Trade Deal Sparks Fight Over Socks

The US Congress and Department of Commerce are considering raising tariffs on sock imports from Honduras. Passage of the Central American Free Trade Agreement in 2005 decreased protections between the US and several Latin American states, and some analysts suggest that factories based in the US will close and move jobs to Honduras, with its low production costs. A Canadian company is taking advantage of the treaty by buying US sock manufacturers, outsourcing operations and then selling the products back to US consumers. Any effort by the Department of Commerce to prevent the shutdown by raising tariffs could in turn damage the domestic cotton industry because CAFTA mandates the use of US yarn in socks sold under the agreement. Lawmakers considering the treaty in 2005 anticipated increased competition, but could hardly have expected such triangular trade. – YaleGlobal