1. STEVE WOLOZ & ASSOCIATES INC. MANAGEMENT CONSULTANTS www.swaassoc.com Connaître Vos Compétiteurs AECQ Le 1 Novembre, 2003

2. STEVE WOLOZ & ASSOCIATES INC. MANAGEMENT CONSULTANTS www.swaassoc.com ? Connaître Vos Compétiteurs

3. STEVE WOLOZ & ASSOCIATES INC. MANAGEMENT CONSULTANTS www.swaassoc.com SWA Experience Brasil ; Colombia Ecquador ; Guyana Honduras;Mexico Mongolia; Salvador United States SWA Recherche

4. STEVE WOLOZ & ASSOCIATES INC. MANAGEMENT CONSULTANTS www.swaassoc.com Format Discussion Interactive ( francais / englais) Video Notes Disponible sur Demande

5. AECQ: NOVEMBER 1, 2003: Rev 7 5Overview INTRODUCTION INTRODUCTION MAJOR TRADE TREATIES AND THEIR IMPLICATIONS MAJOR TRADE TREATIES AND THEIR IMPLICATIONS GLOBAL COMPETITION GLOBAL COMPETITION COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES VIDEO PRESENTATIONS VIDEO PRESENTATIONS SUCCESS FACTORS AND PRESENT OPPORTUNITIES SUCCESS FACTORS AND PRESENT OPPORTUNITIES MARKET INTELLIGENCE MARKET INTELLIGENCE BASIS OF PRESENTATION / ACTUAL EXPERIENCE / STATISTICAL RESEARCH BASIS OF PRESENTATION / ACTUAL EXPERIENCE / STATISTICAL RESEARCH

6. AECQ: NOVEMBER 1, 2003: Rev 7 6 Introduction COMPETITOR CUSTOMER SUPPLIER

7. AECQ: NOVEMBER 1, 2003: Rev 7 7Overview INTRODUCTION INTRODUCTION MAJOR TRADE TREATIES AND THEIR IMPLICATIONS MAJOR TRADE TREATIES AND THEIR IMPLICATIONS GLOBAL COMPETITION GLOBAL COMPETITION COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES VIDEO PRESENTATIONS VIDEO PRESENTATIONS SUCCESS FACTORS AND PRESENT OPPORTUNITIES SUCCESS FACTORS AND PRESENT OPPORTUNITIES MARKET INTELLIGENCE MARKET INTELLIGENCE

8. AECQ: NOVEMBER 1, 2003: Rev 7 8 Trade Treaties What are Trade Treaties ? Exclusive Agreements Between Trading Partners To promote Trade

9. AECQ: NOVEMBER 1, 2003: Rev 7 9 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

10. AECQ: NOVEMBER 1, 2003: Rev 7 10 Major Trade Treaties 807 Outward Processing ? 807 Outward Processing ?

11. AECQ: NOVEMBER 1, 2003: Rev 7 11 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

12. AECQ: NOVEMBER 1, 2003: Rev 7 12 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

13. AECQ: NOVEMBER 1, 2003: Rev 7 13 Chief Criterion of the CBI American Made Fabric Yarn Forward

14. AECQ: NOVEMBER 1, 2003: Rev 7 14 Main Difference CBI / NAFTA NAFTA FABRIC CAN BE MADE IN ANY MEMBER NATION CBI FABRIC & THREAD MUST BE MADE IN UNITED STATES

15. AECQ: NOVEMBER 1, 2003: Rev 7 15 Chief Objectives of the CBI Repatriation of Apparel Production Repatriation of Apparel Production From Asia to Western Hemisphere From Asia to Western Hemisphere Revitalisation of US Textile Industry Revitalisation of US Textile Industry Promotion of Trade with Neighbouring Nations Promotion of Trade with Neighbouring Nations

16. AECQ: NOVEMBER 1, 2003: Rev 7 16 Chief Advantages of the CBI Outward Processing Duty Free And Quota Free Access to US Providing Made With US Fabric

17. AECQ: NOVEMBER 1, 2003: Rev 7 17 CBTPA Trade Benefits Office of Textiles and Apparel International Trade Administration U.S. Department of Commerce US Market

