U.S. ANALYSTS NOT CHEERFUL ABOUT MEXICO’S DUTY HIKES

Byline: Jim Ostroff

WASHINGTON — Although Mexico’s government on Thursday still had not officially put through its threatened increases in import duties on apparel and footwear — as it was expected to do by U.S. trade officials — American trade analysts say they see only gray linings in the storm clouds that have overtaken Mexico’s economy.
Officials with the U.S. Trade Representative confirmed that Mexico’s commerce department, known by its acronym, SECOFI, was preparing regulations to implement the duty decree, issued earlier this week by Mexican President Ernesto Zedillo, on apparel, footwear and leather accessories sourced beyond Mexico’s free-trade partners. These include the U.S., Canada and five Latin American countries.
The prevailing duty rates on these products, currently averaging 20 percent, would rise to the maximum percentages allowed under the World Trade Organization, the new body governing international commerce under the GATT Uruguay Round. These “bound rates” are 50 percent for most apparel, footwear and leather accessories, although some could be 35 percent. USTR officials, who are monitoring the Mexican development, were not certain of the specifics, awaiting SECOFI action, which they said they expected “soon – maybe this week, maybe next week.”
“For U.S. companies doing business in Mexico, December’s peso devaluation increased their costs by 40 percent,” said Clinton Stack, president, International Development Systems. “If that was the straw that broke the camel’s back, the increased duties will bury it.
“In football, this is called ‘piling on,”‘ added Stack, a one-time industry and government textile official who now runs a textile-apparel trade consulting firm.
In addition to the economic situation, U.S. retailers have been reeling from a Mexican regulation issued last fall calling for original country of origin documents to accompany imports and making it virtually impossible for the retailers to ship imported goods stored in central U.S. warehouses into Mexico.
“You need not be a brain surgeon to recognize that retailing in Mexico is not as attractive as it was a year or two ago,” said Robin Lanier, trade vice president at the International Mass Retail Association.
“The apparel import situation in Mexico already was a disaster, but now some companies feel [the Zedillo decree] is the final straw,” Lanier said, declining to identify merchants by name.
However, she did note that she is not aware of any U.S.-owned stores that will be closed in Mexico as a result of its economic and duty-hike situation.
Meanwhile, an official with a large U.S. apparel firm, which sells Far East-sourced clothing worldwide, including in Mexico, said that market essentially is closed now.
“You have to think twice about selling apparel in Mexico,” said the official, who requested anonymity. “If you did, it’s questionable whether anyone could afford to buy your apparel at all.” — Fairchild News Service