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The U.S. trade representative and five Central American trade ministers have signed the U.S.-Central American Free Trade Agreement (CAFTA). However, the U.S. Congress might not approve CAFTA until...

U.S. Trade Representative Robert Zoellick and the trade ministers of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua signed a free trade agreement on May 28 in Washington. However, the ceremony did not make the U.S.-Central America Free Trade Agreement (CAFTA) a legally binding trade pact.

CAFTA could be ratified quickly by the legislatures of its Central American signatories. The White House likely will not submit CAFTA to Congress for approval until sometime in the first half of 2005 -- if U.S. President George W. Bush is re-elected. It might not reach Congress until 2006 if Sen. John Kerry (D-Mass) wins; he has pledged to seek the inclusion of labor and environmental standards in the agreement.

By late 2005, it is likely that some of the benefits CAFTA would bring to Central America's textile industries already will be vanishing in a large shift of investments and jobs, mainly to China. The flight from Central American textiles sectors will be triggered by the elimination on Jan. 1, 2005, of all remaining quantitative restrictions on importing of garments and textiles -- when the World Trade Organization's 1995 Agreement on Textiles and Clothing (ATC) expires.

Central America's textile and garment industries are not the only companies facing this problem. Textile industries from North Carolina to Bangladesh will be affected by the ATC's expiration. Some industry analysts estimate that as many as 30 million textile jobs around the world could move mainly to China, India and Pakistan over the next three to five years, including more than 600,000 textile jobs in the United States.

It is not clear how many jobs could be lost in Central America, but without CAFTA the loss of textile investments and jobs likely will be greater, since garment makers in the region would be denied trading advantages that would help offset the impact of the ATC's expiration.

For example, the garment "cut-and-sew" industry accounts for most of Honduras's manufacturing sector. To avoid paying U.S. import duties of 18 percent to 28 percent on garment exports from Honduras, the country's garment-makers have had to purchase fabrics and yarn from the United States.