would not exactly further its stated objective of promoting the rule of law.”