MEXICO CITY — The new bilateral trade deal between the U.S. and Mexico is a positive development for Mexico’s struggling textiles and apparel industry, the industry’s lead negotiator told WWD.

“The negotiations in balance were good for the industry,” said José Cohen, who is also president of textiles lobby Canaintex. Since talks began last year, “the American posture has always been to eliminate the tariff preference level 100 percent, which would have removed [sourcing] flexibilities we had for 25 years. They have agreed to maintain them except for a 20 percent reduction in some fabrics.”

Mexico has used the North American Free Trade Agreement’s Tariff Preference Levels to boost its competitiveness against Asian rivals taking U.S. market share. The TPL allows the country to import key raw materials to assemble for-export garments outside of the NAFTA block made up of Mexico, the U.S. and Canada.

But the TPL was not the only win for Mexicans.

Cohen said Washington also removed a NAFTA sourcing restriction on visible lining feedstocks, which are scarce in the region, so that Mexico can import them from Asia or other global suppliers, further cementing its competitiveness. Three categories including sewing thread, pocketing fabric and elastic bands were excluded, however.

Perhaps the biggest triumph of the bilateral agreement is a separate enforcement chapter to tame a ballooning contraband and subvaluation trade that has impacted Mexican suppliers, according to Cohen.

“We now have a specific chapter on enforcement and that is the most valuable part of the agreement,” he said. “Now we have clear rules to chase and verify rule of origin, stop triangulation and improve customs so we no longer get hurt.”

Added Cohen: “The U.S also suffers from triangulation and subvaluation, so this was very important for both countries. We joined forces to make this happen and I think everyone on the textiles side is very satisfied.”

Contraband accounts for six out of 10 garments sold in Mexico, with much of the illegal merchandise coming from Asia, but funneling in through the U.S. border.

Cohen said President Trump’s so-called “sunset clause,” or demand that NAFTA be renegotiated every five years, was also altered in exchange for a clause that will see the accord reviewed every six years and terminated after 16 if it is not renewed in that time frame.

Still, he conceded that Canada must quickly join the revised pact to ensure the next NAFTA is trilateral, something the U.S. industry has also said is crucial to create a successful trade corridor between the three nations.

Trump has set an Oct. 1 deadline for Canada to back the deal, which he said the U.S. and Mexico could pursue without it. Canadian officials, however, have said it won’t be rushed into an agreement by that deadline.

Some observers said the Aug. 27 draft’s call to lift the “de minimis” duty-free shipment threshold for e-commerce merchandise to $100 from $50 will help boost Mexico’s online retail sector, set to hit $7 billion this year.

Valentin Mendoza, a retail analyst with brokerage Banorte-Ixe, agreed the move could help spur the industry. However, he noted retailers south of the border were more concerned with Trump’s demands that $800 become the new threshold.

“We were worried about the $800 they originally proposed because that would have made it unattractive to import merchandise from the U.S. and allow more [cheap] merchandise from Asia and other countries to come in and hurt Walmart or Liverpool,” Mendoza explained.

He said the $50 de minimis increase could help foreign retailers such as Amazon bring more merchandise to ship locally in Mexico, diversifying their product catalogue to curb their reliance on imports.

The e-tail market, however, while growing at double-digit rates, still has a lot of maturing to do before it can reach the growth pace of the U.S. or Europe, he noted.

Liverpool controls the online market with a 3.5 percent market share, Mendoza said, adding that its efficient “click and collect” service allows customers to order online and try garments in-store before finalizing their purchase.

load comments
blog comments powered by Disqus