SOURCING MOVES WEST, THANKS TO NAFTA
Byline: Jim Ostroff
WASHINGTON — As textile and apparel imports rose 9.08 percent in 1994, the figures released by the Commerce Department Friday showed a dramatic shift in sourcing to the Western Hemisphere at the expense of Asia.
Mexico and Canada — the U.S.’s allies in the North American Free Trade Agreement — are stealing the show.
“For the longest time, the Asian suppliers dominated the U.S. import market, but it is clear that Mexico and Canada are taking share away from them, while the Caribbean Basin Initiative countries are holding their own,” said Donald Foote, director of the Commerce Department’s Office of Textiles and Apparel agreements division.
The yearend data put the year’s total textile-apparel imports at 17.29 billion square meters equivalent against 15.85 billion in 1993, when the gain against 1992 was virtually the same at 9.1 percent.
“Of the 1.4 billion SME of growth in 1994, the U.S.’s NAFTA partners accounted for 30 percent of this total, while the CBI countries contributed 16 percent and the South Asian nations 16.5 percent to the growth,” Foote said.
The South Asian nations include Bangladesh, Pakistan, India, Sri Lanka and Nepal.
For the year, textile and apparel imports from Mexico soared 30.9 percent versus 1993 to 977 million SME, and Canada’s were up 17.7 percent to 1.3 billion SME.
In comparison, Foote noted that imports from the U.S.’s top supplier, China, fell 3.3 percent to 2.04 billion SME in 1994, while those from Taiwan, the number three supplier, rose just 0.55 percent to 1.24 billion SME.
Imports from Hong Kong, number four, rose 9.3 percent to 1.02 billion SME and those from South Korea fell nearly 1 percent to 864 million SME.
The import statistics also show the year ended with a December surge, especially in apparel. December’s textile-apparel imports reached 1.35 billion SME, up 11.5 percent from December 1993; apparel accounted for 637.8 million SME, up 17.2 percent, and textiles, 715.7 million SME, up 6.8 percent.
For all of 1994, apparel imports came to 8.4 billion SME, up 11.6 percent, and textiles 8.86 billion SME, a 6.8 percent hike.
Analyzing the shifts in textile-apparel sourcing, Foote noted that China’s 3.3 percent reduction in shipments was due to numerous embargoes as categories reached their limits. Eventually, about half of all of China’s textile and apparel trade under limits were embargoed by the end of 1994. This was due partly to 1993 overshipments, which were deducted from 1994 quotas and partly to a new bilateral agreement concluded in January 1994 that froze China’s overall quotas in 1994 to 1993 limits.
The growth rate this year will average 1 percent.
Consequently, China’s textile and apparel shipments to the U.S., which through the first three-quarters of 1994 had been running 80 million SME ahead of the year-earlier period, declined by about 150 million SME in the fourth quarter versus 1993’s fourth quarter, producing the nearly 70 million SME reduction for the whole of 1994.
On a global basis, Foote noted that of several hundred categories tracked by the U.S. Customs Service, imports in just nine categories accounted for 70 percent of the total import growth from all nations. Six of these were in apparel, and together they accounted for a 45.3 percent share of the import growth. They include: category 338/339, cotton knit shirts and blouses; 638/639, man-made fiber knit shirts and blouses; 347/348, cotton trousers; 352/652, cotton and man-made fiber underwear; 336/636, cotton and man-made fiber dresses, and 359/659, miscellaneous apparel.
The other three key growth categories are 229, tire cord, coated fabric and noncellulosic fabric, accounting for 8.5 percent of the gain; 670/870, luggage and handbags, and 369/669, miscellaneous other textiles, together accounting for 15.8 percent.
Foote pointed out it was no coincidence that the U.S.’s NAFTA partners contributed disproportionately to the increases in these nine categories. For example, of the 119 million SME increase in U.S. imports in category 229, Canada accounted for 67 million SME of this total, or 56 percent.
“Within the six big-growth apparel categories, Mexico is well represented in each one,” he said. For example, U.S. imports from Mexico of man-made fiber knit shirts and blouses, soared by 287 percent to almost 64.9 million SME in 1994.
Imports from Mexico of cotton and man-made fiber underwear jumped 60 percent to nearly 92 million SME.
Foote also said it is significant that about 90 percent of all U.S. textile and apparel shipments from Mexico and Canada were imported under NAFTA. A special computer analysis of the 1994 trade done by OTEXA shows that of the 1.32 billion SME of textiles and apparel imported from Canada, 92.3 percent, or 1.21 billion SME, qualified for NAFTA benefits.
Of the 976.9 million SME of textiles and apparel imported from Mexico in 1994, 91.1 percent, or 890.2 million SME, qualified for NAFTA treatment.
The trade pact, which took effect Jan. 1, 1994, requires that for textiles and apparel to be imported without quotas or duties, they must, for the most part, be made of yarn and fabric made in North America and be assembled there as well.
A further analysis of these imports shows that 91.7 percent of the apparel shipped from Mexico and 69.5 percent of the apparel shipped by Canada qualified for NAFTA benefits. Among textiles, 94.1 percent of Canada’s shipments and 90.6 percent of those from Mexico were NAFTA-qualified.
In addition, the OTEXA analysis seemingly indicates that of the 442 million SME in apparel shipped from Mexico to the U.S. under NAFTA, 90.4 percent, or 399.6 million SME, would have qualified for the old 807(A) program — which required that the apparel be made of fabrics cut and made in the U.S. This implies that relatively little apparel made in Mexico using Mexican fabrics, or fabric imported from outside the NAFTA nations, was shipped into the U.S. in 1994.
Canada, with special U.S. trade benefits going back decades, never participated in the 807(A) program, and so similar comparisons are not valid.
The OTEXA analysis also shows that for 1994 at least, there was little utilization of a special NAFTA provision that established special quotas for goods that did not meet all of the pact’s origin rules, but still are eligible to receive free trade benefits.
Only about 733,000 SME of apparel were shipped from Mexico to the U.S. under these Tariff Preference Levels. U.S. importers have said that while several million SMEs are available for these goods — typically those in short supply in the U.S. and made from foreign fabric — the cost of the paperwork needed to certify them for NAFTA benefits makes it unlikely these special quotas will be used.
Meanwhile, the shift in sourcing seemed to sit well with the American Textile Manufacturers Institute. ATMI vice president J. Henry Walker 3rd, pointed out: “U.S. textile manufacturers have certainly benefited from this production shift since the Jan. 1, 1994 implementation of NAFTA.”
Pointing to the flip side of the picture, Walker, who is president and ceo of Dundee Mills, Griffen, Ga., added: “In 1994, U.S. exports of textiles and apparel to Mexico increased 28 percent over 1993 to reach $2.1 billion, while U.S. exports of textiles and apparel to Canada increased 11 percent to $2.2 billion.”
U.S. firms also posted significant increases in textile and apparel exports to CBI nations, such as to Honduras, up 35 percent versus 1993 levels, and to El Salvador, up 48 percent.
Textiles comprised the lion’s share of these increased exports to the CBI, where the U.S.-made fabrics are used primarily to make apparel for shipment to the U.S. under the 807(A) program, where apparel using fabric made and cut in the U.S. receives duty breaks and virtually unlimited quota. — Fairchild News Service