Trade Deal Opens Doors for Manufacturers on Apparel Trade, Mexico Stands to Gain More Than the US from NAFTA, While the Loser May Be Asia

Article excerpt

IF the North American Free Trade Agreement (NAFTA) is ratified, United States consumers are likely to see "made in Mexico" on more of their clothing and fewer labels from Asia.

But some US apparel manufacturers worry that the NAFTA will accelerate the long-term trend of apparel business moving to lower-wage nations.

"It will probably be one of the last nails in the coffin for the apparel industry" in the US, says Gene Laudon, president and owner of A & A Manufacturing Company, a Fall River, Mass., sportswear producer.

"It's just labor costs versus labor costs," Mr. Laudon explains, citing the gap between the $1.50 an hour wages of Mexican apparel workers and the $7 and up that he pays his workers. Despite its struggeles, the US apparel industry employs 1 million people.

The trade agreement would not hurt US apparelmakers so much as it would shift production from Southeast Asia to North America, says William Cline, a textile expert with the Institute for International Economics in Washington.

Such a deal would also benefit US consumers, Mr. Cline says, because apparel sewn in Mexico from North American-made yarn would be freed from tariffs and thus cost less. The current US system of quotas and duties, for example, adds about 28 percent to textile import costs and 56 percent to apparel, according to Cline's research. Mexico and the Caribbean enjoy easier terms when they use US-made fabric.

Meanwhile, as Mexico brings down its own tariffs, US apparelmakers might increase their exports to Mexico from $242 million to $272 million, according to a KPMG Peat Marwick study.

But Mexico's apparel industry would be the big gainer, seeing exports to the US rise from $506 million to $906 million, the accounting firm's study predicts. And the rise could be much greater.

"Using the history of Spain's accession to the European Community as our guide, we would not be surprised if Mexican exports of textiles and apparel reach $3 billion to $5 billion in 10 years," write trade experts Jeffrey Schott and Gary Hufbauer in a recent book. …