In recent years, much of the  talk in Central America’s business communities has revolved around competition with China in the garment trade. In the early 1990s, Chinese apparel exports to the United States were more than twice those of the countries that would become part of the Central American Free Trade Agreement (DR-CAFTA)—Costa Rica, the Dominican Republic, Guatemala, Honduras, Nicaragua and El Salvador. By 1994, these countries had begun to capture U.S. apparel market share from China and, by 1998, had overtaken China.

            The DR-CAFTA countries’ competitive advantages included trade openings with the United States. that China did not share. The United States has encouraged the apparel industry in Central America and the Caribbean islands through trade arrangements in the Caribbean Basin Initiative (1985) and related acts and agreements in 2000 and 2002. However, China’s 2001 entry into the World Trade Organization increased its competitive opportunities in textiles and apparel. The following year, China’s U.S. apparel sales pushed past DR-CAFTA’s...

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