Introduction


Mexico had a huge upswing in 1990s after entering into NAFTA (North AmericaFree Trade Agreement) with Canada in 1994, becoming the world's one of thelargest textile manufacturers. With the NAFTA agreement the sales hiked and Mexico attained large chunk of market share. It assumed to provide US with the biggestTextile and Apparels market, but with Asian and Central American marketsbecoming cheaper, envisages did not turn out to be that fruitful.


Over the past decade, Mexico's textile sector has derivedsome of its greatest benefits from tariff reductions that resulted from thecountry's numerous free-trade agreements. That's especially true in the U.S. market, where Mexico has been the leader for years. However since 2000, Mexico is facing budding competition from China. This Asian gigantic has given headaches not only tothe textile sector but to most Mexican productions, taking a lead in the marketshare of U.S. textile markets.


The Mexican Textile sector comprises of natural, artificial andsynthetic fibres, textiles, apparels, and textile made-up. It has shown a greatviability and vitality during the last years, chiefly after the initiation ofNAFTA. This is one of the manufacturing sectors that have developed the most,at an annual rate of almost 13% from 1997 to 2000. Textile sector ranks secondafter metal products, machinery and equipments. In 2000, Mexico sold US$10.23 billion in textiles and clothing to the United States, representing a 117.21%increase over 1996. However, the overall textile imports and exports fell. Hereare the statistics:



A jointtreaty between Mexico and China was signed when China entered the WTO. Itallows Mexico to maintain compensatory quotas on 1,300 Chinese products until2008. Near the end of 2004, China announced that it would impose taxes onexports of 148 textile products, beginning on January 1. The move was regardedas Chinas attempt to pacify those who fear that the end of the quota systemwill lead to assault of Chinese products globally.

The Chinese will tax products like underwear, pants, suits and overcoats, at rates ranging from 0.2 yuan (.02 cents) to 0.3 Yuan per piece all together. Accessories will be taxed at 0.5 yuan per kilogram. This was only one out of the eight initiatives announced by China's commerce ministry in an effort to help industry acclimatize to free trade to prevent affliction of any hasty upsets. Other steps are designed to require Chinese textile companies to inform the government about their expansion plans; encourage Chinese companies to invest domestically, rather than expand overseas and kindle expansion of Chinese products.

Commencement of problems


Commencement of problems


Starting on January 1, 2004, the United States eliminated all restrictions and all designated quotas on imports of textiles and apparel products from Mexico. Yet, Mexican-made products began to lose their competitiveness in the U.S. for the reason that taxes and tariffs on imports from other countries were also dipping. The textile sector still is a great contributor to Mexico's Gross Domestic Product and to its exports and investments. The sector is also vital to the country's employment generation. Incorporated by links of chemical fibers, textiles and dressmaking, it is Mexicos fourth-largest manufacturing activity. However, the sector began to decline in 2004. Judging on the employment figures, In October 2004, the apparel industry provided 567,000 jobs, nearly 18,000 less jobs than in October 2003.



The fundamental problem is that a high percentage of Mexico's exports are gathered together from different countries whereas in Asia there is a greater assimilation of the production chain for textile products which also provides additional value to it. These days, the products that have more fashionable appeal and higher added value are successful. Labor costs in Mexico are also elevated in comparison to Asian nations. Financing is also a hard nut to crack for Mexican Companies which force them to invite foreign investors. Mexican approach towards China is the biggest root cause of its decline. Mexico has always implicit China as a threat without looking on the other side of the coin. China is preparing to be a vital foreign investor by buying companies, getting into joint ventures and so on. It can also be advantageous to Mexico.


Current Scenario


Textile Industry has been the most badly hit sectors of the economy. Many companies had to shut down and due to that many are left jobless. China replaced Mexico as the top supplier of textiles and apparel to the US, and continued to grow while Mexico's market share fell down. In 2007, China's clothing and textile exports to the US grew by 36%, while Mexico's fell by 7% creating a huge gap between them. By 2008, China's share of the US import market for textiles and clothing was at 35.1% in value terms, while Mexico had dropped to the fourth largest supplier. Still here are the statistics that asserts the potency of the sector.


Gearing for Makeover


Mexico is currently trying to endeavor itself as not only the best textile producer but also adding value to its production methods and strategies. It is trying to focus on Customer satisfaction at affordable costs. The Mexican industry wishes to deliver short period access, reduced language obstructions, minimal cultural differences, and a wide variety of products. The workers are learning new expertise, and companies are diverting their mindset from production of yarn and fabric to finished garment products. In the last five years the textile industry has invested $2bn in textile machinery and equipment according to ProMxico. ProMxico is the Mexican government institution in charge of taking care of Mexico's trade nationally and internationally. Anyhow, Mexico still has the largest bunch of export share in US markets followed by Canada, Colombia, and China, as per ProMxico. It is still one of the major employers in the economy.


Demand among the Consumers


Mexican economy is completely dependent on US. The domestic demand greatly depends on the earnings and remittances to the economy by US. This also affects it negatively if US trade goes negative. The consumer confidence Index also shows a decline from 77th rank to 87th. But Mexico is still among the top global apparel markets, offering numerous avenues for the retailers. Despite of all odds and Mexico's import share in the retail market been growing significantly, it still maintains a positive trade balance.


Mexicans now try to be in line with the current fashion and trends pertaining to customers' tastes and preferences. The clothing accessories, Nightwear and lingerie and sportswear have attained an important hold in the market in the year 2008-2009.


Conclusion


In Mexico, the industry continues to struggle as US importers have shifted orders to China and other low cost Asian countries. In the first half of 2009 alone, Mexican textile and clothing exports declined by 17.5% after falling by 6.2% in 2008. This skirmishing between Mexican and Chinese Textiles and Apparels market is expected to be a healthy one and Mexico badly needs the renaissance!!!

 

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