Order Code RS21839
Updated November 29, 2005
CRS Report for Congress
Received through the CRS Web
Haitian Textile Industry:
Impact of Proposed Trade Assistance
Bernard A. Gelb
Specialist in Industry Economics
Resources, Science, and Industry Division
Summary
Haiti suffers from extreme poverty, political unrest, insecurity, high illiteracy, and
eroding natural resources, among other problems. These factors contribute to low levels
of business investment, impeding development and leading to economic decline. In an
effort to improve Haiti’s economic conditions, bills have been introduced in Congress
that would (a) loosen existing restrictions on the origins of the components of apparel
sewn together in Haiti and exported to the United States, and (b) effectively allow most
of those exports to enter the United States duty free. Such changes could have large
potential benefit for Haitian textile manufacturing, but poor conditions in the country
and some of the consequences of the phase-out of textile quotas at the beginning of 2005
probably preclude any near-term benefit.
Haiti is a very poor country and it is getting poorer. Its per capita gross domestic
product is 193rd in the Central Intelligence Agency’s (CIA) ranking of 232 countries;1 and
Haitian manufacturing value added per capita in 2002 was 3% of the average for all Latin
American and Caribbean countries.2 The country’s per capita gross domestic product in
constant dollars fell an average of 1.4% per year between 1993 and 2003.3 Little or no
change in these conditions is expected in 2005.4
For the sake of clarity, it should be noted that this report interprets the term textile
industry as including apparel manufacture/assembly. This is common, although not
1 CIA, The World Factbook, [http://www.cia.gov/cia/publications/factbook/rankorder/2004rank.
html].
2 United Nations Industrial Development Organization, International Comparisons of Industrial
Performance [http://www.unido.org/data/Country/stats//StaTableA.cfm?c=HAI].
3 World Bank, Haiti at a Glance, September 15, 2004 [http://devdata.worldbank.org/AAG/data/
hti_aag.pdf].
4 For more on Haiti, see CRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991
and Current Congressional Concerns, by Maureen Taft-Morales.
Congressional Research Service ˜ The Library of Congress

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universal, usage. Moreover, such a definition is essential in the present context inasmuch
as apparel making constitutes nearly all “textile” manufacturing in Haiti. Thus, in most
cases, the word “textiles” in this report includes apparel articles.
The Haiti Economic Recovery Opportunity Acts
Bills have been introduced in the 108th and 109th Congresses that would (a) loosen
existing restrictions on the origins of the components of apparel sewn together in Haiti
and exported to the United States, and (b) allow some of those exports to enter the United
States duty free. All that have been introduced have been called the Haiti Economic
Recovery Opportunity Act (HERO), except that those introduced in the 108th Congress
had “of 2003” or “of 2004” appended to their titles. Only one (S. 2261) has progressed
beyond its committee of jurisdiction.
S. 489 and H.R. 1031. Identical 2003 bills, S. 489 and H.R. 1031, would have
amended the Caribbean Basin Economic Recovery Act to allow specified apparel articles
imported directly into the customs territory of the United States from Haiti to enter free
of duty if Haiti has satisfied the economic and democratic reforms required by the bills.
S. 2261 and H.R. 4889. Except for a key qualitative difference, cited below, and
a difference in the base year, the provisions of virtually identical 2004 bills S. 2261 and
H.R. 4889 are same as those in S. 489 and H.R. 1031. They would amend the Caribbean
Basin Economic Recovery Act to allow apparel articles made of cloth to be imported,
subject to quantitative limitations, into the United States duty free if Haiti has satisfied
the requirements of this act, which are noted below. Such apparel articles include articles
that are wholly assembled or knit-to-shape in Haiti from any combination of fabrics,
fabric components, components knit-to-shape, and yarns with no regard to the country
of origin of the fabrics, components, or yarns, the major difference from the bills of 2003.
