NAFTA’s implementation in 1994 and the devaluation of the peso in 1995 helped Mexico become the largest foreign supplier of textiles and apparel to the United States. In 2002, however, Mexico was surpassed by China as the largest foreign supplier, largely reflecting the effects of the appreciation of the peso in recent years and the acceleration of imports from China in quota-free product categories.

      Mexico is facing growing competition in the U.S. textile and apparel market from lower cost countries in Asia and the Caribbean Basin, while the recent appreciation of its currency is effectively reducing the price competitiveness of Mexican textile and apparel products. A large part of the increased competition for Mexico in the U.S. market reflects the entrance of China into the WTO, which resulted in the elimination of certain quotas on Chinese exports to North American markets, and implementation of U.S. trade preferences for certain textile and apparel products from Caribbean Basin and sub-Saharan Africa countries.

      According to Mexican industry consultants, to remain a major supplier of textiles and apparel to the United States, Mexican firms will have to continue to shift production from low-value-added basic garments to more full-package and technology intensive products.

      The Mexican textile and apparel sector covers the entire production chain, which includes fibers, yarns, textiles, and apparel. The apparel industry is the largest segment in the textile chain, accounting for 86 percent of sector exports to the United States in 2002. NAFTA preferences and the emergence of new organizational buyers, especially retailers and brand name marketers, have led to attempts toward greater...

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