Free Trade and Uneven Development: The North American Apparel Industry after NAFTA

By Gary Gereffi; David Spener et al. | Go to book overview

9 Commodity Chains and Industrial
Organization in the Apparel Industry
in Monterrey and Ciudad Juárez

Jorge Carrillo, Alfredo Hualde, and Araceli Almaraz


Introduction

Since the mid-1980s, Mexico’s economy has developed in a context that is substantially different from its former import-substitution industrialization model.1 The opening of the economy to international competition has modified the modes of conduct of both the government and private firms, as well as their mutual relations. This change has been important not only for Mexico but also for its nearest and most important neighbor, the United States, which upon the ratification of the North American Free Trade Agreement (NAFTA) formalized its status as Mexico’s most important trade partner.

Mexico’s unilateral trade opening preceding NAFTA produced macroeconomic imbalances and social tensions among firms. One of the most frequently expressed fears was that Mexico’s small and medium-scale enterprises would be left unprotected against an avalanche of foreign imports. This situation was forecast especially for industries such as apparel, where the trade opening took place very rapidly: In 1985, 100 percent of Mexican clothing production was protected by import licenses that were done away with in 1988, while the average tariff on garments fell from 50 percent in the second half of 1985 to 20 percent by December 1987. Other protectionist measures were reduced or eliminated in textiles as well (Mendoza and Pozos 1997). The trade opening, according to the pessimists, would sharpen competition to the point that the survival of many Mexican small and medium-sized enterprises would be threatened.

Nevertheless, even now, in the early twentyfirst century, it is difficult to assess the outcome of the trade opening for the Mexican garment industry in clear-cut terms. At the beginning of the opening, a significant drop occurred in both employment and number of firms in the industry. Textile and apparel’s joint share of Mexican gross domestic product in manufacturing fell from 13.8 percent in 1980 to 10.8 percent by 1990. These industries’ share of manufacturing employment also fell significantly, from 18.1 percent in 1980 to 15.9 percent in 1990. From 1991 to 1994 the real value of textile and

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