WASHINGTON — In the fast-shifting winds of trade these days, Miami’s position as a hub of North American apparel trade is heading for change.
Scenarios differ, though, as to what the growing level of international competition — promoted by the North American Free Trade Agreement and the pending GATT Uruguay Round treaty — will hold for Miami and its current importance as a key link to the thriving apparel assembly operations of the Caribbean.
In interviews last week, three experts underscored different elements and points of view: Charles Jainarain, international trade director of the Beacon Council, Miami’s business development group, saw the city and its Caribbean neighbors moving to a new level of high tech apparel production and a concentration on better-price goods, pulling away from direct competition with low-price imports from the Far East.
Sergio Cruz, a vice president of Kurt Salmon Associates and regional director of the consulting firm’s Caribbean and Latin American operations, forecast that as free trade spreads, Miami’s primary stand in apparel will be its entrepreneurial sewing industry for quick fulfillment of orders in fashion goods.
Apparel manufacturer Michael Rothbaum, a past chairman of the American Apparel Manufacturers Association, predicted that Miami’s future importance in the apparel industry will be primarily in financial and ancillary services.
“Once China, India and a few other such nations gain increased access to the U.S. market through the GATT’s Uruguay Round,” pointed out the Beacon Council’s Jainarain, “no country and no region will be able to produce apparel as inexpensively as they can.”
U.S. or Caribbean Basin Initiative apparel producers “can either cede their business to China and India or move towards making higher-value products and those that can take advantage of technology and mass production,” Jainarain said.
Although not a GATT member, China is seeking admission to the world trade group, something many analysts believe will be granted within a few years. The Round treaty, if approved by a majority of the 117 GATT-member nations, would phase out the MultiFiber Arrangement beginning July 1, 1995. Ten years from that date, all textile and apparel import quotas would be eliminated and import duties reduced.
Jainarain, an economist who has worked closely with Miami’s apparel industry, said U.S. and CBI-based manufacturers can compete in the post-MFA world only “by substituting capital for labor, that is, installing state-of-the-art machinery.”
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Also, he said he expects CBI producers will engage in apparel design and production of value-added goods requiring skills in leather or embroidery-working.
“The fact of the matter is that the U.S. still is the richest consumer market in the world, and I expect that there will be a significant expansion in apparel manufacturing in Miami for the domestic market,” he said. But it will be specialized.
“I fully expect that in Miami, as in the CBI region, manufacturing will be focused on the high end of the market — employing advanced equipment such as laser cutters and computer-directed assembly. In addition, the trend is toward more design of apparel and production in special niches, such as swimwear and casual tropical clothing, but aimed at the higher, value-added segments of the industry.”
Jainarain also maintained that the CBI region, which last year exported nearly $4 billion worth of apparel to the U.S. — just slightly behind the ASEAN nations as the top supplier — will not suffer either from competition with Mexico.
Under NAFTA, the majority of apparel made in Mexico eventually will be able to enter the U.S. duty free, requiring only that fabric originate and production be done in North America. In contrast, under the 807 programs of the U.S., clothing made in CBI countries requires that the fabric be cut in the U.S. to get duty breaks — and much of that is done in Miami.
However, Jainarain said: “The phaseout period for apparel duties ranges up to 15 years, and most manufacturers simply won’t pick up their equipment and move to Mexico.
“Besides,” he added, “Mexico has so much on its plate with NAFTA it won’t have the time or resources to concentrate on the type of efforts needed to build a major apparel complex for at least a few years.”
In the meantime, he, like many trade observers here, expect the U.S. will grant the CBI’s apparel producers some type of free-trade parity with Mexico.
Moreover, Jainarain said he believes Miami stands to benefit from the expansion of NAFTA to other nations — most likely Chile first, then Argentina, Venezuela, Peru, Columbia and Brazil.
“There is a reason why one-third of all CBI products come through Miami,” he said. “It’s not just our hard infrastructure of factories and ports, but what I call the soft linkages.
“For example, we have 24 foreign trade offices in Miami, 4,000 employees in freight transportation and 50 international banks that make us the nation’s third largest international banking center, and just as importantly, there are the cultural ties that facilitate doing business in the Caribbean and Latin America.”
KSA’s Cruz was not as sanguine about the prospects for fabric-cutting operations in Miami under the growing regime of free trade. “Assuming the CBI countries do get parity with Mexico, they too could get free-trade benefits by using U.S. fabrics to make apparel. The fabric need not be cut in the U.S.,” said Cruz.
“If you can get the free-trade benefit and cut offshore, where labor costs are lower and where overhead is reduced because cutting rooms are attached to sewing facilities, obviously it makes sense to do it there [rather than in Miami],” Cruz said.
The KSA official, based in Miami, nonetheless asserted its apparel industry will not disappear. “I believe there will remain a highly entrepreneurial sewing industry that will service in-season or reorders on the high fashion end of the business,” Cruz said.
Michael Rothbaum, president and chairman of The Harwood Cos., New York, also believes Miami will remain an important cog in CBI apparel trade, but not primarily because of needle skills there.
“We will continue to see a migration in production so that the very basic merchandise that is being produced today in the CBI will move to the Far East and Pacific Rim, while those goods that are less basic and subject to Quick Response and fashion will move to the Caribbean Basin,” said Rothbaum, whose company has plants in Virginia and Honduras.
At the same time, as the requirements for U.S. cutting fade under free trade, Rothbaum said he sees Miami evolving even more than it is today “into the focal point for finance and trade with CBI nations.”
“The ancillary service business in Miami will benefit by providing findings, trimmings, grading, marking, computer and communication services for these CBI countries, which are too small to have this kind of base,” he said.
Miami is a “natural place for a concentration of these kinds of things,” he added, “as it’s just two hours by air from anywhere in the Caribbean region.”
Meanwhile, the Beacon Council, which feels confident Miami’s apparel operations will adapt to the post-MFA world, is taking steps to boost the city’s share of business related to CBI and Latin American apparel assembly operations. This past year, it conducted a survey of more than 300 apparel-related firms in Dade County, which encompasses the city, to determine exactly what each does.
It is publishing booklets providing details about each firm, listing the nature of their production, capacities, work force data and facilities for accepting and executing production orders.
“The idea,” Jainarain said, “is to provide information that will allow anyone interested in CBI or Miami production to get all the information needed about this and determine very quickly which companies can do the work. It will provide names, addresses and telephone numbers. It’s very much a one-stop shopping guide.”
The Council is issuing these guides this week in conjunction with the Bobbin Show, billed as Contexpo, the Apparel Show of the Americas. Contexpo will be held at the Miami Beach Convention Center, Miami Beach, Wednesday through Friday (see related story, this page). Copies of the surveys can be obtained after the show by contacting the Council.