More than a dozen complaints were filed against the regime of Daniel Ortega and Rosario Murillo during the public comment period as part of an investigation launched by the United States last December under Section 301 of the U.S. Trade Act. This provision allows for the investigation of “unfair foreign practices affecting U.S. trade.”
For nearly a month, the Office of the United States Trade Representative (USTR), led by U.S. official Katherine Tai, received comments on its website regarding the investigation. These included complaints against the regime’s practices, as well as defenses from certain companies, particularly those operating in free trade zones, which support their operations in Nicaragua and their commercial and labor relations with the regime.
However, despite the fact that the vast majority of textile companies that chose to participate in the consultation process defended their relationship with the regime, the largest textile supplier in the United States decided to break its silence.
This refers to Milliken & Company, which describes itself in its letter to Tai as the largest domestic textile manufacturer in the United States. “We produce high-performance, highly technical fabrics for a variety of end uses, including workwear, automotive applications, and military apparel for the U.S. Department of Defense,” the company explains.
The letter further clarifies that as manufacturers, they sell their fabrics to clients who cut and sew them to create finished garments or other textile products, as well as other goods.
Although it clarified that as a company, it does not have facilities in Nicaragua or in any country that is part of the Central America-Dominican Republic Free Trade Agreement (DR-CAFTA), Milliken praised the investigative process. The company stated that it shared the “concerns about Nicaragua’s actions, policies, and practices related to labor rights, human rights, and the rule of law.”
“These actions are harming U.S. companies and workers who, like us, have lost millions of dollars in business to companies based in Nicaragua that we believe operate in violation of the rule of law. The loss of this business has impacted our associates, our suppliers, and our company,” the letter explains.
The textile company stated that it was necessary to include the textile and apparel industry in any solution considered during the investigation process because:
The Nicaraguan government has warmly welcomed investments from Chinese companies in the country, including by signing a Free Trade Agreement with China and sending a delegation to the China International Import Expo. At the Expo, the head of the Nicaraguan delegation (Laureano Ortega Murillo, son of the president and vice president) stated: “We are under the guidance of our president to facilitate everything we can do for Chinese companies.”
According to the U.S. textile company, Ortega Murillo’s statement “clearly demonstrates that Chinese-owned and Chinese-invested companies in Nicaragua are operating both at the behest of and with the support of Nicaraguan authorities. Based on our analysis of margins and raw material costs, we suspect that many of these companies are deliberately operating at a loss to intentionally harm the U.S. industry, thereby eliminating competition from U.S. companies.”
Shipments detected
It stated that “at least one Chinese-owned textile company (operating in Nicaragua) has committed internationally recognized human and labor rights abuses. The Laundering Cotton report by Sheffield Hallam University in the United Kingdom linked this Chinese-owned textile company in Nicaragua to the use of cotton from Xinjiang, a region in China that the United States has condemned for its state-sponsored labor transfer program. The Select Committee on the Chinese Communist Party in the U.S. House of Representatives also expressed concern about products made with forced labor entering the U.S. market through Nicaragua, in a letter last year.”
Specifically, the letter from the Committee cited how in 2023, the U.S. Customs and Border Protection (CBP) stopped six shipments from Nicaragua because they tested positive for Xinjiang cotton, it detailed.
For this reason, the textile company accused the Nicaraguan government of facilitating the transshipment of products to the United States through DR-CAFTA “by allowing goods that do not meet the qualification standards of the free trade agreement to receive duty-free preference in the U.S. market, in violation of the law.”
“Our industry shared these concerns with CBP last year, and while we know that CBP’s Textile Product Verification Teams (TPVT) have inspected facilities in Nicaragua this year, they have not yet been able to share the results of those inspections with the public. Allowing goods made with Chinese forced labor to enter the CAFTA-DR market duty-free lowers prices, harms competition, and ultimately decimates U.S. industries,” it stated.
Millionaire losses
The scheme facilitated by Ortega, allowing the shipment of products that use raw materials from China which do not meet the human rights and labor standards outlined in DR-CAFTA, is said to have caused Milliken a loss of $50 million in sales, or approximately 61 million square yards of fabric, over the past two years.
“This loss of business, coupled with strong macroeconomic headwinds in the textile industry, has resulted in a 29 percent decrease in our garment volumes, a 15 percent reduction in our textile workforce, and the closure of three plants, all within the last two years,” the textile company specified.
It is worth mentioning that Nicaragua directs nearly 90 percent of its garment exports to the United States, and Chinese investments have been protected for the past two years since Ortega decided to break ties with Taiwan and align with Beijing. From the outset, China implemented a preliminary trade agreement known as Early Harvest and later the Free Trade Agreement, which marked its one-year anniversary of enforcement in January.
In the context of the U.S. company’s complaint, it stated that it has “identified over $90 million in business that we believe is at risk in the coming years if foreign-owned companies in Nicaragua continue to violate the spirit of our free trade agreements. This further loss of business will likely lead to more plant closures and job reductions in our operations in the United States. Our competitiveness and ability to service other parts of our garment portfolio, including our military fabric supply for the U.S. Department of Defense, will be significantly harmed.”
According to Milliken, the situation is such that even the existence of the company is at risk. “The volume of military business is not enough for any textile company to survive today. We can offer a fair price to the military while delivering the highest-quality fabrics because we can achieve efficient production with additional non-military business volume. As we lose substantial volume to foreign producers in Nicaragua, we will struggle to maintain those efficiencies.”
According to Milliken, a remedy to resolve the situation would be to “consider imposing tariffs on Nicaraguan imports to the U.S., specifically on textile and apparel products. We encourage the president to impose public sanctions through the Office of Foreign Assets Control (OFAC) and the Uyghur Forced Labor Prevention Act (UFLPA) on companies in Nicaragua known to use forced labor or suspected of having Chinese forced labor products in their supply chain. Free trade is only truly free if it is fair.”
“In our opinion, the lack of customs control in Nicaragua and the regime’s blatant disregard for human rights make trade from Nicaragua unfair. We hope that the Administration will exercise its authority to protect U.S. industries and workers from these unfair trade practices,” it concluded.
Milliken is headquartered in Spartanburg, South Carolina. It primarily operates in 13 states on the East Coast and employs more than 6,000 people in the country. The complaint was filed by Allen Jacoby, President of Milliken Textiles.