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Textiles and apparel in NAFTA : a case of constrained liberalization

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  • Bannister, Geoffrey
  • Low, Patrick

Abstract

The authors examine the changes that Mexico's textile and clothing industry is likely to face under the North American Free Trade Agreement (NAFTA). They compare pre-NAFTA and probable post-NAFTA scenarios for Mexican exports. The U.S. clothing and textile industry is likely to remain among the most protected of U.S. industries, so this is essentially a comparison of two protectionist situations, not of protection and free trade. The authors trace how current quota and tariff restrictions on U.S. imports from Mexico will be replaced by rules of origin designed to protect U.S. industry. Mexican textile and clothing exports will enjoy greater access to the U.S. market if most inputs originate in North America. Under the triple transformation requirements, for example, a cotton shirt would have to be made in the NAFTA region from yarn and fabric of NAFTA origin. Mexican compliance with this rule would not prove onerous. Proximity and long-standing production-sharing arrangements have made Mexico heavily dependent on U.S. inputs. Roughly 53 percent of Mexican textile and apparel exports to the United States fall under production-sharing programs, with an average 69 percent of value added of U.S. origin. Only 15 percent of input requirements for the other 47 percent of trade is imported into Mexico - only 8 percent from non-NAFTA countries. What about future trade? The authors estimate that these Mexican exports to the United States will increase only modestly - partly because of the low level of protection already associated with production-sharing arrangements. Rules oforigin under the NAFTA are small. How much investment from outside North America will be attracted to Mexico under stringent input-sourcing requirements is open to question. The competitiveness of Mexico's apparel industry in non-NAFTA markets will depend to some extent on the international competitiveness of the U.S. textile industry.

Suggested Citation

  • Bannister, Geoffrey & Low, Patrick, 1992. "Textiles and apparel in NAFTA : a case of constrained liberalization," Policy Research Working Paper Series 994, The World Bank.
  • Handle: RePEc:wbk:wbrwps:994
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    References listed on IDEAS

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    1. W. Sawyer & Richard Sprinkle, 1989. "Alternative empirical estimates of trade creation and trade diversion: A comparison of the Baldwin-Murray and Verdoorn models," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 125(1), pages 61-73, March.
    2. Vousden,Neil, 1990. "The Economics of Trade Protection," Cambridge Books, Cambridge University Press, number 9780521346696, October.
    3. Laird, Samuel & Yeats, Alexander J., 1990. "Two sources of bias in standard partial equilibrium trade models," Policy Research Working Paper Series 374, The World Bank.
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    Cited by:

    1. Bannister, Geoffrey J., 1993. "Rent-sharing in the multi-fibre arrangement : the case of Mexico," Policy Research Working Paper Series 1191, The World Bank.
    2. Geoffrey Bannister, 1994. "Rent sharing in the multi-fibre arrangement: The case of Mexico," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(4), pages 800-827, December.

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