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While America’s economy continues to bounce back from the pandemic, other countries have not been so fortunate. Specifically, lagging economic conditions have led to a decline in job opportunities in the Latin America region. Economic recovery has begun in Central America; however, the International Monetary Fund claims it’s built on shaky ground as extreme weather events and unpredictable COVID-19 circumstances could send supply chains into turmoil at any point.
While the Biden administration is currently under a firestorm of major policy agenda priorities, one critical solution to help promote stability and economic development in the region could lie in a lesser-known issue with the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR).
The CAFTA-DR is the first free trade agreement between the U.S. and Costa Rica, El Salvador, Guatemala, Nicaragua, Honduras, and the Dominican Republic. The agreement’s original intent was to enhance stability and prosperity in the region. Unfortunately, even prior to the pandemic, the agreement has struggled to increase economic opportunities and stimulate the job growth needed to reduce the flow of immigration into the United States. In fact, the U.S. has witnessed a steady increase of immigrants from the Northern Triangle (Guatemala, Honduras, and El Salvador) since CAFTA-DR was passed in 2005, according to a 2016 report from the AFL-CIO.
Onerous rules in dire need of an update have created an unequal playing field that continues to hamper Central America’s ability to utilize the full benefits of duty-free trade. For example, the “yarn forward” rule only allows duty-free trade of apparel that is made with yarn and textiles from the U.S. or other CAFTA-DR member countries. While beneficial for the small number of American yarn producers, this rule has created a non-competitive environment that dampens the ability of Central American apparel producers to grow and expand.
The apparel industry remains trapped in a market beholden to American producers and incapable of diversifying materials used to scale up Central American production and provide more jobs in the region. Allowing producers in Central America more freedom to source materials also increases stability of the supply chain. By allowing sectors like the apparel industry to source products globally, they become more resilient to disruptions in the supply chain that back up shipping times and adequate inventory. Additionally, CAFTA-DR countries have to be able to connect to global markets to compete across the world and provide longer lasting jobs that pull citizens away from gang activity that perpetuate cycles of immigration.
Fortunately, the path to revising these rules and stimulating economic growth does not require breaking the agreement or a full renegotiation. Congress has the power through proclamation authority to alter and eliminate rules, updating the agreement and, as a result, eliminating many industry stifling rules such as “yarn forward.”
These changes to the CAFTA-DR agreement would allow Congress and the Biden administration to relay a commitment to improving stability and economic conditions in the Central American region. The time for our congressional representative Ron Kind and his fellow congressional colleagues on the House Ways and Means Committee to deliver solutions and action is now.
– Ben Vargas is a political leader and graduate student at the University of Wisconsin’s Robert M. La Follette School of Public Affairs.