In the five years since the Central American Free Trade Agreement was implemented, U.S. and European apparel brands and retailers have faced sourcing challenges but are now said to be looking to increase business in the region.
While the recession hit Central America hard and led to a decrease in U.S. apparel import volume in 2009 and created an uncertain business climate for the seven CAFTA countries, trade has begun to bounce back in the past year and companies are now exploring new investment opportunities. Central America’s apparel and textile industry could attract significant apparel investment by 2015 as U.S. and European brands shift activities to offset deepening sourcing woes in Asia, industry experts said.
Retailers and brands such as Wal-Mart Stores Inc., J.C. Penney Co. Inc., Aéropostale Inc. and Hugo Boss are said to be ready to move some of their apparel sourcing to Central America, according to sources.
Apparel import trade to the U.S. from the other signatory countries — Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and the Dominican Republic — rose 19 percent to 3 billion square meter equivalents in 2010 compared with a year earlier, according to the Commerce Department’s Office of Textiles and Apparel. Not only has the region become a vibrant sourcing platform, it also serves as a major export market for U.S.-made fabrics and yarns. Textile exports rose 21 percent in 2010 to $2.49 billion, according to the National Council of Textile Organizations.
While Asia, and particularly China, has wooed large orders from U.S. and European brands for years, some of those contracts are now expected to go to Central America as China’s domestic clothing demand soars and labor costs rise.
“U.S. retailers and brands are very nervous about surging domestic demand in China,” said Walter Wilhelm, chief executive officer of trade consultancy Walter Wilhelm Associates. “They worry that Chinese producers will begin to focus on meeting internal needs and less on exports so they won’t be able to get as much stuff out and on time.”
China’s unions are also clamoring for higher wages while prices of key raw materials such as cotton have risen sharply, boosting production costs.
“Shipping rates are now higher than in this [Western] hemisphere and there are more labor woes, so major U.S. companies are looking to hedge themselves by moving sourcing elsewhere,” Wilhelm said.
A similar phenomenon is at work in India and Pakistan, where governments are forcing manufacturers to meet local demand, further squeezing export-linked production. While industry officials acknowledge that CAFTA has not lived up to its full potential, there is a growing consensus that the region is likely to attract new investment and continue to expand.
“It’s done some of what it was supposed to do,” said Nate Herman, vice president of international trade at the American Apparel & Footwear Association. “It has definitely maintained business in the region and created some new investment, but it just hasn’t been anywhere near what people were hoping because of the staggered implementation of the agreement and the recession.”
But conditions in Central America are beginning to improve. “The region is starting to get better and it’s starting to get a lot more fabric capacity,” said Herman.
Julia Hughes, president of the U.S. Association of Importers of Textiles & Apparel, said her members are “starting to take a fresh look at sourcing in the CAFTA region.”
“If you look at the trade numbers, most of them are up and I do think that reflects a positive and that companies are coming back,” Hughes said.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty