807 STANDS UP TO NAFTA

Byline: Georgia Lee

ATLANTA--Competition from Mexico since the passage of the North American Free Trade Agreement has taken little away from a well-established Miami apparel industry, closely linked with the Caribbean.
Uncertainty over the effect of NAFTA has diminished over the past year, and with bills pending in Congress to give the Caribbean Basin Initiative nations trade parity with Mexico, most feel that passage will happen within the next year, causing business to boom further.
True, imports from Mexico have surged since NAFTA implementation, and this year the fall of the peso has further propelled shipments. In January and February, U.S. apparel imports from Mexico rose 82.75 percent against a year ago to hit 98 million square meters equivalent. At the same time, though, imports from the CBI collectively, working from a much larger base, also continued to grow, climbing 31 percent from a year ago to total 264 million SME.
Still, with or without CBI parity, many involved in Miami's apparel industry see offshore business in the Caribbean and Central and South America continuing to grow through existing 807 programs. While domestic manufacturing and sewing operations have declined here, opportunities are strong in contracting and cutting operations, as well as related services such as consolidation, freight forwarding and technology to pull it all together.
WWD talked by phone to several key players about the current business climate in Miami, and their major concerns, from CBI parity to unionization to the opening of new markets, such as Cuba.
Jeff Rosenzweig, Southeastern regional sales manager, Gerber Garment Technology: "We're seeing a tremendous boom in our customers' business. There's big-time growth now, with contractors doing a huge amount of work. People are looking at Mexico to do business, but Mexico still has problems and instability.
"Business in Caribbean and Latin American countries is well established and comparatively stable. Miami as a hub continues to grow, as more Latins are looking for cutting operations here to support sewing rooms offshore. Manufacturing here has become too costly, so we are seeing Miami evolve into a service arm, with order entry, distribution, pattern-making, design and cutting capabilities."
Roberto Bequillard, president, Argus International, a Miami-based apparel contractor using offshore sewing in Central America: "We've had 50 percent growth each of the past three years since we started here, and expect increases of 25 percent each year to continue.
"Business here has become more complete in the past three years. Any service dealing with preparation and support for 807 operations is here--from accessories, trims, finishing operations and screen-printers to consolidators and freight forwarders. A year ago, there was some uncertainty surrounding the impact of NAFTA on business here. Now, it seems clear that parity will happen, which will open up huge growth opportunities.
"Our major concerns are political instability on a country-by-country basis and union movements in Central America. We feel that it is inevitable that these countries will organize, but to date, there has been a lack of direction. It is incumbent on manufacturers and contractors to provide the best working environment in these areas."
Sergio Cruz, vice president, regional service director for the Caribbean and Latin America, Kurt Salmon Associates: "Under its present format, 807 business is still going strong. If parity passes, it will accelerate tremendously. Miami has the capability to absorb growth and has advantages, such as industrial space, bilingual human resources and cost of living.
"Growth will come in cutting and distribution facilities and those companies that can provide offshore contract management. Mexico is an attractive alternative, especially with the devaluation of the peso, but the relative stability of the Caribbean countries make them a good offshore investment.
"While Mexican business is a real concern, one of the big question marks being talked about here is Cuba. If the Cuban market opens to U.S. business, it could have a huge impact on existing business elsewhere in the Caribbean."
Lou Melocchi, president, Rimoldi, a Pittsburgh, Pa.-based producer of chain-stitch sewing machines: "The best strategic move we ever made was opening a branch office in Miami five years ago. We've grown from scratch to $5 million in Caribbean and Latin American countries.
"The location is ideal to serve these countries, and Latin Americans love to shop in Miami for sewing-machine parts. Opportunity is great for companies in cutting, spreading and finishing here, and there is plenty more business to be had in other countries, including Cuba, which we're keeping an eye on. The biggest hurdle so far is parity, along with duties, regulations and bureaucratic complications. We're still planning growth and are counting on Miami to provide support."
Bob Lodge, president, Ivory International, a Miami-based manufacturer of women's private label apparel, with offshore sewing plants: "There is plenty of opportunity here, but it is available to those manufacturers that are capable of handling the demands of major players at retail. In addition to doing bulk production, we have to be able to fit in with retailers' quality systems and have the same technology and EDI capabilities as they do.
"Keeping up with retailers' demands and the soft U.S. economy has been much more of a challenge than competition from Mexico to date. Still, we're growing and doing well with 807. Parity will be a tremendous benefit to U.S. business. We're doing well at this level, but with parity, we can really rock 'n' roll."
Tom Travis, managing director, Sandler, Travis & Rosenberg, law firm specializing in international trade: "We're hopeful that passage of parity will occur by Jan. 1, 1996, but there's no consensus on this. CBI parity is the critical missing ingredient here, and when that happens, business will boom.
"Still, we're bullish on offshore production. Manufacturing under 807 will continue to grow regardless of parity. Growth opportunities are here for joint ventures and wholly owned plants. The challenge to companies lies in good management of twin-plant operations. Logistics, transportation and costs still plague companies in these businesses.

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