False HOPE for Haiti

[Note from Haitianalysis Editor: This is an updated article from a piece previously published on the Quixote Center Blog]

Earlier this month President Bush certified that Haiti was “prepared” to take advantage of trade preferences extended under the HOPE Act – also known as the Haitian Hemispheric Opportunity through Partnership Encouragement Act. It has been argued that HOPE will bring desperately needed apparel jobs to Haiti. For example, the free-trade-cheerleading Washington Post editorialized on Monday, November 27, 2006: “After 15 years of political turmoil, violent unrest and economic mismanagement, this looks like a rare opportunity to consolidate tentative progress in Haiti. Congress shouldn’t miss it.”

Congress passed the HOPE Act shortly after midnight on the last day of the “lame duck” session in December 2006. It was attached to a much larger tax bill by the Republican leadership in order to make it harder for textile state Republicans to vote against it. But what did Congress actually pass? It is hard to say they captured an opportunity to consolidate any progress other than further enriching Haiti’s sweatshop overlords, and professional putchists, e.g. Andy Apaid.

HOPE Background

The HOPE act would provide tariff free access to the United States market for apparel made in Haiti. This is not a completely new program. For years Haiti has been part of the Caribbean Basin Initiative, and under these rules has had tariff-free access to the U.S. market for apparel. The caveat is that the fabric had to be made in the United States. Prior to CBI expansion, the U.S. government provided tariff reductions for apparel made with U.S. fabrics under special provisions of customs code. These rules facilitated the expansion of apparel assembly in Haiti, a sector that reach employment levels over 100,000 by the mid-1980s.

The new part of HOPE is the extension of tariff free access to apparel made in Haiti, even if the fabric is not from the United States. There are limits – preferences are primarily extended to fabric from countries that have free trade agreements with the United States. Manufacturers in Haiti would be allowed to use fabric form other sources as well, but there are caps on the volume of this fabric, and the way the bill is written, these caps are reduced over the five year life span of the bill.

Apparel is an important export sector for Haiti, and over the recent past Haiti has become even more dependent on it. Since 1990 the share of Haiti’s exports to the United States represented by apparel has increased from 45% to 90%. In value terms, apparel exports have nearly double since 2001. However, employment has lagged in this sector as companies have shifted production contracts elsewhere and political conflict has scared some investors off. A recent increase in apparel exports has been driven by producers from the Dominican Republic. Companies like Grupo M shift production to Haiti to take advantage of the proximity of lower wages, and weaker unions. Yet, despite these recent trends employment in this sector is still below 20,000 today.

False HOPE

As currently constructed the HOPE Act would have a marginal impact on employment in Haiti, and what “success” it would have is ultimately based on more effectively exploiting Haiti’s poverty. The apparel industry is in a global transformation amidst changes in international quota systems, and the explosion of assembly manufacturing in Asia. Keeping Haiti competitive in this environment means keeping wages low and workers un-organized, and even then there are no guarantees. A temporary expansion of tariff-free access for third country fabric does not solve the underlying problem. Indeed, by placing so much emphasis on apparel HOPE deepens economic insecurity in Haiti, it does not alleviate it.

A real HOPE bill would help create jobs beyond Haiti’s sweatshops, especially in the agricultural sector, and would strengthen the Haitian government’s ability to develop the economy and provide basic government services to its citizens.

A Better HOPE

The single greatest generator of unemployment in Haiti over the past twenty years has been the destruction of the rural economy. The loss of economic opportunity in the countryside has translated into a wholly unsustainable urban migration. Urban communities in Port-au-Prince, Gonaives, Port de Paix and elsewhere are straining unsuccessfully to absorb dislocated peasants and their families.

The current HOPE Act does not impact this tragic cycle in any meaningful way. But Congress can take steps that would help. A real HOPE Act would provide Haiti’s government the space to adjust tariff levels to protect its agricultural producers. It is unlikely that the destruction already wrought by years of extremely low tariffs (lowest in the Caribbean) can be reversed. But giving families still trying to scrape out a living in the rural economy a fighting chance would help stabilize employment far more than creating sweatshops.

Another approach a new HOPE could take would be to shift funds for development away from project based grants and loans, delivered primarily through the non-governmental sector, to direct support for government ministries in Haiti.

Haiti has the lowest public sector employment in the region, less than 0.7 percent. Public education programs and government provision of health services suffer as a result. Most education and health care is currently provided by non-governmental organizations, including networks of church based programs. These programs often fill in important gaps, but over time ultimately further undermine the public sector’s capacity. In the long run, rebuilding the existing public infrastructure in health and education has to happen if Haiti has any chance to break the cycle of underdevelopment it is currently trapped in.

Encouraging private sector employment through tariff preferences, as in the current HOPE Act could also be pursued, but not in a vacuum. Worker rights need to be protected, and not with boilerplate labor clauses that go un-enforced. This should not take place through unilateral mandates issued by the U.S. Congress, essentially blackmailing the government to comply or loose benefits. Enforcement should evolve through dialogue, and direct support for the ministries that would be responsible. Further there must be an absolute insistence on protecting workers rights to organize and collectively bargain. The best guarantor of worker rights is an organized work force.

Finally, an alternative HOPE could flourish if Congress will take what steps it can to insist that Haiti’s debts be cancelled immediately and unconditionally. The Inter-American Development Bank, the International Monetary Fund, and the World Bank have already agreed to cancel a large portion of Haiti’s debt. But the current program requires that Haiti wait at least two years (more likely three) meet a host of invasive policy conditions, and then face continued indebtedness anyway because the debt “relief” targets will still leave Haiti with a debt burden. Canceling Haiti’s debt outright today would free up $50-70 million a year, and provide the government many opportunities to engage in the public investment mentioned above.

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