STEVE WOLOZ

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STEVE WOLOZ ASSOCIATES INC.MANAGEMENT
CONSULTANTS
www.swaassoc.com
Know Your Competitors For AECQ ( Quebec
Contractors Association) Novembre 1 , 2003
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STEVE WOLOZ ASSOCIATES INC.MANAGEMENT
CONSULTANTS
www.swaassoc.com
? Who Are Your Competitors
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STEVE WOLOZ ASSOCIATES INC.MANAGEMENT
CONSULTANTS
www.swaassoc.com

• SWA Experience
• Brasil Colombia
• Ecquador Guyana
• HondurasMexico
• Mongolia Salvador
• United States
• SWA Research

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STEVE WOLOZ ASSOCIATES INC.MANAGEMENT
CONSULTANTS
www.swaassoc.com

• Seminar Format
• Interactive Discussion
• ( English French)
• Video
• Lecture Notes Available on Request

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Overview

• INTRODUCTION
• MAJOR TRADE TREATIES AND THEIR IMPLICATIONS
• GLOBAL COMPETITION
• COMPETING REGIONS COUNTRIES STRENGTHS AND
  WEAKNESSES
• VIDEO PRESENTATIONS
• SUCCESS FACTORS AND PRESENT OPPORTUNITIES
• MARKET INTELLIGENCE
• BASIS OF PRESENTATION / ACTUAL EXPERIENCE /
  STATISTICAL RESEARCH

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Introduction
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Overview

• INTRODUCTION
• MAJOR TRADE TREATIES AND THEIR IMPLICATIONS
• GLOBAL COMPETITION
• COMPETING REGIONS COUNTRIES STRENGTHS AND
  WEAKNESSES
• VIDEO PRESENTATIONS
• SUCCESS FACTORS AND PRESENT OPPORTUNITIES
• MARKET INTELLIGENCE

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Trade Treaties

• What are Trade Treaties ?
• Exclusive Agreements Between
• Trading Partners To promote
• Trade

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Major Trade Treaties

• GATT 1947 1986-DEC 1990 1994
• WTO 1994 2005
• NAFTA 1994
• US Preference Programs for Apparel
• CBTPA Caribbean Basin Trade Partnership Act Oct
  2000 Sep 2008
• AGOA Africa Growth and Opportunity Act
• Oct 2000 Sep 2008
• ATPDEA Andean Trade Promotion and Drug
  Eradication Act Oct 2002 Dec 2006

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Major Trade Treaties

• 807 Outward Processing ?

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History of the CBI-NAFTA

• NAFTA 1994
• Progressive and Complete
• Elimination of
• Duty and Quota
• Between Trading Partners
• United States Mexico Canada
• Rules of Origin
• For Trading Partners

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History of the CBI-NAFTA

• Rules of Origin
• yarn forward
• Means
• Textile and Apparel goods must be produced from
  yarn made in a Nafta Country

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Chief Criterion of the CBI

• American Made Fabric
• Yarn Forward

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Main Difference CBI / NAFTA

• NAFTA
• FABRIC CAN BE MADE IN ANY MEMBER NATION
• CBI
• FABRIC THREAD MUST BE MADE IN UNITED STATES

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Chief Objectives of the CBI

• Repatriation of Apparel Production
• From Asia to Western Hemisphere
• Revitalisation of US Textile Industry
• Promotion of Trade with Neighbouring Nations

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Chief Advantages of the CBI

• Outward Processing
• Duty Free
• And
• Quota Free Access to US
• Providing
• Made With US Fabric

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CBTPA Trade Benefits
US Market
Office of Textiles and Apparel International
Trade Administration U.S. Department of Commerce
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Treaties Opportunity Challenge
Help finance full package expansion
Opportunity to accelerate trade

• Heated race for more investment and new
  strategic partnerships

Develop Manufacturing expertise in all areas
Existing trade treaties (e.g. NAFTA) New trade
treaties (e.g. FTAA and WTO 2005)
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CBTPA Summary
Section 211(b)(2)(A)
Eligible Countries

