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North American Free Trade Agreement NAFTA

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Presentation on theme: "North American Free Trade Agreement NAFTA"— Presentation transcript:

1 North American Free Trade Agreement NAFTA e-mail:

2 Multi-Fiber Arrangement (MFA) n MFA was instituted in 1974 as trade laws for the textile and apparel industry, it is in the process of being phased-out. n 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. n The most important structural change is the gradual phase-out of Multi Fiber Arrangement between now and the year 2005.

3 Uruguay Round Agreement n The Uruguay Round Agreement replaces the Multi-Fiber Arrangement. n 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. n Uncontrolled products could grow at an an accelerated rate during the transition period. n Many of these imports will come from countries that have low-cost production and can easily penetrate and over whelm the United States market.


5 North American Free Trade Agreement n 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: n Canada, Mexico and the United States. n Initial tariff phase-out, effective January 1, 1994, Mexico removed tariffs on nearly 50% of all industrial goods. n By 1999, sixty-five per cent of all U. S. Industrial products exported to Mexico will enter that country tariff free. n NAFTA strengths Mexico’s position as a main supplier of imported textiles and clothing product6s to the United States.

6 North American Free Trade Agreement Countries

7 1992-1996 Imports in Million of Dollars n 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. n Over half of the textiles and apparel sold in the United States has been imported from outside the country. n 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. n China has been the main supplier of textiles and apparel to the United States prior to 1996.


9 Imports to the United States - 1996 n The countries that have been most successful in importing textiles and apparel goods to the United States are: n Millions Sq. Meters Millions $$ n China1644,000,0004892,000,000 n Hong Kong1796,000,0004031,000,000 n South Korea2207,000,0002049,000,000 n Taiwan1203,000,0002733,000,000 n Mexico 891,000,0004231,000,000 n Canada 729,000,0001995,000,000







16 Manufacturing Companies and Factories n Companies are closing down Far Eastern manufacturing companies and factories and moving them to Mexico, a direct consequence of NAFTA. n Though workers in Mexico make higher wages, savings in transportation time and cost means savings for United States companies and consumers. n 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.

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

18 Leading Suppliers n At present Mexico’s swift accent to become, if only by a small margin, is the United States leading suppliers of imported apparel and textiles. (square meter equivalent.) n Mexico’s ( in 1966) combined shipments out passed China, which has held the top spot most of the last decade. n 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.

19 Countries involved in NAFTA


21 n 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. n Honduras32.73 increase in 1996 n El Salvador23.26increase in 1996 n Brazil -22.04 decrease in 1996 n Colombia -14.29decrease in 1996

22 1992-1996 Mexico’s Imports in Dollars n Since the North American Free Trade Agreement’s enactment three years ago, Mexico’s exports to the United States have trebled, to over four billion dollars. n 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.



25 U.S. Textile/Apparel Imports - MFA Data In Million $$

26 International Trade Patterns n 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. n Market share of imports to the U.S. from Mexico during the years 1995-1996 increased 42.39% (meters) and 39.33% ($). n Canadian market share of imported goods during the years 1995-1996 was increased 15.25% and 20.81% ($)


28 – 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.

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