Update Country Report Curaçao 24 Sep 2020

Event

On September 22nd the US Congress unanimously approved the renewal of the Caribbean Basin Trade Partnership Act (CBTPA), a trade programme that grants preferential trade conditions to selected Caribbean countries.

Analysis

CBTPA, first implemented in 2000, was due to expire at end-September, but the US has approved its extension until 2030. This comes as good news for manufacturers across the region, who had been lobbying for the renewal of the programme for years. CBTPA provides duty-free access for apparel products that use US raw materials, from Barbados, Belize, Curaçao, Guyana, Haiti, Jamaica, St Lucia, and Trinidad and Tobago.

In recent years, Haiti has been CBTPA's largest beneficiary, with about 30% of Haitian exports to the US (the country's main trading partner) coming under this programme in 2019. Trinidad and Tobago, and Belize also benefited from the programme, although exports under CBTPA represent a marginal share of their total exports.

Other countries, such as Guyana, have dramatically decreased their use of CBTPA in the past few years. Although this may in part be attributed to a lack of investor awareness on the advantages of this programme and perhaps changes in industrial policy, it also reflects increasing competition in the apparel sector from other markets both outside and within the Caribbean, with countries such as Haiti enjoying a more competitive environment for apparel production (in Haiti this chiefly reflects very low labour costs). In Guyana, wage conditions are favourable for the sector, but the cost of electricity continues to be a major impediment to competitiveness.

Against a backdrop of both disruptions in global trade, amid the coronavirus (Covid-19) pandemic and US-China trade tensions, the renewal of CBTPA creates opportunities for textile manufacturers in the region to recover from the crisis. Although in the short term textile exports from the Caribbean will continue to suffer from low demand amid the pandemic, the renewal of CBTPA amid US-China trade tensions could compel US retailers to move some of their apparel production away from China (a major source country for international apparel) and closer to the US. In the short term, manufacturers in East Asia will be the initial beneficiaries of US-China tensions, but changing supply chains may create opportunities for CBTPA beneficiaries in the medium to long term. Nevertheless, weaknesses, including poor infrastructure, will remain a challenge for the broader region.

Impact on the forecast

Our Caribbean forecasts remain unchanged, as we previously expected CBTPA to be renewed.