CANADIAN APPAREL EXPORTERS STILL DEPEND ON U.S. MARKET

Byline: Brian Dunn

MONTREAL — Canadian apparel exporters haven’t weaned themselves off the U.S. market and don’t have a follow-up strategy if things suddenly go sour for them south of the border, according to a leading industry expert.
“The Nineties was a transition decade when Canadian apparel manufacturers became true exporters. In fact, the industry was saved by strong demand for Canadian products in the U.S.,” said Randy Harris, president of Trendex North America, based in Toledo, Ohio. “But the industry doesn’t have a second act if there’s a recession or other exporters take market share away. The final act is a major consolidation in the apparel supplier base.”
Harris, speaking at the Canadian Apparel Federation annual conference here late last month, told WWD afterward that because most of the business is still family owned in Canada, there is no long-term planning, and that long-term trends are working against them.
The U.S. still accounts for 96 percent of Canada’s $1.83 billion (converted from Canadian dollars at current exchange rates) in apparel exports last year, although they have slowed on a percentage basis in the past three years. And while apparel imports from the U.S. were off 11 percent last year, imports from Mexico were up 26 percent.
“Mexico is still a minor player in the Canadian market compared to its position in the U.S., but its influence is growing,” Harris remarked.
One jeans and outerwear manufacturer was concerned that with trade liberalization, including China’s pending membership in the World Trade Organization, there will be significant job losses among domestic apparel manufacturers.
“I question whether we should continue to invest in Canada, and I know several apparel producers who are exploring more offshore options,” said Jack Kivenko, president of Jack Spratt Manufacturing Inc. here. “I hope the government doesn’t have an open-door policy.”
Canada is considering introducing an Outward Processing Program similar to the 807 program in the U.S., said Frank Podruski of Industry Canada, a federal trade department.
Under the program, a garment that is partially or fully assembled outside the country would be subject only to partial duty when shipped back to Canada.
Several manufacturers at the conference felt they would be better served if import duties on fabrics not available in Canada were eliminated. One noted that since the free trade agreement was signed, about 60 percent of fabrics used in Canadian apparel manufacturing comes from the U.S., and virtually none of the fabric is made in Canada.
The manufacturers also wanted to know if the OPP would apply to garments only made from Canadian fabrics, pointing out that under the FTA, most dress shirt production in Canada has moved to the U.S.
“Everything is on the table, including some reciprocity agreements with the U.S.,” said Podruski.
Bob Kirk, director of marketing at the Canadian Apparel Federation in Ottawa, would like to see some manufacturers allowed to import duty-free fabrics since many retailers are going offshore for their private label programs.
“The supply base here is shrinking,” he said. “We’ve got to give them some cost advantages to survive.”