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US mulls hiking duties on CAFTA partner Honduras

By: | at 08:00 PM | International Trade  

The Bush administration could re-impose duties this fall on sock imports from Honduras, one of the United States’ newest free trade partners, as it scrambles for votes in Congress on other free trade pacts.

The Commerce Department announced it had decided “on its own initiative” to investigate whether increased sock imports from Honduras had seriously harmed, or threatened to seriously harm, US producers.

An injury finding would re-impose a 13.5% duty on sock imports from Honduras for up to three years. A decision is expected in coming months.

Sock imports from the Latin American producer increased to 10.2% of total US imports in the year ending in June, from 6.7% in the prior 12 months.

The “safeguard” probe makes good on a promise US Commerce Secretary Carlos Gutierrez and then-US Trade Representative Rob Portman made two years ago to persuade wary textile state Republicans to support a free trade pact with five Central American countries and the Dominican Republic.

The US House of Representatives approved the agreement by the narrow margin of 217-215 after a bitter, mostly party-line fight. The Bush administration needs Republican support to win a tough battle for approval of three other free trade pacts with Panama, Peru and Colombia.

Rep. Robert Aderholt, an Alabama Republican, credited the administration’s promise to restrict CAFTA country sock imports if they reach threatening levels as the main reason he decided to vote for CAFTA.

Aderholt’s district includes Fort Payne, Alabama, which bills itself as the “sock capital of the world.” He has praised the administration’s decision to launch the probe.

Domestic producers have seen their share of the US sock market decline to 29.1% in the first three months of 2007, from 37.9% in all of 2005, according to the Commerce Department.

Honduras argues its sock exports to the United States are too small, compared to other suppliers, to cause serious harm to US producers. It warned in a statement this week that re-imposing tariffs would discourage foreign investment in Honduras, while allowing Asian sock producers to increase their exports to the United States.

Ed Gresser, a trade policy expert at the Progressive Policy Institute, said sock imports from two other CAFTA countries—Guatemala and the Dominican Republic—have fallen as imports from Honduras have increased.

The pact seems to have encouraged integration of the Central American sock industry, just the sort of thing the Bush administration argued two years ago would help the region compete with the rest of the world, Gresser said. (Reuters)