Analysts' Perspective - November 2003

— November 01, 2003

"The 2005 quota phase out will proceed as planned. However, the lack of consensus in Cancun will regrettably delay other key global trade liberalization initiatives, including an ambitious sectoral program that would have addressed the full range of tariff and non tariff barriers that still restrain the global trade in textiles and apparel and keep many U.S. branded sewn products out of developing and developed markets. The attention of U.S. negotiators and trade policy analysts will probably shift back to regional agreements, such as the U.S./Central America Free Trade Agreement (USCAFTA), which completed its 7th round during the week after Cancun. With Central America representing one of the largest sources of U.S. apparel imports and U.S. textiles exports, the importance of a swift implementation of this agreement cannot be overstated."

Kevin Burke, President and CEO, American Apparel & Footwear Associateion (AAFA)

"The failure of the trade ministers to reach agreement in Cancun on an agenda for the rest of the Doha negotiations is a setback but certainly not a death knell for the trade liberalization process, delaying the prospect of achieving tariff reductions in the apparel sector. However, bilateral and regional free trade agreement negotiations, particularly within the Western Hemisphere, now appear to have moved to the top of the U.S. government to-do list, which could mean that such preference arrangements will be a more significant factor in apparel sourcing options, assuming that duty-free provisions come into force promptly and that commercially meaningful and manageable origin rules are established. With the elimination of the quotas at the end of 2004 still firmly on track - nothing at Cancun changed that - duties will become even more important in business decision-making in 2005."

Brenda Jacobs, Sidley Austin Brown & Wood LLP

"Failure to advance the trade agreements in Cancun will make it difficult to gain closure on trade safeguards prior to the end of 2004. Without a global trade agreement, developing countries with major apparel manufacturing industries will have a difficult time competing with markets that have well-developed vertical infrastructures. We need to continue the momentum behind bilateral trade discussions, such as CAFTA, etc., to protect the American consumers. Retailers and manufacturers must develop radical new approaches to sourcing. KSA's Countdown to 2005 discusses opportunities for developing countries to compete not on price alone, but service and speed to market. A new partnership opportunity is emerging, where the American consumer and the retailer/wholesaler can win, but we must quickly develop alternative approaches to sourcing in this very unbalanced trade climate, or we will find ourselves not prepared for the inevitable global manufacturing shakeout."

Jennifer Pritchard, merchandising and Sourcing Specialist, Kurt Salmon Associates



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