• (i) US Fabric Cut in US, Assembled in CBI
• (ii) US Fabric Cut and Assembled in CBI
• (iii)Knit Apparel Knit-to-Shape/Cut Sew
• (iv)Brassieres Cut Assembled in US or CBI
• (v) Short Supply Yarns and Fabrics
• (vi)Handloomed, Handmade Folklore Art.
• (vii)Special Rules (Exceptions to the Rules)
• (viii)Luggage Cut in US/CBI, Assembled in CBI

• Barbados
• Belize
• Costa Rica
• Dominican Republic
• El Salvador
• Guatemala
• Guyana
• Haiti
• Honduras
• Jamaica
• Nicaragua
• Panama
• Saint Lucia
• Trinidad and Tobago

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CBTPA Trade Treaty

• Total U.S. textile and apparel imports from CBI
  increased by 8
• CBPTA-qualifying trade accounts for 68 of total
  exports
• 88 of CBPTA Qualifying Apparel Use US Yarn and
  US Fabric
• 10 of CBPTA Qualifying Apparel Use Regionally
  Formed Fabric of US Yarn

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ATPDEA Trade Treaty

• Total U.S. textile and apparel imports from
  ATPDEA increased by 22
• Andean-qualifying trade accounts for 16 of total
  ATPDEA apparel exports
• 88 of ATPDEA Qualifying Apparel Use Regional
  Fabric of US or Regional Yarn
• 11 of ATPDEA Qualifying Apparel Use US Fabric

• Relating to the implementation of procedures and
  requirements similar to those in chapter 5 of the
  NAFTA
• Bolivia Colombia Ecuador Peru

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AGOA Trade Treaty

• US Apparel imports from Africa increased 28 in
  2003
• AGOA-qualifying trade accounts for 74 of total
  AGOA apparel exports
• 80 of AGOA Qualifying Apparel Uses Third Country
  Fabric
• 18 of AGOA Qualifying Apparel Uses Regional
  Fabric of US Regional Yarn

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Overview

• INTRODUCTION
• MAJOR TRADE TREATIES AND THEIR IMPLICATIONS
• GLOBAL COMPETITION
• COMPETING REGIONS COUNTRIES STRENGTHS AND
  WEAKNESSES
• VIDEO PRESENTATIONS
• SUCCESS FACTORS AND PRESENT OPPORTUNITIES
• MARKET INTELLIGENCE

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Global CompetitorsTop US SuppliersMarch 31, 2003

• Share Growth
• MEXICO 11.88 -2.44
• CHINA 10.00 78.68
• HONDURAS 6.31 14.67
• BANGLADESH 5.17 -0.97
• HONG KONG 4.51 -9.20
• EL SALVADOR 4.42 8.49
• DOMINICAN REPUBLIC 4.09 -0.50
• KOREA 3.53 0.80
• INDONESIA 3.48 7.82
• TAIWAN 3.21 -5.40

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Apparel ImportsPercent Share by Region
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The Apparel Commodity Supply Chain
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Apparel Imports From Asia Soar1995-2002
(Billion SME)
Trade-weighted Index of 21 Asian Currencies
vs. Textile Imports from the Same 21 Asian Nations
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US Apparel Imports Central America Dominican
Republic2000
(U.S. Millones)
Source OTEXA - 2001
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US Apparel Imports Shifts in Regional
Imports1986 - 1996
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Overview

• INTRODUCTION
• MAJOR TRADE TREATIES AND THEIR IMPLICATIONS
• GLOBAL COMPETITION
• COMPETING REGIONS COUNTRIES STRENGTHS AND
  WEAKNESSES
• VIDEO PRESENTATIONS
• SUCCESS FACTORS AND PRESENT OPPORTUNITIES
• MARKET INTELLIGENCE

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MexicoHistory

• Until the early 90s almost exclusively an
  assembler, operating primarily as an 807 supplier
  to the US.

