The impending expiry of the Dominican Republic Earned Import Allowance Program (DR 2-for-1 or EIAP) on 1 December has been met with equanimity by the Caribbean country and its manufacturers, who hope the trading relationships created by the system can expand.
With the DR-CAFTA (Central America-Dominican Republic-United States Free Trade Agreement) continuing, the Dominican deputy minister of foreign trade Yahaira Sosa said in a recent speech: “Although not everything has gone as planned, regarding…exports and attraction of foreign direct investment (FDI), there are points that deserve to be highlighted.”
Indeed, an official from the ministry of industry, commerce and SMEs told just-style the government thinks Dominican Republic clothing exporters need to take advantage of experience gained through the DR 2-for-1 system and “follow up the bridges to markets that DR-CAFTA and related programmes have already opened.”
Also, commenting on the end of the programme, Marcelo A Salazar, secretary of industry and trade at the DR ministry of industry, commerce and SMEs, says, as a result, he thinks “there are more points in favour than against” participating in the programme.
Wagner Méndez, president of Wagner Management Group, a Dominican Republic business and economic consultancy adds: “The impact of that programme increased the interest and opportunities to new clients and since buyers have their own requirements our producers were able to improve the quality of the final products for exports, and at the same time take advantage of growing new client lists.”
Ultimately, as far as the DR 2-for-1 system is concerned, interest has waned to such an extent – with only 13 companies registered this year, and just four actually using it – that the US International Trade Commission (USITC) concluded in August that it was “not providing enough incentives to significantly boost Dominican apparel exports to the US market.”
The system allowed DR apparel manufacturers using US-made fabric to produce certain apparel to earn a credit to export other apparel made with non-American fabric into the US duty free.
Some DR clothing manufacturer executives, who have requested anonymity, argue the ten years the DR 2-for-1 system had existed did not provide enough time to sustainably develop growing markets.
Others complain that the Dominican government had not sufficiently promoted products sold via the system; and others note DR exporters found it hard to compete with rival cheaper exporters in neighbouring Haiti and also in Asia.
Looking ahead, José Manuel Torres, executive vice president of the Dominican Association of Free Zones (ADOZONA), says the Dominican Republic government and manufacturing sector should “invest in the development of the free zones sector”. He explains: “It has been demonstrated that this activity returns seven pesos for each peso spent on incentive schemes such as the DR 2-for-1 system.
And with DR-CAFTA in general continuing, Philipp Laraque, owner of Santiago de los Caballeros-based sports footwear manufacturer Ibex Dominicana SRL, says: “For the shoes manufacturing sector, it has been very positive.” Even though “the volumes of exports of our products haven’t grown as much as expected, this is because our production infrastructure is still the same since we started.”
He admits that regarding the EIAP, many Dominican firms simply “never took advantage of that great opportunity.”
Nevertheless, apparel exports from the Dominican Republic to the US have a lot of ground to make up. So far this year, exports are up 2.3% to $442m after falling 6.8% to $743m in 2017, according to data from the Department of Commerce’s Office of Textiles and Apparel (OTEXA).
But last year’s decline contrasts with a 2.4% jump in clothing shipments for the seven nations making up the DR-CAFTA trade bloc, led by Honduras, Guatemala and Nicaragua: Dominican Republic falls behind on apparel exports. According to the new re:source by just-style online sourcing tool, the main product categories exported from the Dominican Republic are casualwear pullovers, T-shirts and tops, followed by underwear lingerie and intimates.