NEW YORK — The countries of the Central American Free Trade Agreement are benefiting from a movement away from China and its escalating costs and toward the sourcing community’s desire for more speed-to-market production and better inventory and quality control.
The Western Hemisphere’s advantage in those realms for U.S. manufacturers was the topic for a gathering of executives dubbed “How CAFTA-DR Duty-Free Opportunities Support Apparel Sourcing Strategies” that also promoted the Apparel Sourcing Show in Guatemala on May 22 to 24.
“We don’t want to be China, we understand that is not our value,” said Carlos Arias, president of the Guatemala Apparel & Textile Association, also known as Vestex. “Our value comes from how we address service, how we address speed to market, how we address innovation, how we address those things that make the proximity to market mean something. Proximity is our natural window of opportunity, but proximity doesn’t just mean fast, which isn’t enough if it’s not well-integrated, not well-coordinated with our customers.”
Arias said the industry in Guatemala, and in the other CAFTA countries of Honduras, Costa Rica, Nicaragua, El Salvador and the Dominican Republic, has taken stock in the five years since the pact went into effect and since the 2008 recession “about where do we need to be as an industry in 2015.”
“It’s really about being competitive, about being responsible, being versatile and flexible, making sure we respond quickly, that our products are of great quality and our service is, as well,” Arias said. “We are one sector, one region, we are too small to be apart. In the sourcing world there is a country called CAFTA…we’re happy to be bunched together. It’s really about quality and corporate social responsibility, and providing industry leadership. Guatemala has the most diversified products in the region, with more value-added products and more sophisticated production processes.”
The country has 142 apparel companies employing 55,000 people. Its 41 textile mills make it the largest in the region, he noted, with 80 percent of the production going to other countries in the region, as well as Mexico and the U.S.
“We grew last year and seem to be getting back the momentum we lost in the recession,” Arias added. “If you have an inclination to look at the Western Hemisphere as a balanced strategy for your sourcing, come to see us, you’ll be very surprised at what you will find.”
Antonio Malouf, president of the organizing committee of the Guatemala trade show, said, “If you come to the Apparel Sourcing Show, you can do it all in three days. If you go to the Orient, you need those three days just to fly.”
The show will feature 200 booths, with exhibitors including textile mills, full-package manufacturers, technology, trimmings, shoes, accessories and services over 32,000 square feet at the Grand Tikal Futura Hotel & Convention Center in Guatemala City.
Julia Hughes, president of the U.S. Association of Importers of Textiles & Apparel, said, “Sourcing is not a static business and the industry is always looking for opportunities and there are opportunities with CAFTA.”
Hughes said while China still represented 40 percent of U.S. imports of apparel in 2011, followed by Vietnam, Bangladesh and Indonesia, Honduras was fifth, El Salvador was ninth and Guatemala was 15th, “so we have an opportunity to look at CAFTA as another sourcing destination.” Hughes said the CAFTA countries combined for 13 percent of all U.S. apparel imports last year. Apparel and textile shipments from China fell 12.7 percent in February to 1.6 billion square meter equivalents compared with a year earlier.
While imports from CAFTA went down over the last few years during the economic crisis, there is now a strong upward trend, she said, noting that 85 percent of products from CAFTA are duty free.
“The Obama administration has been working diligently on efforts to promote sourcing opportunities in Central America, in Mexico, and with our free trade partners and trade preference partners in the hemisphere,” said Kim Glas, deputy assistant secretary for textiles and apparel at the U.S. Commerce Department. “Two years ago in the State of the Union address, President Obama laid out a vision of doubling our exports in the next five years. The supply chain for U.S. textiles is Central America and NAFTA [North American Free Trade Agreement] and our free trade agreement partners in the Western Hemisphere, as well as some of our trade preference partners.”
Glas said 66 percent of U.S. exports of yarns and fabrics go to Central America, NAFTA and other countries in the hemisphere.
“What’s good for the region is good for U.S. textile mills,” she said. “We can’t work without them and they can’t work without us. To really push the envelope, we’ve been trying to promote each other through events like the Guatemala Apparel Sourcing show and the MAGIC show.”
In addition, Commerce and other agencies have created a data base at drcaftasourcing.com to help facilitate business in the region.
U.S. exports of yarns and fabrics to CAFTA totaled $3.3 billion in 2011, up 33 percent.
“So, we are on track for just this industry of reaching that goal of doubling our exports in the next five years,” said Glas, adding that the U.S.-Colombia and U.S.-Panama FTAs about to go into effect will help to further integrate the region.
Sergio De la Torre, economic minister of Guatemala, said the textile industry is one of the eight priority sectors identified by the government as important to Guatemala’s economy. He said the government is working closely with the private sector to expand the industry’s export capabilities.
“It’s important for the region to invest in new technologies to stay competitive,” De la Torre said. “We also realize the importance of labor, the environment and corporate social responsibility. CAFTA has also served in solidifying the relationship between Guatemala, the U.S. and other countries in the region.”