Publication Number: 4016

Report Title: Textiles and Apparel: Effects of Special Rules for Haiti on Trade Markets and Industries

Author's name(s): William Deese, Heidi Colby-Oizumi, William Powers, Laura Rodriguez

Date Published: June 2008

Report Description/Introductory Text: The 2006 Haitian Hemispheric Opportunity through Partnership Encouragement (HHOPE) Act, signed into law on December 20, 2006, was designed to support development and employment growth in Haiti, the poorest country in the Western Hemisphere. The HHOPE Act extends duty-free treatment to U.S. imports of knit and woven apparel assembled in Haiti from U.S., Haitian, or global inputs, subject to eligibility requirements, and in most cases, value-added content requirements.

To date, the impact of the HHOPE Act on Haiti, the United States, and countries with which the United States has a free or preferential trade agreement (beneficiary countries) has been minimal. The HHOPE Act has apparently provided some small benefits to Haiti in terms of increased employment and increased exports over what might have occurred in the absence of the Act. Some Haitian apparel firms have expanded operations, but there has been little additional foreign investment.

U.S. imports under the HHOPE Act began in July 2007 and accounted for just 3 percent of total U.S. imports of apparel from Haiti in 2007. Although the short six-month period of observable data precludes reaching a definitive conclusion, the small response to the Act suggests that there has been no effect on the U.S. market or industry. U.S. exports of textiles and apparel to Haiti declined in 2007, but this trend began prior to the Act.

The HHOPE Act has had little, if any, effect on trade markets and industries in the beneficiary countries. The Dominican Republic is the country most likely affected by the Act, in a small but positive way, because textiles and apparel production in the Dominican Republic is integrated with Haitian apparel manufacturing.

Factors that limited the effectiveness of the HHOPE Act include the limited duration of benefits (5 years for most purposes), the 50 percent value added requirement, the requirement that goods have to be shipped directly from Haiti (instead of from the Dominican Republic where many garments undergo finishing operations), and the difficult business climate in Haiti (where political instability, lack of access to financing, cumbersome government regulations, etc. are disincentives to invest).

Topics Covered: Haiti, apparel, Haiti HOPE Act, HHOPE, trade, tariff liberalization, development

Countries: Haiti, Dominican Republic, United States

HTS Numbers: 55, 60, 61, 62

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