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Could trade agreement impact artisans?

03.06.06 06:44 PM – Andy McDonald
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Sally Bushong, executive director at Tamarack in Beckley, West Virginia, runs a facility that promotes craft produced in her state. But the passage of CAFTA could make it easier for foreign crafts to enter the American market.
When the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) passed last summer, proponents predicted it would be a boon for the American economy. The agreement removes trade barriers between the United States, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, creating the second largest free trade zone in Latin America for U.S. exports. CAFTA countries currently constitute a market that already consumes $15 billion worth of American goods per year.

While U.S. industries like agriculture and information technology are poised to capitalize on newly open markets, the CAFTA agreement, combined with demographic trends, may have an impact few predicted; the pact may enable Central American craft producers to greatly expand their presence in the U.S. craft market.

When considering how CAFTA may impact American craft, the events following the enactment of the North American Free Trade Agreement may provide some clues.

After NAFTA went into effect, Mexican firms seized upon an advantage their North American trading partners did not share: a large, growing population of Hispanic expatriates living in the United States and Canada. As a result, American and Canadian firms faced the challenge of marketing to mostly Hispanic consumers south of the border, but Mexican retailers could pitch their goods without the complications of language or cultural barriers. Moreover, Mexican prices were very competitive because of the relative strength of the dollar against the peso.

Like the NAFTA before it, CAFTA may create opportunities for Central American firms marketing to Hispanics, since 75% of the trade barriers and tariffs against goods coming into the United States will be eliminated. The remaining barriers will be phased out over a 10-year period. But the news gets even better for CAFTA countries: The number of prospective Hispanic consumers in the U.S. and Canada is growing, as is their buying power.

America’s growing Hispanic market

The Hispanic population in the United States more than doubled between 1980 and 2000, accounting for 38 percent of the total population growth in the nation. Latinos in America currently constitute the fifth largest Spanish-speaking population in the world, trailing only Mexico, Spain, Columbia, and Argentina. According to the Pew Hispanic Center, report “Trends 2005,” Latinos are projected to account for 46 percent of U.S. population growth over the next two decades.

With their growth in numbers, Hispanic consumers are wielding a corresponding increase in buying power, reaching an estimated $686 billion in 2004, according to the University of Georgia’s Selig Center for Economic Growth. And while Latino entrepreneurs make up just 4 percent of the nation’s 7.7 million business owners, they are younger than their non-white counterparts. Forty-six percent of Hispanic business owners are under the age of 45, compared to 33% of all business owners in the U.S., according to the 2002 Economic Census.

Analysts call the second and third generation American Hispanics “Generation Si,” an increasingly affluent segment of the market with an expensive taste for consumer goods, including craft items like jewelry.

As they come of age in the United States, so will their buying power, skyrocketing from $222 billion in 1990 to $992 billion by 2009, according to the Selig Center study.

Ready or not, here they come

In 2001, the most comprehensive industry-wide survey about the crafts industry revealed some encouraging trends for Central American producers who hope to introduce their products into the $14 billion U.S. craft economy. According to a study by Craft Organization Development Association (CODA), only 1 percent of respondents identified themselves as Hispanic. Moreover, less than one percent of respondent’s sales (.47%) were derived by exporting craft from the U.S. to international markets.

Taken together, those statistics may reveal two important factors about American craft producers: as mostly non-Latinos, American crafters may not be predisposed to catering to Hispanic craft consumers; and, since so little of American craft is exported, domestic producers probably have little experience in navigating cultural or language barriers to sell their products. As a result, craft producers in CAFTA countries may be in a good position to enjoy advantages in the U.S. market.

Thanks to projects funded by the U.S. Agency for International Development and Aid to Artisans, a non-profit whose mission is to create economic opportunity in developing countries, some CAFTA countries are already exporting goods to America.

In 2002, Aid to Artisans (ATA) began working with potters of the Guatajiagua community in El Salvador, helping them rethink their traditional methods of ceramic production. The result was to create pottery that is sturdier and better suited for export.

Initially, Guatajiaguan potters resisted any departure from their pre-Hispanic, Lenca tradition of low-fire pottery making. But Guatajiauan clay is fragile by nature, making international shipping a risky proposition. ATA hired a ceramics expert who introduced a process of sifting clay before using it, making the finished pots more robust. Once local potters adopted the more efficient methods for production, 22,500 pots were subsequently produced for export to be sold in 350 Kirkland stores across the United States.

Aid to Artisans El Salvador director Veronica Martinez said officials and artisans can’t yet foresee all the ways CAFTA will impact the local craft economy. But now that trade barriers are falling, ATA is helping local artisans improve processes that will enable them to become more competitive internationally, including more efficient production processes, better quality control, and better packaging.

“We know that we will have to improve in everything we do when trying to reach the international markets and even the local ones,” Martinez said. “To be positive, we think that this agreement will help our country increase our exports with minimum regulations or fees, which is good.”

So far, those efforts have produced results, according to Martinez, who noted that in addition to sales through local fairs, craft stores and regional events, 51% percent of fine art and craft sales from ATA projects in El Salvador were to international vendors.

Similar efforts are under way in Guatemala, where craftspeople are using traditional designs to fashion products that cater to the international market.

With the assistance of AGEXPRONT, the Guatemala Non-Traditional Products Exporters Association, the country’s artisans are benefiting from various initiatives, including the creation of a country handicraft logo, seminars in technical and marketing for artisan groups around the country, as well as a handicrafts design and development center, which provides seminars for designing textiles, wood products, natural fibers and ceramics to artisans throughout Guatemala. Some suggest the key to success in the American market is continuing the effort to prepare local producers for the trade opportunities that CAFTA may provide.

“From AGEXPRONT, we see it as an opportunity,” said Silvia Moreira, executive coordinator of the organization’s commission for artisans. “That opportunity relies on getting the sector more competitive for external markets and being able to develop new programs to help craft producers achieve this [new] level of competitiveness.”

New opportunities

In recent years there has been a debate about whether it’s wiser for American craftspeople to create products appealing to affluent baby-boomers or to go in the opposite direction of the age spectrum and begin developing products that attract consumers in the lucrative 18-34 age market.

The adoption of CAFTA, combined with changing demographics in the United States suggest the American craft industry might find an opportunity in a third option: following the lead of NAFTA and CAFTA countries by developing products and marketing to America’s growing and increasingly affluent Hispanic community.
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