2004 Developments. The Senate passed S. 2261 on July 16, 2004, following
which the House Ways and Means Trade Subcommittee held a hearing (September 22)
on whether to provide additional trade preferences for Haiti, on the impacts on Haitian
economic development and trade, and on the impacts on the U.S. textile and apparel
industries. Supporters of additional preferences urged passage before textile and apparel
quotas phase out in January 2005. U.S. textile producers contended that permitting duty-
free entry of Haitian-assembled apparel regardless of country of origin of the components
would result in Caribbean and Central American apparel makers moving to Haiti where
they would be able to use Chinese and other-nation yarn and fabrics, and get duty-free
access to the U.S. market.
After the hearing, the Trade Subcommittee worked on a draft alternative bill, the
“Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2004"
(called the HOPE Act), which reportedly required apparel components to originate in the
United States or in countries to which the U.S. grants trade preferences, with some
exceptions. U.S. importers object to this, saying it would not provide enough benefits to
attract new business to Haiti. The draft bill was not introduced, and there was no further
action on additional trade preferences for Haiti before the lame duck session ended.
S. 1937 and H.R. 4211. Virtually identical bills S. 1937 and H.R. 4211 of the
109th Congress, introduced October 27 and November 2, 2005, respectively, essentially

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are identical to S. 2261 and H.R. 4889 of the 108th Congress except for a difference in
base year. Also called HERO bills, they would limit the quantity of articles to which such
preferential treatment would be extended in the initial 12-month period, beginning
October 1, 2004, to an amount equal to 1.5% of the aggregate square meter equivalents
(SME) of all apparel articles imported into the United States during the 12-month period
beginning October 1, 2002. During the 12-month period beginning October 1 of each
succeeding year, the quantity would be limited to the percentage applicable to the
previous 12-month period plus 0.5% (but not over 3.5%) times the aggregate square meter
equivalents of all U.S. imports of apparel during the 12-month period ending on
September 30 of that year.
As in the cases of the 2003 and 2004 bills, Haiti would qualify for such preferential
treatment only if the U.S. President certifies to Congress that Haiti has established or
made progress toward establishing a large number of economic, legal, and political
institutions and policies. These include a market-based economy, minimum government
interference that protects private property rights, the rule of law, the elimination of
barriers to U.S. trade and investment, economic policies to reduce poverty, a system to
combat corruption and bribery, and protection of internationally recognized human and
worker rights. These are reforms that Haiti has tried to enact over the past decade, and
has had difficulty making or maintaining progress in any of these areas.
Current Haitian Textile Manufacturing and Trade
There is too little quantitative information available on Haitian textile manufacturing
to provide a reasonably complete quantitative picture of the industry. However, it can be
said that 84% of all Haitian exports went to the United States in 2003,5 and that, in the
first nine months of 2005, textiles accounted for 91% of Haitian exports to the United
States,6 99.5% of Haitian textile exports to the United States were in the form of apparel,7
and about two-thirds of Haitian textile exports to the United States were in the form of
apparel assembled from U.S.-made fabric and yarn.8 Employment in Haitian textile
manufacturing recently has been variously estimated at between 25,000 and 30,000.9
Qualitatively, the industry was on an upswing before the violence and change in
government in early 2004 — as suggested by the 34% rise in exports to the United States
between 2002 and 2003. A study prepared for the U.S. Agency for International
Development (USAID) reported that some Haitian textile manufacturing companies are
well managed — run by individuals with “a strong U.S. background,” who use the latest
5 International Monetary Fund. Direction of Trade Statistics, Yearbook 2004, p. 237.
6 U.S. International Trade Commission Dataweb (compiled from U.S. Departments of Commerce
and Treasury data), [http://dataweb.usitc.gov].
7 U.S. International Trade Commission Dataweb.
8 U.S. Department of Commerce, Office of Textiles and Apparel, [http://otexa.ita.doc.gov/agoa-
cbtpa/catv0.htm].
9 Hemlock, Doreen. “Dire Threat to Job Creation,” South Florida Sun-Sentinel, March 31, 2005,
Haiti Democracy Project [http://www.haitipolicy.org/printversions/2903.htm]; International
Confederation of Free Trade Unions. “Could Haiti Become an Example of Successful Trade
Unionism?” Trade Union World: Briefing, November 2005, p. 6.