• In 1996, Mexico surpassed China to become the 1
  apparel exporter to the U.S.A.
• In 1997, it made the top 10 list of apparel
  exporters to Canada for the 1st time
• Since NAFTA, Mexico's U.S. exports of apparel
  increased nearly eight-fold

Qualitative leap to more value added production
through cutting primarily NAFTA sourced fabrics.
By the mid 90s the non-807 exports rose
significantly
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MexicoHistory

• Mexico-U.S. trade in this sector reached US
  16.7 billion in 1999, an increase of more than
  300 since 1993.
• Mexico-Canada trade in textiles similarly
  increased from US 44.3 million in 1993 to US
  340 million in 1999

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MexicoStrengths

• Much larger overall production capacity and
  availability of fabric
• Proximity to the U.S., skilled labor force,
  vertically integrated industry, and close
  supplier - customer ties
• Under 807, duty is paid on the V.A. vs.
  practically no duty from Mexico to the US
• As of 2004, most NAFTA cotton apparel made in
  Mexico will carry
• Duty and quota-free in the US
• Approximately 12 duty (to be eliminated by 2004)
  and no quota in Canada

Ability to capitalize on the 28 free trade
agreements may be the key to reshaping and
recharging its apparel industry

• Agreements
• Chile
• Costa Rica
• Israel
• Bolivia
• Nicaragua
• The EU
• Others

• Negotiating with
• Japan
• Norway
• Singapore

The only industrialized nation with NO trade
agreement with China.
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MexicoWeaknesses

• High rate of rejects 1.43 vs. 1.12 in Costa
  Rica (Speer 2000)
• High labor force turnover 70 (Speer 2000)
• High income taxes
• Shortages of electricity
• Piracy and smuggling
• 97.5 of 40,000 businesses operating in the
  textile sector are micro or small businesses

• They just took advantage of FTA rather than
  investing in the engineering and the know-how
• Passage of the TDA in 2000 with CBI countries
  makes them more threatening competitors
• Farther away, but no less menacing, China is in
  a position to regain its U.S. apparel market
  share in 2005, when the World Trade Organization
  (WTO) implements the final phase-out of quotas

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Asia

• Asia's significant investment in recent years
  in Central America will accelerate
• In Guatemala, Asian ownership of apparel
  facilities is up to 17 , while in other
  countries, this level of ownership ranges from
  28 to 45.

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AsiaStrengths

• The key exporting nations of the Orient have
  developed unquestionable high levels of
• Raw Materials Availability
• Quick Development Capability
• Flexibility
• Quality workmanship
• All are considered by import experts as the
  strongest strategic advantages influencing the
  sourcing decision.

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AsiaWeaknesses

• The long lead-time required for production in the
  Orient
• The complexities of doing business offshore
  (language, distance)

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Combating China2005 Massacre

• A two-year window of opportunity before quotas
  expire under the WTO in 2005.
• During this period, it will be important for
  countries to develop a well-rounded sourcing
  matrix that includes
• High quality/price ratio
• Full package production
• Rapid turnaround capabilities
• Excellent customer service
• Flexibility
• Over the long term, these capabilities will be
  necessary for Latin America to compete with the
  Far East.

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China

• Heavy investment in CBI countries (e.g.,
  Nicaragua)
• Impossibility to compete with China in terms of
  cost
• Necessity to offset that with
• shorter cycle times
• quicker response times
• changing styles with the market.

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Caribbean CountriesStrengths

• NAFTA made it almost impossible for other Latin
  American countries to compete with Mexico simply
  by offering cheap labor
• To remain competitive, manufacturers in the CBI
  region responded by
• Building state-of-the-art facilities
• Offering high-quality goods and quick turnaround

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Caribbean Countries Strengths

• Absence of quota and duty under 807A
• Positive relationships with the U.S.
• Outstanding productivity
• Proximity to market
• The infrastructure
• The know-how
• Cost

• Perception in the importer community
• Shorter lead times on fashion orders
• Higher levels of quality and productivity than
  Mexico

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Caribbean Countries Weaknesses

• Lack of cooperation between countries
• Jamaica's apparel industry
• Contractions over the past few years
• Loss of business to other CBI beneficiary
  countries (Speer 2000)
• Lack of fabrics
• Lack of non-cotton apparel production (30 of
  U.S. exports, vs. balanced Mexico's exports)
• A small, inexperienced woven goods base
• A shortage of skilled pattern makers
• A lack of financial capital
• Potential U.S. investors, such as textile mills,
  are not familiar with the CBI region.

