Discussion questions:
- What are the advantages and disadvantages of CAFTA-DR as an apparel-sourcing base for US fashion companies?
- What are the key bottlenecks that prevent more apparel sourcing from CAFTA-DR members?
- Do you support liberalizing the rules of origin or keeping the strict “yarn-forward” rules of origin in CAFTA-DR, and why?
FASH455 Global Apparel & Textile Trade and Sourcing 
This podcast really made me think about the implications of CAFTA-DR and whether or not it has been successful over the past few years. Listening to this podcast really helped me to understand how the short list is a key shortcut for many US fashion brands. Many brands source finished garments and textiles from Asia for much cheaper than other regions, however the tariffs they pay must be worth it. Getting items on the short list is a hack for US fashion brands as they can source these items cheaply without paying tariffs. This podcast also demonstrated how there are two schools of thought when it comes to CAFTA-DR and its efficacy. US fashion brands are against it and believe the rules should be more lenient. US textile brands favor CAFTA-DR and want it to remain in place. This makes sense to me as very few US textile companies would be motivated to keep factories in the US and invest in infrastructure here without CAFTA-DR.
Caroline, this podcast also made me consider the implications of CAFTA-DR and it’s success in recent years. Only about 10% of U.S. textile and apparel sourcing came out of the CAFTA-DR region so there is definitely room for improvement. With many countries trying to reduce sourcing from Asia, CAFTA-DR should be a great alternative but it hasn’t been. We can definitely assume this is due to the two sides of the argument you bring up. The U.S. textile industry which supports strict yarn forward rules as they incentivise more investment to the CAFTA-DR region therefore leading to more factories and more yarn mills. On the other hand U.S. fashion companies support a more liberal approach because they believe as long as sourcing volume goes up more investments will come. I believe the latter, more sourcing should lead to more opportunities for growth overall. Which approach do you support?
What are the key bottlenecks that prevent more apparel sourcing from CAFTA-DR members?
– It is fascinating to actually discuss why the growth opportunity in CAFTA-DR regions are lower than one might hope for. CAFTA-DR regions still lack the capital to actually produce products that are more complex, and thus most of the sourcing orders are composed of simple shirts or bottoms. With this lack of capacity and options for brands, it makes sense as to why they choose other sourcing destinations that offer these capabilities at sometimes even lower prices or at faster speed-to-market.
– If CAFTA-DR regions had the capabilities to create their own textiles rather than importing them from the US, it could be argued that sourcing trends would occur more in these regions.
Do you support liberalizing the rules of origin or keeping the strict “yarn-forward” rules of origin in CAFTA-DR, and why?
– I think that “yarn-forward” roots of origin has its positives and drawbacks. Though the yarn-forward rules of origin encourages stronger relationship and trade interactions within this region, I think that it fails to take into account our basic trade theories, such as the factor proportion trade theory, as well as the complexities of the supply chain. The FPTT says that countries that are capital intensive with focus on capital intensive products, such as textiles, and countries that are labor intensive will focus on labor intensive products, such as cut & sew and manufacturing. This causes a large bottleneck for CAFT-DR sourcing locations, as they do not have the capabilities to produce their own textiles, and thus are limited in their abilities to satisfy brands’ needs. If CAFTA-DR did not have the “yarn-forward” rules of origin, these members would be able to import other textiles to create more products, without losing the benefit of tariff requirements.
It is difficult, however, because if you are an American textile producer, you would argue that the “yarn-forward” rules of origin should remain in tact. This is because this portion of the policies, it directly supports the US Textile industry, because it guarantees textile export markets.