On November 30, a new regional trade agreement between Mexico, the United States and Canada was signed in Buenos Aires, Argentina, after lengthy, tense negotiations during the last twelve months. The new agreement, known by the acronyms USMCA in the United States, CUSMA and ACEUM in Canada, and T-MEC in Mexico, replaces the North American Free Trade Agreement (NAFTA) in force for 24 years in the three countries’ joint trading area.
Although the T-MEC presented challenges for some Mexican industrial sectors, the local textile, fashion and apparel industries had fewer issues with its terms. The new deal not only allows the country to maintain the current pace of its exports to the highly important North American market, but also to plan an expansion in terms of quality and more effective marketing schemes.
However, it should be borne in mind that other Latin American countries that are important fashion-wise will not be sharing the benefits of T-MEC, so they will have to strive to find new markets, and also try to establish partnerships within the Mexican textile industry to approach the Canadian and US markets at less of a disadvantage.
Certainty for Mexico
Raúl García Tapia, director of Fashion Outlet and former Director General of the Mexican National Chamber of the Garment Industry (Ca.Na.I.Ve.), told FashionNetwork.com that the new treaty, now in the process of being approved by the three countries’ parliaments, is a positive deal for Mexico’s textile, footwear and apparel industries. There is now certainty in terms of customs duties, something that is reassuring for both Mexican companies and North American buyers.
“(The T-MEC) impacts our sector positively, especially in the current climate, as the USA has threatened China and other countries with imposing additional tariffs to slash its trade deficit. This is important because, nowadays, buyers from T-MEC countries, particularly from the USA, have no assurance that, in future, the trade exchanges they currently undertake with China will maintain the same tariffs when the goods arrive in the country,” said García Tapia.
“This is good for Mexico, because our country has a clear indication of what the level of its tariffs for the treaty’s first few years is, that is to say, zero tariffs. This goes down well with buyers, and I believe that any treaty that we have in effect at any time is beneficial to us,” said García Tapia. He also recalled that, until the T-MEC is approved in the USA, Mexico will continue to benefit from the conditions laid down in the NAFTA agreement signed in 1994.
Mexico has therefore passed a crucial test, after the President of the United States, Donald Trump, initially threatened to eliminate some of the tariff flexibility for the textile industry that was featured in the NAFTA deal.
It is worth mentioning however that the new treaty includes some tariff restrictions for Mexican textile manufacturers. It features as an additional requirement that garment components such as sewing thread, fabric linings, elastic and coated fabrics must originate in the treaty’s signatory countries.
This should force Mexican suppliers to stop importing certain components from Asian countries, and may in turn give the opportunity to the Mexican textile industry to produce these materials internally, generating more employment and economic benefits.
A stricter framework
The T-MEC will also help the Mexican textile industry fight the plague of undervaluation. This is a disguised form of contraband, that occurs when a value that is below what is actually being paid is declared for imported goods at customs.
The T-MEC includes provisions that allow for more stringent checks on the compliance of imported goods with rules of origin, and for checking for infringements of customs regulations, while at the same time it sets up a textile committee to facilitate consultations and ensure greater cooperation between authorities.
The Mexican textile industry exports $6.4 billion worth of goods per year to the USA, according to figures by Ca.Na.I.Ve. This makes Mexico the first-largest Latin American apparel exporter to the USA, and the sixth globally.