STEVE WOLOZ &
ASSOCIATES INC.
MANAGEMENT CONSULTANTS
www.swaassoc.com
Know Your
Competitors
For
AECQ ( Quebec Contractors Association)
Novembre 1 , 2003
STEVE WOLOZ &
ASSOCIATES INC.
MANAGEMENT CONSULTANTS
www.swaassoc.com
?
Who Are Your
Competitors
STEVE WOLOZ &
ASSOCIATES INC.
MANAGEMENT CONSULTANTS
www.swaassoc.com
SWA Experience
•Brasil ; Colombia
•Ecquador ; Guyana
•Honduras;Mexico
•Mongolia; Salvador
•United States
SWA Research
STEVE WOLOZ &
ASSOCIATES INC.
MANAGEMENT CONSULTANTS
www.swaassoc.com
Seminar Format
•Interactive Discussion
( English; French)
•Video
•Lecture Notes Available on
Request
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 /
5
AECQ: NOVEMBER 1, 2003: Rev 7
STATISTICAL RESEARCH
Introduction
Dynamics
CUSTOMER
COMPETITOR
SUPPLIER
AECQ: NOVEMBER 1, 2003: Rev 7
6
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
AECQ: NOVEMBER 1, 2003: Rev 7
7
Trade Treaties
What are Trade Treaties ?
Exclusive Agreements Between
Trading Partners To promote
Trade
AECQ: NOVEMBER 1, 2003: Rev 7
8
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
AECQ: NOVEMBER 1, 2003: Rev 7
9
Major Trade Treaties

807 Outward Processing ?
AECQ: NOVEMBER 1, 2003: Rev 7
10
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
AECQ: NOVEMBER 1, 2003: Rev 7
11
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
AECQ: NOVEMBER 1, 2003: Rev 7
12
Chief Criterion of the CBI
American Made Fabric
Yarn Forward
AECQ: NOVEMBER 1, 2003: Rev 7
13
Main Difference CBI / NAFTA
NAFTA
FABRIC CAN BE MADE IN ANY MEMBER NATION
CBI
FABRIC & THREAD MUST BE MADE IN UNITED
STATES
AECQ: NOVEMBER 1, 2003: Rev 7
14
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
AECQ: NOVEMBER 1, 2003: Rev 7
15
Chief Advantages of the CBI
Outward Processing
Duty Free
And
Quota Free Access to US
Providing
Made With US Fabric
AECQ: NOVEMBER 1, 2003: Rev 7
16
CBTPA Trade Benefits
US Market
Office of Textiles and Apparel
International Trade Administration
U.S. Department of Commerce
AECQ: NOVEMBER 1, 2003: Rev 7
17
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)
AECQ: NOVEMBER 1, 2003: Rev 7
18
CBTPA Summary
Section 211(b)(2)(A):
(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
Eligible Countries:
Barbados
Belize
Costa Rica
Dominican Republic
El Salvador
Guatemala
Guyana
Haiti
Honduras
Jamaica
Nicaragua
Panama
Saint Lucia
Trinidad and Tobago
AECQ: NOVEMBER 1, 2003: Rev 7
19
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
AECQ: NOVEMBER 1, 2003: Rev 7
20
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
AECQ: NOVEMBER 1, 2003: Rev 7
21
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
AECQ: NOVEMBER 1, 2003: Rev 7
22
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
AECQ: NOVEMBER 1, 2003: Rev 7
23
Global Competitors
Top US Suppliers
March 31, 2003
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
MEXICO
CHINA
HONDURAS
BANGLADESH
HONG KONG
EL SALVADOR
DOMINICAN REPUBLIC
KOREA
INDONESIA
TAIWAN
% Share
11.88
10.00
6.31
5.17
4.51
4.42
4.09
3.53
3.48
3.21
AECQ: NOVEMBER 1, 2003: Rev 7
Growth
-2.44
78.68
14.67
-0.97
-9.20
8.49
-0.50
0.80
7.82
-5.40
24
Apparel Imports
Percent Share by Region
AECQ: NOVEMBER 1, 2003: Rev 7
25
The Apparel Commodity
Supply Chain
AECQ: NOVEMBER 1, 2003: Rev 7
26
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
AECQ: NOVEMBER 1, 2003: Rev 7
27
US Apparel Imports
Central America & Dominican Republic
2000
$2,365
$2,500
$2,456
(U.S.$ Millones)
$2,000
$1,499
$1,634
$1,500
$1,000
$500
$831
$337
$0
Nicaragua
El Salvador
Costa Rica
Guatemala
Honduras
AECQ:
NOVEMBER 1, 2003: Rev 7 Rep. Dominicana
28
Source: OTEXA - 2001
US Apparel Imports
Shifts in Regional Imports
1986 - 1996
AECQ: NOVEMBER 1, 2003: Rev 7
29
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
AECQ: NOVEMBER 1, 2003: Rev 7
30
Mexico:
History
Until the early 90s: almost
exclusively an assembler,
operating primarily as an
807 supplier to the US.
