MEXICO CITY — Mexico’s textiles industry is fearing Vietnam will steal key exports to the U.S. under the proposed Trans-Pacific Partnership at a time when its market share continues to decline.
“We are very worried, this country [Vietnam] is an evident risk to our country and enjoys big government subsidies,” contended Juan Alfonso Ayub, president of main textiles trade lobby Canaintex. “Fifteen years ago, we were the number one or two supplier to the U.S. Now we are the fifth or sixth.”
Mexico is one of the 11 Pacific Rim countries making up the game-changing TPP that could connect the U.S. to Singapore under a free-trade corridor accounting for 40 percent of the world’s goods.
As part of TPP, Latin America’s second-largest economy negotiated a 16-year, 25-percent average duty phase out for 80 key apparel and textile products. Ayub said that’s insufficient to protect textiles suppliers from Vietnamese competition and the lingering risk that China will triangulate sales through Vietnam.
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“Eighty products is nothing,” he said. “There are 1,300 textile categories that could be affected.”
Ayub alleged U.S. concessions to Vietnam gives it an unfair sourcing advantage, notably the so-called Import Allowance Program and short-supply rules enabling it to import fabric from China relative to how much cotton it buys from the U.S.
“This is a one-to-one advantage,” Ayub added. “For every square meter of fabric it buys from the U.S., Vietnam can buy a square meter of fabric outside the region [TPP] and take it back to the U.S without paying duties.”
Added Ayub: “Why is the U.S., favoring a treaty where a third-party benefits more than your main trading partner [Mexico]? We understand there are certain products we can’t make in the region but that doesn’t mean you give it to a third party. The chance for us to become competitive in those products is gone.”
Canaintex will lobby Mexican legislators to keep the textiles sector’s concerns in mind when debating the TPP, in which the timeline will be synced to the U.S. Congress’ discussions. TPP faces a tough road in the U.S., with both Democrats and Republicans opposed to the trade pact.
“The U.S. is unlikely to debate TPP until after the [presidential] elections so probably next year,” said Héctor de la Cueva, director of labor rights movement Centro de Investigación Laboral y Asesoría Sindical, or CILAS, in Mexico City, which has joined consumer and civil bodies to demand Mexico put the TPP under public consultation. “Mexico is afraid of discussing something before the U.S. does.”
De la Cueva said the TPP could have an adverse impact on Mexico’s maquila industry including textiles and apparel. He said Cilas and others have asked the Senate to reveal the TPP’s full text in Spanish so that society can analyze it.
Miguel Angel Andreu, a textiles industry consultant, said the TPP will affect domestic apparel manufacturers more than those focused on full-package production for U.S. brands.
“If you look at global brands’ sourcing strategies, they have about 40 countries they use. It’s not like work is going to move out or into Mexico only, the whole global sourcing pie is very divided now. Industry executives need to understand that.”
Ayub said the textiles segment, which mainly sends cotton and polyester fabrics to the U.S., is moving to develop more value-added products to supply full-package firms looking to thwart Asian rivals.
“We are making more intelligent fashion and printed fabrics like denim with Tencel, modal or bamboo as well as polyester yarn,” Ayub said, adding that Mexico is also boosting synthetic, microfiber, thermal knit and thermo-cool fabrics output. There are also plans to develop agave-based fabrics.
Ayub claimed Mexico is making 30 to 35 percent more value-added, niche products than five years ago. In jeans, for example, price points have risen to as much as $120 compared to $30.
The stronger dollar should boost value exports 6 percent to 7 percent this year compared to a 10 percent hike in 2015, as falling textile prices offset volume gains, according to Ayub.
He would not provide precise figures. The industry exports roughly $1 billion of textiles annually, with roughly two-thirds going to the U.S., 32 percent to Latin America and 6 percent to Europe and the U.S, according to a Canaintex spokeswoman, who declined to provide current data.
Overall, the sector should grow 4 percent this year amid higher U.S. demand and domestic production increases set to benefit from import substitution. That’s better than the 2 percent increase in 2015, said Ayub, who owns yarn thread supplier Turbo Yarn.