Textile and apparel products manufactured by the Honduran maquila industry – located in the country’s export processing zones – are facing stiff competition in their biggest traditional market, the US, according to a World Trade Organization (WTO) report.
The US absorbs about 75% of all of Honduras’ maquila exports, with enterprises benefiting from preferential trade accords such as the Dominican Republic – Central America Free Trade Agreement (DR-CAFTA).
The Central American economy’s main exports are products from the maquilas, which in 2009 were valued at $2.8bn, or about 54% of the all exports of goods. The vast majority of these maquila enterprises are textiles and apparel firms, and last year generated HNL62.7bn (US$3.32bn) or 79.5% of the total.
The report compiled by the global agency for a two-day review of Honduras’ trade regime by WTO members, says nearly 90% of the country’s exports of goods for processing consists of apparel, knitted or crocheted fabrics, textiles, and yarn and thread.
However, WTO trade economists say intense competition faced by Honduran firms in the US market – partly due to the phase-out of the restrictive global import quota regime (MFA) in 2005 – had meant both employment and gross value added by the maquila industry have declined in the last two years.
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By GlobalDataThe number of employees fell from 134,007 in 2007 to 121,700 in 2008, and contracted further to 104,048 last year. Similarly, gross value added as a percentage of gross domestic product declined from 7.3% in 2007 to 5.9% in 2009.
David Shark, deputy chief of the US delegation to the WTO, told delegates that US-Honduras bilateral trade in goods was $6.7bn in 2009 and was driven by preferential trade.
But Shark also said: “Despite the tariff and tax concessions that Honduras provides under its free trade zone (FTZ) regime, the productivity of FTZ firms has been low and their linkages with the rest of the economy are weak.”
Melvin Redondo, Honduras’ chief trade negotiator, said the government expected economic activity to recover, with a growth of between 3.6% and 4.6%, and an increase in foreign direct investment.
