Mexico Fields U.S. Cotton Exports

By Ann Murphy

Under the North American Free Trade Agreement (NAFTA) provisions, the United States is shipping more raw and processed cotton products to Mexico, and Mexico is enjoying higher employment and foreign exchange earnings in the textile and apparel sectors.

A textile trade agreement between the two countries was established before NAFTA was off the drawing board. But the earlier Caribbean Basin Initiative (CBI) trade agreement and recent favorable domestic agricultural policy implemented by the two countries only set the stage for the greater dynamic relationship fostered by NAFTA.

NAFTA Cottons to Textiles

The NAFTA-induced transition to lower tariffs on raw fiber exports to Mexico and the liberalization of trade restrictions on processed products such as yarn and fabric have since taken center stage in the textile trade between the two countries, enabling the dramatic increases seen in this sector after 1994.

Under NAFTA, the tariff on raw cotton imported into Mexico dropped from pre-NAFTA rates of 10 percent to the current level of 5 percent. The tariff is scheduled for elimination by 2004. In return, U.S. quotas were eliminated for Mexican yarn, fabric and apparel produced from yarn originating from a NAFTA member.

In 1997, the United States exported $354 million worth of raw cotton to Mexico--94 percent of the market share of all cotton fiber imported into Mexico. Mali and Cameroon exports made up most of the remaining 6 percent.

U.S. Labeling a Boon to Textile Mills

Besides the perks of proximity, timely delivery and financing options, U.S. cotton bales also include fiber classification labels called High Volume Instrument (HVI). Modern Mexican textile mills are geared to work with these fiber-defining systems, which smooth the miller’s task by increasing handling and processing efficiency.

Mexico Is Customer No. 1

After the Asian financial crisis diminished exports of U.S. cotton to China and the Far East, Mexico became the top export market for U.S. cotton fiber–not surprising since cotton makes up 46 percent of the textile fiber consumed in the country.

Although the U.S. cotton crop for marketing year (MY) 1998/99 is expected to be the lowest in 9 years due to bad weather, the decreased supply is unlikely to affect Mexico’s level of imports. In fact, total Mexican imports of U.S. cotton may even exceed the 1 million bales sold last year.

Liberalization Brings Investors, Profits

Data from Mexico’s National Textile Industry Chamber (CANAITEX) reflect the tremendous post-NAFTA progress that the Mexican textile industry has made, compared to negative growth patterns in some earlier years. NAFTA also has stimulated textile and garment manufacturing investment in Mexico, eliminating import substitution and protectionism.

CANAITEX reports another indicator of the industry’s growth and modernization: In 1997, textile machinery and equipment imports increased 85 percent over 1996.

Direct advantages provided to Mexican and U.S. producers through NAFTA:

• Duty-free and quota-free treatment to U.S.-formed and cut fabrics sewn in the Mexican maquilas (apparel assembly operations). While, prior to NAFTA, Mexican textile producers had a one-sixth market share of U.S. imports, they now claim No. 1 status, holding more than double the share of their nearest competitor, India.
• U.S. apparel imports contain significant amounts of U.S.-grown fiber. For 1998, U.S. cotton textile imports from Mexico are projected to be more than five times the pre-NAFTA level.

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The author is an agricultural economist with the Cotton and Oilseeds Division of the Foreign Agricultural Service. Tel.: (202) 720-9513; Fax: (202) 720-1171.

Cotton, Incorporated, and EFS®

Cotton, Inc., evolved from the Research and Promotion Act of 1966, which was designed to invigorate the eroding domestic market share of the U.S. cotton textile industry. Faced with a market share that had fallen from 78 to 34 percent from 1960 to 1975, the company set up a highly successful promotional campaign that enabled king cotton to regain its throne, peaking with a market share back up to 49 percent by 1987.

Besides its success in recovering market share, the company developed a sophisticated cotton fiber management system called Engineered Fiber Selection (EFS®).

The software, available under license of Cotton, Inc., uses HVI label data–on fiber length, uniformity of length, micronaire (fiber fineness and maturity), strength, color and leaf–to improve the efficiency and quality of production.

The software programs carry a bale of cotton through the entire cotton pipeline– from producer, ginner, and yarn manufacturers, all the way through dying or other finishing processes.

Last modified: Thursday, October 14, 2004 PM