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computer technology. The same source regards that management as capable of returning
the industry to previous high levels of production.10
From the U.S. industry viewpoint, the Haitian industry presently is too small to be
a major factor any time soon. Notwithstanding any advantage that geographical proximity
may provide, U.S. imports of textiles and apparel from Haiti account for 0.4% of total
imports of textiles and apparel by the United States; U.S. imports of apparel from Haiti
account for 0.5% of total U.S. apparel imports; and the value of U.S. textile and apparel
imports from Haiti in 2003 equaled 0.3% of the value of shipments by textile and apparel
manufacturing in the United States.11
International Trade Law and Haitian Trade Preferences
In analyzing the impact that S. 1937 and H.R. 4211 could have on the Haitian and
U.S. textile industries, it is important to take into account existing international trade law
and U.S. trade preferences applicable to Haiti. With respect to international trade law, a
key negative development for Haiti was the final phasing out of quotas on textiles and
apparel effective January 1, 2005. This was mandated by the Agreement on Textiles and
Clothing, concluded during the Uruguay round of trade negotiations, and applicable to all
member nations of the World Trade Organization. (Haiti is one.) It is widely expected
that some countries that were subject to quotas will increase their exports of apparel to
the United States. China and India are considered to be major threats to compete against,
and potentially crowd out Haitian-made apparel.
Haiti is a beneficiary country of the Caribbean Basin Trade Partnership Act
(CBTPA) (Title II, P.L. 106-200). As amended, this provides certain special trade
preferences to goods produced in qualifying Caribbean countries – with particular
attention paid to textiles. Under the CBTPA, the following categories of apparel can enter
the United States duty- and quota-free:
(1) Apparel assembled in a CBTPA beneficiary country from U.S.-made fabric from
U.S.-made yarn, and cut in the United States; or from U.S.-made fabric from U.S.-made
yarn, cut in the CBTPA country, and sewn in a CBTPA country with U.S. thread.
(2) Apparel articles (except socks) knit-to-shape from U.S.-made yarn in a
beneficiary country, or articles (other than non-underwear T-shirts) assembled from fabric
knit in the United States or in a beneficiary country from U.S.-made yarn, and cut in a
beneficiary country. U.S. knit-to-shape components are treated like U.S.-cut fabric
components. However, duty-free treatment of knit-to-shape articles (T-shirts and socks
excluded) is subject to annual quantity limits; there are limits for non-underwear T-shirts;
and all dyeing, printing, and finishing of components (except sewing thread) must be done
in the United States.
(3) Brassieres cut and assembled in the United States and/or one or more beneficiary
countries during the six-year period beginning with October 1, 2001, if the cost of the
10 Assessment of the Potential Impact, pp. 16 and 25.
11 U.S. Bureau of the Census, Annual Survey of Manufactures, Statistics for Industry Groups and
Industries: 2003; U.S. International Trade Commission Trade Dataweb.

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U.S.-made fabric components used in their manufacture by their individual producer
during the preceding year is at least 75% of their customs value; if the U.S.-component
requirement is not met in any year, the producer will not be eligible for the preference
until the year following that in which the value of U.S.-made fabric components is at least
85% of the customs value of the brassieres produced by the individual producer.
(4) Apparel articles assembled in a beneficiary country from fibers, fabric, or yarn
not formed in the United States or a CBTPA beneficiary country that are not widely
available in commercial quantities in the United States. Under Annex 401 of the North
American Free Trade Agreement, the Committee for the Implementation of Textile
Agreements, upon request, is authorized to determine and designate that such an article
is eligible for this preference.
(5) Certified hand-loomed, handmade, and folklore articles.12
Thus, the trade preferences provided to Haitian textiles under the CBTPA appear to
be nearly as broad and extensive as those that would be provided by S. 489 and H.R.
1031. At present, roughly half of Haitian exports of apparel and accessories to the United
States already enter duty free under the CBTPA, which limits the potential scope for
benefit under the three bills. However, the fact that S. 1937 and H.R. 4211 would allow,
subject to the quantitative limitations, duty-free imports of apparel made from fabrics,
components, or yarns originating in any country contrasts sharply with the CBTPA rules
of origin; and, absent other considerations, the latter bills would seem to have
considerable potential benefit to the Haitian textile industry.