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Overview

• INTRODUCTION
• MAJOR TRADE TREATIES AND THEIR IMPLICATIONS
• GLOBAL COMPETITION
• COMPETING REGIONS COUNTRIES STRENGTHS AND
  WEAKNESSES
• VIDEO PRESENTATIONS
• SUCCESS FACTORS AND PRESENT OPPORTUNITIES
• MARKET INTELLIGENCE

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Honduras
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Mexico
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El Salvador
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Guyana
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Honduras Pride Mfg.
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Overview

• INTRODUCTION
• MAJOR TRADE TREATIES AND THEIR IMPLICATIONS
• GLOBAL COMPETITION
• COMPETING REGIONS COUNTRIES STRENGTHS AND
  WEAKNESSES
• VIDEO PRESENTATIONS
• SUCCESS FACTORS AND PRESENT OPPORTUNITIES
• MARKET INTELLIGENCE

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Factors For Success

• FULL PACKAGE SERVICE
• SPEED TO MARKET
• TOTAL COST
• SECURITY

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Factors For Success

• NEW BUSINESS MODEL FOR SUCCESS
• Total Supply Chain Integration
• Elimination Of Middlemen
• Minimization of Overheads, Lead Times (Birnbaum
  Pg 40)
• 2 Link Paradigm Factory - Customer
• Full Value Garment Sourcing Model

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Most Promising Prospects(Largest volume from Far
East High Tariffs)

• Mens Cotton Sport Shirts (w) 140 mm sme
  20.1-28.5
• Mens MMF Sport Shirts (w) 97 mm sme 28.5
• Womens MMF Dresses (w) 114 mm sme 16.3
• Womens Girls MMF Blouses (w) 149 mm sme
  15.1-27
• Womens MMF Panties (k) 117 mm sme 15.9
• Womens Girls MMF 268 mm sme 8.6-16.7
• Nightwear (w)
• Infants Knitwear 272 mm sme 8.2-32.8

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Overview

• INTRODUCTION
• MAJOR TRADE TREATIES AND THEIR IMPLICATIONS
• GLOBAL COMPETITION
• COMPETING REGIONS COUNTRIES STRENGTHS AND
  WEAKNESSES
• VIDEO PRESENTATIONS
• SUCCESS FACTORS AND PRESENT OPPORTUNITIES
• MARKET INTELLIGENCE

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Trade Data

• WHERE TO FIND MORE
• INFORMATION
• PROGRAMS TO HELP
• EXPORT MARKET DEVELOPMENT
• http//www.swaassoc.com

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OTEXA Website

• Trade and Development Act of 2000
• Title I AGOA
• Title II CBTPA
• Title V Wool Articles
• Export Advantage
• Directories of U.S. Exporters Foreign Buyers

http//otexa.ita.doc.gov
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Apparel Associations

• MATERIAL WORLD
• http//www.material-world.com
• 2 X YEAR
• NEXT EVENT
• MAY 18-20, 2004
• MIAMI BEACH, Fla
• Co Hosted By
• American Apparel and Footwear Association
  http//www.americanapparel.org/
• American Apparel Producers' Networkhttp//www.usa
  wear.org/

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Major Shows

• American Apparel and Footwear Association A
  national association representing U.S. apparel
  manufacturers.
• http//www.americanapparel.org/
• American Apparel Producers' NetworkA non-profit
  trade group and network of producers of
  American-made apparel.
• http//www.usawear.org/
• American Textile Manufacturers Institute
  Represent textile mill firms which operate in
  the United States.
• .
• Canadian Apparel Federation Furnishes
  information on the apparel industry, government
  regulations, trade, and membership.
• Children's Apparel Manufacturers Association
  Non-profit trade organization, representing the
  interests of Canadian manufacturers and importers
  of children's wear.

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STEVE WOLOZ ASSOCIATES INC.MANAGEMENT
CONSULTANTS
www.swaassoc.com