Mexican Textile, Clothing Industry at Odds regarding Agreement with Cafta Nations and U.S

SourceMex Economic News & Analysis on Mexico, May 16, 2007 | Go to article overview

Mexican Textile, Clothing Industry at Odds regarding Agreement with Cafta Nations and U.S


Mexico's apparel and textile industries are taking radically different stances on Mexico's recent decision to enter into a supply agreement with the US, five Central American countries, and one Caribbean nation. Under the accord, Mexico would supply textiles to the apparel industries in Honduras, Guatemala, Nicaragua, Costa Rica, El Salvador, and the Dominican Republic at very low tariff rates. The textiles would then be manufactured into clothing for shipment to the US. Mexico's Camara Nacional de la Industria del Vestido (CNIV) has raised the alarm about the arrangement, claiming that it would result in the loss of tens of thousands of jobs in the apparel industry. However, the Camara Nacional de la Industria Textil (CANAINTEX) claims that the accord could boost its exports by US$250 million in a year, creating several thousand new jobs.

The Mexican government had to sign individual agreements with the US, the five Central American nations, and the Dominican Republic, in essence creating a link to the Central American Free Trade Agreement (CAFTA). CAFTA was scheduled go to into effect at the start of 2006 (see NotiCen, 2006-01-05), but implementation was delayed because each country had to ratify the accord (see NotiCen, 2006-03-02 and 2006-04-06 and 2006-09-28).

The agreements were completed in recent months and ratified by the Mexican Senate in April. The accords followed the completion of a customs-cooperation agreement between Mexico and the US, which Economy Secretary Eduardo Sojo and US Trade Representative (USTR) Susan Schwab signed during a meeting in Davos, Switzerland, in January of this year. The two officials said that the agreement would be subject to annual limits on the quantity of apparel that would receive preferential treatment.

The arrangement has left the Mexican clothing industry reeling. In a press conference in early May, CNIV president Simon Feldman warned that the agreement could displace exports of Mexican apparel to the US market, resulting in the loss of as many as 100,000 jobs in the clothing and apparel industry. "Production costs are 30% lower in Central American countries than they are in Mexico," he said. Feldman said costs are cheaper in Central America because of lower labor costs. For example, he said wages in the clothing industry on average are the equivalent of US$2.45 per hour in Mexico, compared with US$1.48 in Honduras and US$0.92 in Nicaragua.

Clothing manufacturers say they weren't consulted

Feldman criticized the Mexican government for consulting only with textile manufacturers before agreeing to the arrangement with the CAFTA nations. He criticized the Senate for ratifying the accord without questioning the impact on clothing manufacturers. "The CNIV was surprised that this accord was ratified so quickly and without consulting all the members of the textile and apparel sector," said Feldman.

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Mexican Textile, Clothing Industry at Odds regarding Agreement with Cafta Nations and U.S
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