Cablegate: Info On Mexican Textiles and Apparel Production

DE RUEHME #5240/01 2712217
P 282217Z SEP 07





E.O. 12958: N/A

REF: STATE 114799

Post has collected the below information in response to
reftel questions regarding Mexico's textile and apparel

Total industrial production in USD value?

According to the Mexican Government's official statistical
bureau, Mexican manufacturing GDP in 2006 was worth 1,482.3
billion pesos. Dividing by the average exchange rate for
2006 (1 USD = 10.9 pesos) results in a manufacturing GDP of
USD 136 billion.

Total textiles and apparel production in USD value?

According to Mexico's National Chamber of the Textile
Industry, textiles account for 3.2 percent of total Mexican
manufacturing GDP and apparel for another 2.8 percent, for a
combined total of 6 percent. According to a study by the
Secretariat of Economy, in 2005 textiles and apparel

accounted for 1.2 percent of total GDP and 6.7 percent of
manufacturing GDP, versus 1.6 percent of total GDP and 8.3
percent of manufacturing GDP in 2000.

Textile/apparel share of host country imports and exports?

According to the Bank of Mexico, Mexico imported USD 635.47
million in apparel, USD 1.687 billion in textiles, and USD
200.9 million in chemical fibers in the first four months of
2007. The corresponding figures for the full year 2006 are
USD 2.639 billion in apparel, USD 5.811 billion in textiles,
and USD 609.5 million in chemical fibers. According to the
Mexican government's statistical bureau, in 2006 total
Mexican imports were USD 256.7 billion. For the first four
months of 2007, 32 perecent of Mexican apparel imports, 74.2
percent of Mexican textile imports, and 58.04 percent of
chemical fiber imports came from the U.S.

Regarding Mexican exports, according to the Mexican
government's statistical bureau, in 2006 total Mexican
exports were USD 250.5 billion. We only have figures from
the Secretariat of Economy for Mexican exports to the U.S.,
which account for more than 90 percent of Mexican apparel
exports. In the first half of 2006, Mexico exported USD
547.1 million in textiles and USD 2.64 billion in apparel to
the U.S. In the first half of 2007, Mexico exported USD 537
million in textiles and USD 2.253 billion in apparel to the

Exports in textiles and apparel to the U.S. in USD Value
(year on end)?

According to the Mexican Secretariat of Economy, Mexico
exported to the U.S. USD 547.1 million in textiles in the
first half of 2006, falling to USD 537 million in the first
half of 2007. Mexico exported to the U.S. USD 2.64 billion
in apparel in the first half of 2006, falling to USD 2.253
billion in the first half of 2007.

Total manufacturing employment?

In 2005, total manufacturing employment (according to workers
covered under the Mexican social security system) was around
3.7 million.

Total textiles and total apparel employment?

According to the Mexican Social Security Institute, in 2007
apparel employment in Mexico was 377,668, down from 381,745
in 2006 and 639,774 in 2000. Textiles employment in 2007 was
125,069, up from 121,725 in 2006 but down from 168,052 in

Are host country producers receiving lower prices due to
heightened international competition? Have manufacturers
received more, less, or the same number of orders as in years
past? Have foreign investors, particularly Asian investors,
closed factories or otherwise pulled out of local production?

Mexico's textile and apparel industry representatives claim
that their lost market share both at home and in the U.S.
market is due in large measure to low-cost competition from
China, resulting in lost business. We have heard that a
number of investors in these sectors have left Mexico for
Asia or other lower-cost areas.

Have U.S. and EU restrictions on certain exports of textiles

MEXICO 00005240 002 OF 003

and apparel from China, effective through 2007/2008, affected
export prospects for host country manufacturers?

Post does not have breakdowns on how Mexican exports to the
U.S. of apparel products that compete directly with Chinese
exports subject to USG-initiated China textile-specific
safeguards have fared.

Has the host government implemented, or is it considering
implementing, safeguards or other measures to reduce growth
of imports of Chinese textile and apparel products into the
host country?

Mexico has for a number of years imposed very high
anti-dumping duties on a wide range of Chinese textile and
apparel imports. As a result of bilateral negotations
between China and Mexico related to the former's WTO
accession process, China agreed to not challenge any Mexican
anti-dumping cases on Chinese products in the WTO through
December 11, 2007. The Mexican Government is currently
reviewing its existing anti-dumping penalties on imports from
China, and will likely eliminate at least a portion of them.
These high tariff barriers have certainly limited legal
imports of Chinese textile and apparel products, but large
amounts of Chinese goods enter the Mexican market as
contraband. Septel has more details.

Does the host government have policies or programs in place
to deal with any dislocated workers in the sector resulting
from increased competition?

Not to our knowledge.

Has increased global competition affected local labor
conditions by causing employers to reduce wages, seek
flexibility from government required minimum wages, or
adversely affected union organizing?

Increased global competition has generated downward pressure
on Mexican wages in these sectors, and has also led employers
to either renege on collective bargaining agreements, choose
to work only with more pliant unions, or look for non-union
workers. ConGen Ciudad Juarez reports that apparel makers
cannot pay workers the wages that prevail along that part of
the border, where higher value-added industries offer better
remuneration, and still compete with Chinese and other Asian
apparel producers.

Has the host government or private industry taken action to
increase the country's competitiveness, such as improving
infrastructure, reducing bureaucratic requirements,
developing the textiles (fabric production) industry, moving
to higher value-added goods, or identifying niche markets?
Does post think that the host government or private
industry's strategy will be successful?

There has been much discussion among government, industry,
and unions about moving up the value-added chain in the
textile and apparel sectors. Industry sources claim that
they have invested substantially in new technology, and the
Mexican Government has unilaterally lowered tariffs on a
number of inputs that are no longer produced in sufficient
quantities domestically. ConGen Cuidad Juarez reports that
surviving local textile manufacturers there are moving to
niche products like specialty pillows. Mexico is also keen
to begin implementation of the CAFTA-DR textiles cumulation
mechanism, which would likely lead to increased textiles
exports to Central American apparel makers.

If your host government is a partner in a free trade
agreement or a beneficiary of a preference program such as
AGOA, CBTPA, CAFTA or ATPDEA, what impact does the program
have on local sector industry competitiveness?

NAFTA was a huge boon to Mexican textile and apparel
manufacturers, giving them clear advantages over the global
competition until 2000. With China's accession to the WTO in
2001, China and other Asian countries have steadily eroded
Mexico's market share in the U.S.

Overall, if not already addressed, does post think that the
host country can be competitive in textiles and apparel
exports given heightened global competition?

Given competition from China and elsewhere, Mexico will
almost certainly not regain its circa 2000 position in the
U.S. market. Nonetheless, the local textile and apparel
industries are not going to disappear. In fact, exports and

MEXICO 00005240 003 OF 003

employment in these sectors are still above where they were
in 1993, before the half-decade boom resulting from NAFTA's
trade diversion effect.

Visit Mexico City's Classified Web Site at and the North American
Partnership Blog at /

© Scoop Media

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