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Under the African Growth and Opportunity Act, eligible countries can export apparel to the United States duty-free, using fabric and other inputs from wherever it is produced most cost-effectively, as long as the fabric is cut and sewn in the African beneficiary country. Under the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act, as I discussed in a post earlier this week, most Haitian apparel exports must incorporate American materials to be eligible for duty-free treatment. If American yarn and fabric were the most cost-effective option for Haitian producers, then this provision would not be necessary. That, in turn, suggests that Haiti’s exports are not as competitive as they would be if producers were free to choose where they sourced their materials, and that means fewer exports and fewer jobs created.
Senators Ron Wyden (D-OR) and Bill Nelson (D-FL) recently introduced legislation to improve opportunities for Haiti to export to the United States. Their efforts are certainly welcome and many of the items in the bill have great merit, especially the proposals to quickly extend the Caribbean Basin Trade Partnership Act, which would otherwise expire later this year, and to provide technical assistance so that Haitian exports aren’t blocked by cumbersome customs regulations (subscription required). But, so far, the proposals being floated do not adequately address the fundamental problem created by the convoluted rules of origin. Surely in the midst of this great tragedy, the U.S. contribution to Haiti’s long-term recovery should match the incredible generosity shown in providing short-term relief.