18. AECQ: NOVEMBER 1, 2003: Rev 7 18 Treaties = Opportunity + Challenge Heated race for more investment $$$ and new strategic partnerships Existing trade treaties (e.g. NAFTA) New trade treaties (e.g. FTAA and WTO 2005) Opportunity to accelerate trade Help finance full package expansion Develop Manufacturing expertise in all areas

19. AECQ: NOVEMBER 1, 2003: Rev 7 19 CBTPA Summary (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 Section 211(b)(2)(A):Eligible Countries: BarbadosBelize Costa Rica Dominican Republic El Salvador GuatemalaGuyanaHaitiHondurasJamaicaNicaraguaPanama Saint Lucia Trinidad and Tobago

20. AECQ: NOVEMBER 1, 2003: Rev 7 20 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

21. AECQ: NOVEMBER 1, 2003: Rev 7 21 ATPDEA Trade Treaty Relating to the implementation of procedures and requirements similar to those in chapter 5 of the NAFTA: Bolivia Colombia Ecuador Peru 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

22. AECQ: NOVEMBER 1, 2003: Rev 7 22 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

23. AECQ: NOVEMBER 1, 2003: Rev 7 23Overview INTRODUCTION INTRODUCTION MAJOR TRADE TREATIES AND THEIR IMPLICATIONS MAJOR TRADE TREATIES AND THEIR IMPLICATIONS GLOBAL COMPETITION GLOBAL COMPETITION COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES VIDEO PRESENTATIONS VIDEO PRESENTATIONS SUCCESS FACTORS AND PRESENT OPPORTUNITIES SUCCESS FACTORS AND PRESENT OPPORTUNITIES MARKET INTELLIGENCE MARKET INTELLIGENCE

24. AECQ: NOVEMBER 1, 2003: Rev 7 24 Global Competitors Top US Suppliers March 31, 2003 % ShareGrowth % ShareGrowth 1. MEXICO11.88 -2.44 2. CHINA10.00 78.68 3. HONDURAS 6.31 14.67 4. BANGLADESH 5.17 -0.97 5. HONG KONG 4.51 -9.20 6. EL SALVADOR 4.42 8.49 7. DOMINICAN REPUBLIC 4.09 -0.50 8. KOREA 3.53 0.80 9. INDONESIA 3.48 7.82 10. TAIWAN 3.21 -5.40

25. AECQ: NOVEMBER 1, 2003: Rev 7 25 Apparel Imports Percent Share by Region

26. AECQ: NOVEMBER 1, 2003: Rev 7 26 The Apparel Commodity Supply Chain

27. AECQ: NOVEMBER 1, 2003: Rev 7 27 Apparel Imports From Asia Soar: 1995-2002 (Billion SME) Trade-weighted Index of 21 Asian Currencies vs. Textile Imports from the Same 21 Asian Nations

28. AECQ: NOVEMBER 1, 2003: Rev 7 28 US Apparel Imports Central America & Dominican Republic 2000 (U.S.$ Millones) Source: OTEXA - 2001

29. AECQ: NOVEMBER 1, 2003: Rev 7 29 US Apparel Imports Shifts in Regional Imports 1986 - 1996

30. AECQ: NOVEMBER 1, 2003: Rev 7 30Overview INTRODUCTION INTRODUCTION MAJOR TRADE TREATIES AND THEIR IMPLICATIONS MAJOR TRADE TREATIES AND THEIR IMPLICATIONS GLOBAL COMPETITION GLOBAL COMPETITION COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES VIDEO PRESENTATIONS VIDEO PRESENTATIONS SUCCESS FACTORS AND PRESENT OPPORTUNITIES SUCCESS FACTORS AND PRESENT OPPORTUNITIES MARKET INTELLIGENCE MARKET INTELLIGENCE

