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Summary

In December 2006, the 109th Congress passed the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 (HOPE I), which included special trade rules that give preferential access to U.S. imports of Haitian apparel. These rules were intended to promote investment in the apparel industry as one element of a broader economic growth and development plan. HOPE I allowed for the duty-free treatment of select apparel imports from Haiti made from less expensive third-country inputs (e.g., non-regional yarns, fabrics, and components), provided Haiti met rules of origin and eligibility criteria that required making progress on worker rights, poverty reduction, and anti-corruption measures. Early assessments of the effectiveness of HOPE I, however, were disappointing. The 110th Congress responded by amending HOPE I in the Hemispheric Opportunity through Partnership Encouragement Act of 2008 (HOPE II). HOPE II extends the preferences for 10 years, expands coverage of duty-free treatment to more apparel products, particularly knit articles, and simplifies the rules, making them easier to use. HOPE II also amended the eligibility requirements by requiring Haiti to create a new independent Labor Ombudsman's Office and establish the Technical Assistance Improvement and Compliance Needs Assessment and Remediation (TAICNAR) Program within 16 months of enactment of the legislation. The TAICNAR program provides technical assistance through the UN International Labor Organization (ILO) to help Haiti develop the capacity to monitor compliance of apparel producers in meeting internationally recognized core labor standards. Those firms that are habitually unable, or refuse to comply with these standards or to accept technical assistance to remedy deficiencies, can lose their eligibility for the trade preferences. In providing preferential access to Haitian apparel imports, the HOPE Act, as amended, gives Haitian firms a competitive (price) advantage in the U.S. market over other foreign producers, who must pay U.S. duties on their apparel exports made from yarns and fabrics supplied by non- regional (e.g., Asian) producers. Improved competitiveness of the apparel business is intended to attract long-term investment to Haiti's primary export industry, expand output and employment, and provide one pillar of a policy foundation aimed at promoting sustainable economic growth and improving the standard of living in Haiti. Unilateral trade preferences have played a long-standing role in U.S. trade and development policy in the Caribbean. Congress designed the HOPE Act, as amended, as the most flexible and generous of these arrangements to meet Haiti's critical development needs. The rationale for success is based on trade preferences reducing the relative costs of Haitian apparel exported to the U.S. market, the largest market for Haiti's primary export industry. The labor provisions reflect a relatively new approach for incorporating core labor standards because the tariff preferences are tied directly to firm performance. The ILO, which wields international credibility, is actively involved in administering and overseeing the program. The model combines government, private sector, and international agency participation in a way that achieved some success under the U.S.-Cambodia Textile Agreement. Congressional oversight is mandated and important for ensuring that the HOPE Act is implemented as intended. Haiti, for its part, faces many challenges and will have to find ways to overcome a legacy of political volatility, economic inequality, and social dissension. These factors could directly affect prospects for rejuvenating the apparel export industry. Without the transition to a more equal and stable society, trade preferences may be overwhelmed by the force of broader social and economic factors that could keep investors away.

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