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Mexico

Though fairly substantial and growing, the share of India exports in the overall imports of Mexico under textiles and clothing is negligible at just about 0.5 per cent. This also speaks for the kind of potential, which is available and could be explored by Indian companies.

With a population of 100 million, a per capita income of a little over US$ 6000, coupled with other factors, the Mexican market has become one of the most attractive in the viewpoint of trade and investments.

In the last nearly one decade, specially following the signing of NAFTA in 1994, the Mexican economy has achieved unprecedented growth, stability and consolidation on nearly all fronts. The current estimated GDP of more than US$ 600 million is the largest in Latin America.

The textiles and apparel industry in the country is concentrated in central and north eastern parts of the country viz. Mexico city and states of Mexico, Puebla, Hidalgo, Tlaxcala, Jalisco, Nuevo Leon, Guanajuato and San Luis Potosi. The industry has traditionally contributed about two per cent of the national GDP whereas between eight-nine per cent of the manufacturing. In terms of growth, this sector has been growing slightly slower than the general growth trends. Ever since the signing of NAFTA, the growth in textiles and apparel industry has been mainly driven by export processing segment (Maquiladora), During the period 1993-2000, Maquiladora registered a growth of nearly 20 per cent per annum whereas the rest of the industry nearly stagnated with a growth of 0.7 per cent per annum.

The textiles and apparel industry employs a total of nearly 750,000 workforce in more than 17,000 manufacturing units, of which less than four per cent are large units, 15 per cent medium and more than 81 per cent are small and micro enterprises.

The textile industry is one of the traditional occupations in Mexico. Mexico is quite well known for cotton products, mainly the long staple cotton. Cotton looms are designed to produce fabrics with a width ranging from 140 to 300 centimeters. The knitting industry in Mexico has nearly 20,000 circular knitting machines, more than 2,000 warp knitting machines and some 4500 machines based on rectilinear technology. In woollens, Mexico has fairly advanced technology comparable to European standards. The wool stocks are normally imported from a wide range of sources. The basic wool is eventually converted into superior wool and wool blend fabrics for apparel as well as woollen carpets.

Mexico also has huge indigenous capacity to produce of petroleum and petrochemicals, and the country can produce synthetic fibre, yarn and fabric at highly competitive prices. With regard to spinning, Mexico has some 3.5 million spindles. For carpets and rugs, the capacity is over 10 million sq meters produced in more than 100 looms. The country is also known for handmade carpets.

The apparel industry in Mexico is both vertically and horizontally integrated for maximising returns. Strong laws protecting patents, design and brands play an important role in attracting foreign investment in the apparel industry. Joint ventures and investments in apparels have also been greatly enhanced by the wide network of free trade agreements, which Mexico has signed with more than 30 trading partners.

Textile trade

In the post-NAFTA period, textile exports have registered an average annual growth of nearly 27 per cent, which was much higher than the overall growth rate of 18 per cent. The items, which have registered an extraordinary growth, included woollen knitwear and readymade garments with an average export growth of 30 per cent. Export of vegetable and synthetic fibres and related products registered an average growth of 17.5 per cent. As regards composition of the export basket, it is dominated by garments, which contribute nearly 64 per cent followed by different types of fibres with a share of some 18 per cent.

Chapters 61 and 62 alone are responsible for more than 70 per cent of total exports. Other chapters, which are important, include 63, 54, 52 and 55. Imports are driven by such chapters as 52, 54, 61 and 62. Other important segments fall under chapters 55, 56, 58, 59 and 60.

For obvious reasons viz duty and quota-free access, proximity and joint ventures, the Mexican trade in textiles and clothing is dominated by the two other NAFTA partners - USA and Canada. USA accounts for some 60 per cent of export in textiles, 95 per cent in readymade garments and over 90 per cent in other made-ups. The remaining share is accounted for by Chile (another FTA partner), Canada, Argentina, UK, Brazil, Italy and Cuba, etc.

USA and Canada, put together, are the principle engines for global textile trade. Mexico has definite advantage in these two markets. Most of the duty and quota restrictions have already been eliminated on Mexican textiles/ clothing exports. Currently, the US applies nominal duties on chapter 54 (3.4 per cent), 57 (2 per cent), 58 (1.68 per cent) , 59 (1.32 per cent), 61 (3.4 per cent), 62 (4.4 per cent) and 63 (1.44 per cent). Canada applies duties only on two chapters: 61 (5 per cent) and 62 (6 per cent). All these restrictions are to be completely eliminated by 2004.

Role of textiles in bilateral trade

Textiles and clothing have always been playing an important role in Indian exports to Mexico. In the year 2000, textiles and clothing contributed nearly 19 per cent in our overall export basket and in the year 2001, the share was around 16 per cent. Exports under this sector have also registered substantial growth in recent years: 55 per cent in the year 2000 and nearly 25 per cent in 2001. The overall export figure for textiles and clothing in the year 2001 was US$ 61.6 million. Chapters 61 and 62 have traditionally accounted for a major share, nearly 65 per cent in the year 2001. Though fairly substantial and growing, the share of India’s exports in the overall imports of Mexico under textiles and clothing is negligible at just about 0.5 per cent. This also speaks for the kind of potential, which is available and could be explored by Indian companies.

The segments at four-digit level where Indian exports have been more than US$ 200,000 in the year 2001 have been analysed with the total import market size for the last three years to give an idea of the potential sectors.

The important items have been further analysed at eight-digit level, providing information on Indian export performance, other competitors, preferential duty arrangements with FTA partners and the applicable duty rates on Indian exports.

Trade promotion measures

Considering geographical distance, lack of direct shipping facilities, language problems and little mutual awareness, an annual export of over US$ 60 million in textiles and clothing may be considered as substantial.

There has been a growth of 77 per cent in textile exports over the last two years. However, India still represent just about 0.5 per cent of the overall Mexican textile import market. If India targets this market in a focused and systematic manner, India can increase market share by several-folds.

On one side, India needs to continue pursuing those chapters where it has performed well and explore means to promote those segments, which have shown signs of growth.