31. AECQ: NOVEMBER 1, 2003: Rev 7 31 Mexico: History Until the early 90s: almost exclusively an assembler, operating primarily as an 807 supplier to the US. By the mid 90s the non-807 exports rose significantly Qualitative leap to more value added production through cutting primarily NAFTA sourced fabrics. In 1996, Mexico surpassed China to become the #1 apparel exporter to the U.S.A. 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 1 st time In 1997, it made the top 10 list of apparel exporters to Canada for the 1 st time Since NAFTA, Mexico's U.S. exports of apparel increased nearly eight-fold Since NAFTA, Mexico's U.S. exports of apparel increased nearly eight-fold

32. AECQ: NOVEMBER 1, 2003: Rev 7 32 Mexico: History Mexico-U.S. trade in this sector reached US $16.7 billion in 1999, an increase of more than 300 % since 1993. 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 $340 million in 1999 Mexico-Canada trade in textiles similarly increased from US$ 44.3 million in 1993 to US $340 million in 1999

33. AECQ: NOVEMBER 1, 2003: Rev 7 33 Mexico: Strengths 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 Chile Costa Rica Costa Rica Israel Israel Bolivia Bolivia Nicaragua Nicaragua The EU The EU Others Others Negotiating with: Japan Japan Norway Norway Singapore Singapore The only industrialized nation with NO trade agreement with China.

34. AECQ: NOVEMBER 1, 2003: Rev 7 34 Mexico: Weaknesses 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 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 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 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

35. AECQ: NOVEMBER 1, 2003: Rev 7 35Asia Asia's significant investment in recent years in Central America will accelerate: 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%. In Guatemala, Asian ownership of apparel facilities is up to 17 %, while in other countries, this level of ownership ranges from 28% to 45%.

36. AECQ: NOVEMBER 1, 2003: Rev 7 36 Asia: Strengths 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. All are considered by import experts as the strongest strategic advantages influencing the sourcing decision.

37. AECQ: NOVEMBER 1, 2003: Rev 7 37 Asia: Weaknesses The long lead-time required for production in the Orient The complexities of doing business offshore (language, distance)

38. AECQ: NOVEMBER 1, 2003: Rev 7 38 Combating China 2005 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.

39. AECQ: NOVEMBER 1, 2003: Rev 7 39China 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.

40. AECQ: NOVEMBER 1, 2003: Rev 7 40 Caribbean Countries : Strengths 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

41. AECQ: NOVEMBER 1, 2003: Rev 7 41 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 Shorter lead times on fashion orders Higher levels of quality and productivity than Mexico Higher levels of quality and productivity than Mexico

42. AECQ: NOVEMBER 1, 2003: Rev 7 42 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.

43. AECQ: NOVEMBER 1, 2003: Rev 7 43Overview INTRODUCTION INTRODUCTION MAJOR TRADE TREATIES AND THEIR IMPLICATIONS MAJOR TRADE TREATIES AND THEIR IMPLICATIONS GLOBAL COMPETITION GLOBAL COMPETITION COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES VIDEO PRESENTATIONS VIDEO PRESENTATIONS SUCCESS FACTORS AND PRESENT OPPORTUNITIES SUCCESS FACTORS AND PRESENT OPPORTUNITIES MARKET INTELLIGENCE MARKET INTELLIGENCE

44. AECQ: NOVEMBER 1, 2003: Rev 7 44 Honduras

45. AECQ: NOVEMBER 1, 2003: Rev 7 45 Mexico

46. AECQ: NOVEMBER 1, 2003: Rev 7 46 El Salvador

47. AECQ: NOVEMBER 1, 2003: Rev 7 47 Guyana

48. AECQ: NOVEMBER 1, 2003: Rev 7 48 Honduras: Pride Mfg.

49. AECQ: NOVEMBER 1, 2003: Rev 7 49Overview INTRODUCTION INTRODUCTION MAJOR TRADE TREATIES AND THEIR IMPLICATIONS MAJOR TRADE TREATIES AND THEIR IMPLICATIONS GLOBAL COMPETITION GLOBAL COMPETITION COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES VIDEO PRESENTATIONS VIDEO PRESENTATIONS SUCCESS FACTORS AND PRESENT OPPORTUNITIES SUCCESS FACTORS AND PRESENT OPPORTUNITIES MARKET INTELLIGENCE MARKET INTELLIGENCE

