US apparel and footwear companies have welcomed the signing of the US-Central America Free Trade Agreement (FTA) on Friday, although textile trade groups argue the trade deal will destroy thousands of US manufacturing jobs.

Kevin Burke, president and CEO of the American Apparel & Footwear Association (AAFA), witnessed the signing at a ceremony at the Organization of American States.

He said: "This is the only opportunity available to support US exports of textiles and fabrics to the region and retain, as well as possibly bolster, demand in the region for US textile inputs.

The AAFA believes US textile companies will be among the strongest beneficiaries
of this agreement, since so many garments produced in the region use US cotton, yarns, and fabrics.

The American Manufacturing Trade Action Coalition (AMTAC), however, says the agreement is riddled with loopholes, most of which "will benefit China."

These include a yarn forward rule of origin on the essential or primary fabric used in the garment, not other non-visible fabric; single-step transformation on bras, boxer shorts and pyjamas; Tariff Preference Levels; cumulation with Canada and Mexico; and a short-supply list of items believed to be unavailable in commercial quantities in the US or Central American countries.

Once approved by Congress and fully implemented by the Administration, the
FTA will eliminate trade barriers between the US and the five Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua.

The agreement will be extended to include the Dominican Republic in a signing ceremony expected to take place at the end of June.

On the issue of timing AAFA's Burke said the FTA needs to be passed this year. "The flexibility contained in this agreement is essential if this relationship, and the corresponding demand for US inputs, is to continue."

The Central American region is the largest supplier of apparel to the United States, selling over $9 billion worth of apparel to the US market in 2003. The region is also the United States' 11th largest source of footwear, supplying over 8 million pairs worth $81 million in 2003.