NAFTA & U.

S TEXTILE
INDUSTRY
Group 14 Marri Vivekananda Yadav 26nmp32
Piyush Monga- 26nmp33
NAFTA An overview
The North American Free Trade Agreement (Jan 1, 1994) is an agreement
between Canada, the U.S. and Mexico stipulating that no tariffs, import
duties, quotas or other protectionist trade tactics will be employed .
Agreement was agreed to make North America be more competitive in the
global marketplace.

As of January 1, 2008, all tariffs between the three countries were fully
eliminated and NAFTAs 14-year implementation was completed.

NAFTA created the world's largest free trade area, which now links 450
million people producing $17 trillion worth of goods and services
Case Facts Against NAFTA

10 years after the passage of NAFTA (i.e1994- 2004)
Production of apparel fell by 40%
Production of textiles by 20%
Employment in textile mills dropped from 478000 to 239000
Employment in apparel plummeted from 858000 to 296000
Exports of apparel from Mexico to U.S surged $1.88bn to $6.94bn

All the above data seem to indicate that job losses have been
due to apparel production migrating from U.S to Mexico

Job losses
Job losses
Apparel Exports
Anecdotal examples (case)
In 1995 , Fruit of the Loom Inc., the largest manufacturer of
underwear in the U.S said it would
close 6 of its domestic plants and cut back operations at 2 others,
laying off 3200 workers, or 12% of its U.S workforce
Move its operations (sewing) to Mexico
Cone Mills of South Carolina, one of largest producers of
denim fabric
reduced its U.S employment by one-third
Invested $200mn in 2 new factories in Mexico
Burlington Industries in North Carolina
Eliminated 2900 jobs (17% of workforce)
Invested heavily in Mexican manufacturing capability.

Advantages of Mexico (case)
Cheap Labor:
Labor rates in Mexico were normally $10 -$ 20/day
(in U.S its $10-$12 /hour)

Cheap water:
30 cents per cubic meter (in U.S its 5 times)

Reduced Transportation costs:
Fabric makers are shifting here because their
customers i.e. garment makers have already
shifted here
: Average factory wages
United States Canada Mexico

$16/hr


$17/hr

$ 3/ hr
Source: Univ. of Wisconsin,
http://www.uwec.edu/geography/Ivogeler/w188/border/maquil.htm

Average factory wages
Facts in Support for NAFTA
Clothing prices have dropped (from 1994 to 2004)
Denim fabric : From $3.2 /yard to $2.4 /yard
Jeans : From $55 to $48
Blank T-shirts : From $24/dozen to $14/dozen
Customers can spend more money on other items
Exports have surged for U.S. fabric and yarn markets
U.S producers supply 70% of the raw material going to Mexican
sewing shops
U.S textile and yarn exports to Mexico grew from $794mn to 3.42bn
Exports have surged for U.S textile equipment exports
U.S textile equipment exports to Mexico grew from $153mn to
$320mn

Yarn and Fabric Exports
The Yarn Forward rule Tool to
protect Yarn and fabric exports

NAFTAs effect after MFA

Conclusion
Although U.S textile industry has lost jobs, U.S
economy has benefited in the form of lower
clothing prices, Increase in exports of fabric &
yarn and Textile Machinery and increase in
productivity


NAFTA created winners (Economy) and losers(Textile
employees)