North American Free Trade Agreement

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North American Free Trade Agreement

• NAFTA
• e-mail sheltork_at_jmu.edu

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Multi-Fiber Arrangement (MFA)

• MFA was instituted in 1974 as trade laws for the
  textile and apparel industry, it is in the
  process of being phased-out.
• Multi-Fiber Arrangement served to protect the
  textile and apparel industries of developed
  countries from the low-cost competition of
  textile and apparel from developing countries.
• The most important structural change is the
  gradual phase-out of Multi Fiber Arrangement
  between now and the year 2005.

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Uruguay Round Agreement

• The Uruguay Round Agreement replaces the
  Multi-Fiber Arrangement.
• Uruguay Round Agreement has been designed to
  liberalize the trade in textiles and clothing by
  allowing market forces to guide the consumption
  and production decisions.
• Uncontrolled products could grow at an an
  accelerated rate during the transition period.
• Many of these imports will come from countries
  that have low-cost production and can easily
  penetrate and over whelm the United States
  market.

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North American Free Trade Agreement

• In addition to changes in the MFA Agreement under
  the North American Free Trade Agreement, by
  January 1, 2004 all tariffs will be eliminated on
  textiles and apparel products traded among
• Canada, Mexico and the United States.
• Initial tariff phase-out, effective January 1,
  1994, Mexico removed tariffs on nearly 50 of all
  industrial goods.
• By 1999, sixty-five per cent of all U. S.
  Industrial products exported to Mexico will enter
  that country tariff free.
• NAFTA strengths Mexicos position as a main
  supplier of imported textiles and clothing
  product6s to the United States.

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North American Free Trade Agreement Countries
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1992-1996 Imports in Million of Dollars

• The direction of imports of textiles and apparel
  to the United States is changing, the big four
  suppliers of textiles and apparel to the United
  States in the past has been China, Hong Kong,
  Twain and South Korea.
• Over half of the textiles and apparel sold in the
  United States has been imported from outside the
  country.
• In the 1980, eight three percent of these
  importers came from Asia - today with NAFTA in
  place. Asia accounts for forty one percent of
  textiles and apparel imports.
• China has been the main supplier of textiles and
  apparel to the United States prior to 1996.

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Imports to the United States - 1996

• The countries that have been most successful in
  importing textiles and apparel goods to the
  United States are
• Millions Sq. Meters Millions
  
• China 1644,000,000 4892,000,000
• Hong Kong 1796,000,000 4031,000,000
• South Korea 2207,000,000 2049,000,000
• Taiwan 1203,000,000 2733,000,000
• Mexico 891,000,000 4231,000,000
• Canada 729,000,000 1995,000,000

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Manufacturing Companies and Factories

• Companies are closing down Far Eastern
  manufacturing companies and factories and moving
  them to Mexico, a direct consequence of NAFTA.
• Though workers in Mexico make higher wages,
  savings in transportation time and cost means
  savings for United States companies and
  consumers.
• Although wages in Mexico are three times the 60
  per month textiles and apparel workers make in
  some Asian countries, it is cheaper and faster to
  move goods from Mexico to the United States than
  from China.

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U.S. Textile /Apparel Imports - MFA
Million Equivalent
Square Meters
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Leading Suppliers

• At present Mexicos swift accent to become, if
  only by a small margin, is the United States
  leading suppliers of imported apparel and
  textiles. (square meter equivalent.)
• Mexicos ( in 1966) combined shipments out passed
  China, which has held the top spot most of the
  last decade.
• A new scene may emerge, and countries will want
  low cost labor supply - lower than Mexico - labor
  cost may be more competitive in a quota less
  world.

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Countries involved in NAFTA
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• North American Free Trade Agreement which already
  has resulted in significantly increased trade
  among the United States, Canada and Mexico, it is
  likely that NAFTA will negotiate free trade
  agreements with other countries in the future.
• Honduras 32.73 increase in 1996
• El Salvador 23.26 increase in 1996
• Brazil -22.04 decrease in 1996
• Colombia -14.29 decrease in 1996

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1992-1996 Mexicos Imports in Dollars

• Since the North American Free Trade Agreements
  enactment three years ago, Mexicos exports to
  the United States have trebled, to over four
  billion dollars.
• In years past, the United States has supplied
  only minuscule amounts of fabric to the Asian
  market, but in 1996, they supplied seventy
  percent of the raw materials going to the Mexican
  sewing shops.

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U.S. Textile/Apparel Imports - MFA
Data In Million
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International Trade Patterns

• International trade patterns for three of the
  four major Asian importers of textile and apparel
  during the years 1995-1996 decreased in market
  share measured in million square meters.
• Market share of imports to the U.S. from Mexico
  during the years 1995-1996 increased 42.39
  (meters) and 39.33 ().
• Canadian market share of imported goods during
  the years 1995-1996 was increased 15.25 and
  20.81 ()

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• Freer trade in the apparel and textile sector
  will pose important challenges for manufacturers
  and retailers in defining and adapting their
  competitive positions and marketing strategies in
  a quota less world.