Donald Trump, who met with Mexico President Enrique Peña Nieto, last August, has vowed to renegotiate NAFTA with Mexico and Canada.
MEXICO CITY — As it gears up to renegotiate aspects of the North American Free Trade Agreement in mid-August, Mexico wants the pact's tariff preference levels, which enable the sourcing of key raw materials for apparel to be exported, to remain in place.
"We don't want them removed," Samuel Gershevich, president of top apparel lobby Canaive, told WWD, adding that the U.S. is considering removing the TPL provisions as it seeks to modernize the 23-year-old treaty to fit its interests.
Canada has also asked that the provisions — which allow apparel manufacturers to import raw materials from non-NAFTA members — to remain in the treaty since eliminating them would dent its exports.
Mexico is backing Canada because losing the TPL would also hurt its competitiveness, already under huge pressure from Vietnam, China and Central American players, Gershevich said.
But providing a hint of the possible discussions ahead, he said Canada enjoys "many more millions of meters" of TPL benefits than Mexico, giving it a sourcing advantage against Latin America’s second-largest economy.
President Donald Trump has demanded that NAFTA be modernized to help fix the U.S.' $62 billion trade deficit with its southern neighbor. Mexico, however, is unlikely to budge without a fight.
Gershevich said the TPL has allowed the country to import key clothing feedstocks such as wool and synthetics from Asia to offer better prices to American buyers. "This has also benefited the U.S.," he claimed. "No one is giving us anything for free. This has been convenient for both parties."
The executive, who owns the Comercializadora Arush apparel firm that produces private label brands for Mexican department stores such as Liverpool and Pierre Cardin apparel under license, would not comment on suggestions that Mexico will also ask Washington to end NAFTA's yarn-forward rule of origin.
"The apparel sector wants simple transformation instead of yarn-forward," said Miguel Angel Andreu, director of trade consultancy Center for Textiles Development, who is familiar with the Mexican negotiating side. "Simple transformation allows you to make a small change in a garment and meet the rule-of-origin [under NAFTA]."
Under yarn-forward rules, Mexico, the U.S. and Canada must source raw materials from each other, reducing their sourcing and manufacturing flexibility, Andreu said.
He added that the much smaller textiles sector, struggling from choppy economic growth, is lobbying for the yarn or fabric-forward rule to stay in the treaty as this would bring greater demand for its products, which it sells mainly to domestic firms.
As its haggles to create NAFTA 2.0, Mexico is willing to make concessions, including on labor, said Canaive's Guadalajara chapter president Arturo Vivanco.
"You can pay a week's salary here with an hour's wage in the U.S.," said Vivanco. "We can't compete fairly that way. Our salary gap needs to be stabilized."