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 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
By the mid 90s the non-807
exports rose significantly
nearly eight-fold
AECQ: NOVEMBER 1, 2003: Rev 7
31
Mexico:
History
Mexico-U.S. trade in
this sector reached US
$16.7 billion in 1999, an
increase of more than
300 % since 1993.
Mexico-Canada trade in
textiles similarly
increased from US$ 44.3
million in 1993 to US
$340 million in 1999
AECQ: NOVEMBER 1, 2003: Rev 7
32
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:
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
Duty and quota-free in the US
Approximately 12% duty (to be
 The EU
eliminated by 2004) and no
AECQ: NOVEMBER 1, 2003:
Rev 7
 Others
quota in Canada
Negotiating
with:
Japan
Norway
Singapore
The only
industrialized
nation with NO
trade
agreement
33
with China.
Mexico:
Weaknesses
High rate of rejects: 1.43
% vs. 1.12 % in Costa Rica
(Speer 2000)
They just took advantage of
FTA rather than investing in the
engineering and the know-how
High labor force turnover:
70% (Speer 2000)
Passage of the TDA in 2000
with CBI countries makes them
more threatening competitors
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
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
AECQ: NOVEMBER 1, 2003: Rev 7
34
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%.
AECQ: NOVEMBER 1, 2003: Rev 7
35
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.
AECQ: NOVEMBER 1, 2003: Rev 7
36
Asia:
Weaknesses
The long lead-time required for
production in the Orient
The complexities of doing business
offshore (language, distance)
AECQ: NOVEMBER 1, 2003: Rev 7
37
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
38
Far East.
AECQ: NOVEMBER 1, 2003: Rev 7
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.
AECQ: NOVEMBER 1, 2003: Rev 7
39
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
AECQ: NOVEMBER 1, 2003: Rev 7
40
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
AECQ: NOVEMBER 1, 2003: Rev 7
41
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.
AECQ: NOVEMBER 1, 2003: Rev 7
42
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
AECQ: NOVEMBER 1, 2003: Rev 7
43
Honduras
AECQ: NOVEMBER 1, 2003: Rev 7
44
Mexico
AECQ: NOVEMBER 1, 2003: Rev 7
45
El Salvador
AECQ: NOVEMBER 1, 2003: Rev 7
46
Guyana
AECQ: NOVEMBER 1, 2003: Rev 7
47
Honduras:
Pride Mfg.
AECQ: NOVEMBER 1, 2003: Rev 7
48
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
AECQ: NOVEMBER 1, 2003: Rev 7
49
Factors For Success
FULL PACKAGE SERVICE
SPEED TO MARKET
TOTAL COST
SECURITY
AECQ: NOVEMBER 1, 2003: Rev 7
50
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 AECQ: NOVEMBER 1, 2003: Rev 7
Sourcing Model
51
Most Promising Prospects
(Largest volume from Far East & High Tariffs)
Men’s Cotton Sport Shirts (w)
Men’s MMF Sport Shirts (w)
Women’s MMF Dresses (w)
140 mm sme
20.1-28.5%
97 mm sme
28.5%
114 mm sme
16.3%
Women’s & Girls’ MMF Blouses (w) 149 mm sme
15.1-27%
Women’s MMF Panties (k)
117 mm sme
15.9%
Women’s & Girls’ MMF
Nightwear (w)
268 mm sme
8.6-16.7%
Infant’s Knitwear
272 mm sme
AECQ: NOVEMBER 1, 2003: Rev 7
8.2-32.8%
52
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
AECQ: NOVEMBER 1, 2003: Rev 7
53
Trade Data
WHERE TO FIND MORE
INFORMATION
PROGRAMS TO HELP
EXPORT MARKET DEVELOPMENT
http://www.swaassoc.com
AECQ: NOVEMBER 1, 2003: Rev 7
54
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
AECQ: NOVEMBER 1, 2003: Rev 7
55
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' Network
http://www.usawear.org/
AECQ: NOVEMBER 1, 2003: Rev 7
56
Major Shows
American Apparel and Footwear Association
A national association representing U.S. apparel manufacturers.
http://www.americanapparel.org/
American Apparel Producers' Network
A non-profit trade group and network of producers of Americanmade 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.
AECQ: NOVEMBER 1, 2003: Rev 7
57
STEVE WOLOZ &
ASSOCIATES INC.
MANAGEMENT CONSULTANTS
www.swaassoc.com
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History of the CBI