CTD 447 Lecture 10: CTD 447 Chapter 10 Notes

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Clothing, Textiles and Interior Design
Course Code
CTD 447

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CTD 447 Chapter 10 Notes Americas • The terms America and the Americas, as used in this text, refer to the combination of North, Middle, and South America Cultural Diversity in the Americas • Four official languages: English, Spanish, Portuguese, and French • North America is often described as progressive while Latin America is seen as traditional Economic and Industrial Standing of Selected American Countries • Canada has the largest geographic size; the US has the largest population • Only the U.S. and Canada are considered developed countries; most countries in region are considered developing countries Textiles and Apparel 1. The United States, Canada, and Mexico dominate in the textile and apparel trade in the Americas 2. Canada and the United States have negative trade balances in both textiles and apparel 3. Imports of less expensive Asian textiles and apparel have made serious inroads into apparel production in the Americas 4. North American Free Trade Agreement (NAFTA) initially increased textile and apparel production in Mexico, but that growth has almost evaporated 5. Apparel production in Central America and the Caribbean was developed and is supported by U.S.-initiated trade programs – Central America Free Trade Agreement (CAFTA) Free Trade Agreement of the Americas • Free Trade Area of the Americas (FTAA) ➢ 34 countries started negotiation in early 2000s ➢ Includes North, Central, and South America • Focus on industrial development through reduced trade barriers NAFTA • North America Free Trade Agreement (NAFTA) ➢ Signed in 1992 and became effective in 1994 ➢ Focuses primarily on trade and investment matters related to goods and services ➢ Immediately eliminated quotas ➢ Gradually reduced tariffs ➢ Eliminated restrictions on direct foreign investment Disadvantages of NAFTA – U.S. & Canada Textile Industry 1. Textiles and apparel manufacturing jobs lost to Mexico • USA: Post-NAFTA job loss in textiles and apparel exceeds 1mn (1994 to 2007) ➢ Alabama – 60,800 losses ➢ California – 38,900 losses ➢ Georgia – 77,355 losses ➢ New York – 80,550 losses ➢ North Carolina – 193,000 losses ➢ South Carolina – 90,211 losses ➢ Virginia – 43,685 losses 2. Creates opportunities for transshipment and counterfeiting • Duty/quota-free access to the U.S. and Canadian market Benefits of NAFTA – U.S. & Canada Textile Industry 1. Increase yarn and fabrics exports to Mexico 2. Make U.S. and Canada clothing goods easier access to Mexican retail market 3. Make it easier for U.S. and Canada based firms to build plants in Mexico NAFTA – Yarn Forward Rule of Origin • Yarn Forward Rule of Origin ➢ In order to qualify for duty and quota free access to the U.S. market, Mexico, and Canada produced garments have to use yarn and fabric from the United States • What does U.S. have to gain for verifying country of origin of textiles and apparel? Challenges to US Textile and Apparel Industry • Between 1980 and 2002, the apparel workforce was cut to 56.6% • Industry adjustments: 1. Increase business efficiency through consolidation 2. Focus on high-tech and high-value added products 3. Choose the right market niche The Impact of NAFTA 1. How did NAFTA affect the U.S. textile and apparel industry? 2. How did NAFTA affect the Mexican textile and apparel industry? Changes in the US Textile and Apparel Industry 1. Closing outmoded and inefficient plants 2. Restructuring through acquisitions, consolidations, and mergers 3. Investments in technology 4. Efforts to improve productivity levels 5. Total quality management 6. Developing a greater sensitivity to market needs 7. Closer working relationships within soft goods chain 8. Concentrating on market segments in which U.S. has greatest advantages 9. Shortening response time 10.Promoting domestic products 11.Influencing public policy (Protectionist Trade Policies) California Apparel Centers • Since the mid-1980s, Los Angeles County has become the largest apparel production center in the U.S. • Major center for immigration, especially from Asia, Central America, and Mexico; ready supply of expertise and low-cost labor Canada • US’s largest trading partner ➢ 85% of products are exported to the US ➢ 70% of imports are from the US • Similar to the US ➢ Economic system, patterns of production and living standards • Textile and apparel industry face the same pressures as U.S. • Majority of apparel exports from Canada are destined for the U.S. • Strong clothing retail market, but only has 10% of the U.S. population Mexico • Has the most free trade agreements with other countries in the world ➢ NAFTA, Central America, and Europe • NAFTA has spurred its growth, but NAFTA’s benefits across the country were unequal • Free trade created demand for a more skilled Mexican workforce but underinvestment in education has created a roadblock Mexico – Disadvantages of Textile & Apparel Manufacturing 1. Has relatively high labor costs 2. Product quality and production reliability problematic 3. Weak middle management skills 4. Concentrates on mass-producing basic garments 5. Limited ability to offer full-package services and product fashion apparel 6. Security for shipments Mexico • After 2005: ➢ Share of U.S. apparel imports has declined ➢ May continue to be strong supplier for some basic apparel o Particularly those needed on short-turnaround basis ➢ Has potential to expand yarn and fabric exports Latin America • Those countries in the Americas and the Caribbean that speak Latin-derived languages, mostly Spanish and Portuguese • It includes Mexico, Central America, South America, and the Caribbean Caribbean Basin • Includes Central America and the West Indies ➢ West Indies consists of the Bahamas, the Greater Antilles, and the Lesser Antilles • Growth of the textile and apparel industry is largely the result of U.S. economic development legislation and trade preference programs Caribbean Basin Countries • Antigua and Barbados, Aruba, Bahamas,
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