During the past two decade, the availability and cost of quotas have influenced sourcing strategies of U.S. apparel companies and retailers, and investment and production strategies of Asian producers and trading companies.

      Many of U.S. firms surveyed by the U.S. International Trade Commission recently stated that quota availability and cost largely explain why they import apparel from as many as 50 or more countries, especially for heavily traded items such as tops and pants. The cost of quotas can be high and thus serve as deterrent to sourcing. For example, in 2002, the estimated export tax equivalent on the quota for Chinese knit cotton shirts was about 27 percent ad valorem and for cotton trousers it was 64 percent ad valorem.

            U.S. apparel companies and retailers surveyed indicated that they have reduced or eliminated their sourcing in Mexico, or plan to reduce their sourcing when quotas are removed, because of a number of factors that make Mexico less competitive than other suppliers. Industry sources cited rising labor costs, inconsistent quality, and problems with the reliability of production as major reasons for moving sourcing, along with concerns for the security of shipments during transit. Most products being sewed in Mexico are basics, particularly five-pocket denim jeans and knit shirts. Industry sources expressed concern that their Mexican suppliers were not able to diversify into

...Continued in the pages of Twin Plant News, Subscribe Today!