Potential Benefits of the HERO Bills
Significant relaxation of existing restrictions of the country origin(s) of components
used to assemble apparel in Haiti could set the stage for tripling apparel production and
employment in the initial years of the proposed new regimen. This is derived from the
fact that Haiti initially would be eligible to export duty-free a quantity of apparel equal
up to 1.5% of total U.S. apparel imports in the previous year, whereas Haiti accounts for
0.5% of total U.S. apparel imports (value basis). Just a tripling would raise employment
in the industry to 75,000–90,000 (3 times 25,000 or 30,000). If Haitian apparel exports
to the United States reach 3.5% of total U.S. imports in later years, it could mean Haitian
apparel manufacturing employment of at least 175,000 (7 times 25,000).
Should such apparel production and employment gains take place, there would be,
in addition, indirect positive effects on other parts of the Haitian economy, as the
increases in personal and business incomes from expanded Haitian apparel manufacturing
stimulate other parts of the Haitian economy. One proponent of the legislation has
projected indirect employment gains at 100,000.13
12 These category descriptions are adapted from CRS Issue Brief IB95050, Caribbean Basin
Interim Trade Program: CBI/NAFTA Parity, by Vladimir N. Pregelj.
13 Jacqueline Charles, “In U.S., Haitian Leader to Ask for Funds,” Miami Herald, May 4, 2004.

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Haiti’s Political and Business Climate
Among other considerations in analyzing the impact that the proposed legislation
would have on Haiti’s textile industry are Haiti’s political and business climates, access
to basic services, and public safety.14 While some progress is noted,15 one can question
Haiti’s ability to make progress in the near future toward establishing political pluralism
and the rule of law, protecting human and worker rights, and reducing corruption.
The business climate is marred by inadequate protection of private property and
considerable red tape that greatly slows transactions and procedures such as importing
equipment, purchasing factories, and incorporating.16 Inadequate protection of private
property raises the question of availability of insurance for entrepreneurs, without which
investment would not occur. In addition, reliable and sufficient electric power is lacking
in many areas, roads are poor, and inadequate security tends to preclude businesses from
adding night shifts, as workers cannot be assured of safe trips home.
On the positive side, Haiti’s production costs are reported to have become very
favorable relative to those of other Caribbean apparel producers.17 The country has a large
number of unemployed and underemployed people who constitute a labor pool readily
available for training and incorporation in the Haitian textile industry work force. The
free trade zone with the Dominican Republic is open and operating. And the new
government has appeared eager to create a positive environment.18
Observation
The proposed textile trade preferences contained in S. 1937 and H.R. 4211 could
have large potential benefits for Haiti, particularly in view of the proposed removal of
restrictions on the country origins of components used in Haiti to make apparel that would
be exported duty free to the United States. To the extent that Haitian exports of apparel
would increase in a future period, Haitian apparel manufacturing and associated
employment would increase — and stimulate activity in the rest of the Haitian economy.
However, a number of negative factors taken together weighs heavily, and may well
preclude any significant near-term gains. Moreover, Haiti will not have had a window of
opportunity to gear up production capacity and develop markets before textile and apparel
quotas expired at the beginning of 2005. Thus, the Haitian industry does not have added
U.S. trade assistance to help it as it starts to compete for U.S. markets more intensively
with goods from other textile-producing countries.
14 Violence by police and UN peacekeepers as well as by gangs has been reported: Aaron Mate,
“Police-UN Killings in Haiti,” ZNet/Haiti, October 10, 2005. Viewed on November 29, 2005
[http://www.zmag.org/content/print_article.cfm?itemID=8909&sectionID=55].
15 See pages 19-23 of CRS Report RL33156, Haiti: International Assistance Strategy for the
Interim Government and Congressional Concerns, by Maureen Taft-Morales.
16 Assessment of the Potential Impact, p. 22.
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17 Assessment of the Potential Impact, p. 17.
18 Based upon telephone conversation with Patricia Forner, World Vision Haiti, May 10, 2004.

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