50. AECQ: NOVEMBER 1, 2003: Rev 7 50 Factors For Success FULL PACKAGE SERVICE SPEED TO MARKET TOTAL COST SECURITY

51. AECQ: NOVEMBER 1, 2003: Rev 7 51 Factors For Success NEW BUSINESS MODEL FOR SUCCESS Total Supply Chain Integration Total Supply Chain Integration Elimination Of Middlemen Elimination Of Middlemen Minimization of Overheads, Lead Times (Birnbaum; Pg 40) Minimization of Overheads, Lead Times (Birnbaum; Pg 40) 2 Link Paradigm: Factory - Customer 2 Link Paradigm: Factory - Customer Full Value Garment Sourcing Model Full Value Garment Sourcing Model

52. AECQ: NOVEMBER 1, 2003: Rev 7 52 Most Promising Prospects (Largest volume from Far East & High Tariffs) Men’s Cotton Sport Shirts (w)140 mm sme 20.1-28.5% Men’s MMF Sport Shirts (w) 97 mm sme28.5% Women’s MMF Dresses (w)114 mm sme16.3% Women’s & Girls’ MMF Blouses (w) 149 mm sme 15.1-27% Women’s MMF Panties (k)117 mm sme15.9% Women’s & Girls’ MMF 268 mm sme8.6-16.7% Nightwear (w) Infant’s Knitwear272 mm sme 8.2-32.8%

53. AECQ: NOVEMBER 1, 2003: Rev 7 53Overview INTRODUCTION INTRODUCTION MAJOR TRADE TREATIES AND THEIR IMPLICATIONS MAJOR TRADE TREATIES AND THEIR IMPLICATIONS GLOBAL COMPETITION GLOBAL COMPETITION COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES COMPETING REGIONS & COUNTRIES: STRENGTHS AND WEAKNESSES VIDEO PRESENTATIONS VIDEO PRESENTATIONS SUCCESS FACTORS AND PRESENT OPPORTUNITIES SUCCESS FACTORS AND PRESENT OPPORTUNITIES MARKET INTELLIGENCE MARKET INTELLIGENCE

54. AECQ: NOVEMBER 1, 2003: Rev 7 54 Trade Data WHERE TO FIND MORE INFORMATION PROGRAMS TO HELP EXPORT MARKET DEVELOPMENT http://www.swaassoc.com

55. AECQ: NOVEMBER 1, 2003: Rev 7 55 Trade and Development Act of 2000 Trade and Development Act of 2000 Title I: AGOATitle I: AGOA Title II: CBTPATitle II: CBTPA Title V: Wool ArticlesTitle V: Wool Articles Export Advantage Export Advantage Directories of U.S. Exporters & Foreign BuyersDirectories of U.S. Exporters & Foreign Buyers OTEXA Website http://otexa.ita.doc.gov

56. AECQ: NOVEMBER 1, 2003: Rev 7 56 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 and Footwear Association http://www.americanapparel.org/ American Apparel Producers' Network http://www.usawear.org/ American Apparel Producers' Network http://www.usawear.org/

57. AECQ: NOVEMBER 1, 2003: Rev 7 57 Major Shows American Apparel and Footwear Association American Apparel and Footwear Association A national association representing U.S. apparel manufacturers. American Apparel and Footwear Association http://www.americanapparel.org/ American Apparel Producers' Network American Apparel Producers' Network A non-profit trade group and network of producers of American- made apparel. American Apparel Producers' Network http://www.usawear.org/ American Textile Manufacturers Institute American Textile Manufacturers Institute Represent textile mill firms which operate in the United States. American Textile Manufacturers Institute. Canadian Apparel Federation Canadian Apparel Federation Furnishes information on the apparel industry, government regulations, trade, and membership. Canadian Apparel Federation Children's Apparel Manufacturers Association Children's Apparel Manufacturers Association Non-profit trade organization, representing the interests of Canadian manufacturers and importers of children's wear. Children's Apparel Manufacturers Association

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