Handout #3
The New York Times (March 23, 2002)
INTERNATIONAL BUSINESS; In Men's Clothing, More and More of the Labels Say 'Made in Canada'
By BERNARD SIMON
It's a familiar story line. A flood of imports drives long-established American manufacturers out of business, leaving factories idle and hundreds of workers out of a job. But this time, the usual suspects -- cheap, low-quality goods from developing countries -- are not the ones being blamed for the woes of a large segment of the men's clothing industry in the United States. Instead, it is an avalanche of fashionable, well-made pants, suits and sport coats of wool and artificial fibers from, of all places, Canada.
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What are the distinctive feature of Canadian imports?
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''It seems like the casual pant business is dominated by a few Canadian manufacturers,'' said Kenneth Giddon, president of Rothman's, a men's clothing retailer whose main store is in Manhattan. Rothman's sold about 1,000 Canadian-made pairs of men's pants last year at an average price of about $160.
Though the seeds for the Canadian invasion were planted more than a decade ago, the effects have become more apparent in the last few years as pressure on the American clothing industry has grown.
The Canadians got their first break from a 1988 free trade treaty with the United States, followed six years later by the North American Free Trade Agreement, which also includes Mexico.
Besides ending most customs tariffs among the three countries, Nafta gave a special bonus to Canadian and Mexican clothing factories. Under Nafta's rules of origin, most kinds of goods qualify for duty-free access to the United States only if they are made predominantly from North American raw materials. But garments made in Canada or Mexico get in duty-free even if the fabric they are made of originated in another country, like Italy, Germany or Turkey.
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This gave Canadian makers of woolen suits ''a free run at the American market far beyond their wildest dreams,'' according to Gordon Ritchie, Canada's chief Nafta negotiator, who wrote of the provision in his 1997 book ''Wrestling With the Elephant: The Inside Story of the Canada-U.S. Trade Wars.''
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Little happened at first, but by the late 1990's, the American manufacturers were starting to worry. The Tailored Clothing Association, a lobbying group of American manufacturers that was formed in 1999, estimates that the volume of men's woolen suits, jackets and pants entering the country from Mexico and Canada almost doubled from 1995 to 2000, and the two Nafta countries are now America's No. 2 and No. 3 sources of imported pants and suits, after Italy. Most recently, the Canadians have begun increasing exports of men's shirts.
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United States production of woolen suits, jackets and pants has fallen by more than 20 percent since 1995, and casualties have been mounting. The Pietrafesa Company, for instance, a manufacturer based in Syracuse, closed two years ago, laying off 1,000 workers at factories in upstate New York and Kentucky. In early 2001, Pincus Brothers of Philadelphia closed the city's last remaining men's clothing factory.
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By contrast, Canadian manufacturers that export to the United States -- there are half a dozen principal companies -- have been modernizing and expanding.
Herschel Victor, chairman of Jack Victor Ltd. in Montreal, said the United States now accounted for three-quarters of his company's sales of sport coats, suits, tuxedos and pants, up from 5 percent in 1994. The work force at Jack Victor has expanded from 300 to 800. Pincus Brothers, which now makes all its garments outside the United States, is producing suits and sport coats in Canada.
The Canadians ''saw Nafta as an opportunity, and made sure they had a piece of it,'' said Richard Pietrafesa, who was chief executive of the Pietrafesa Company and now works for a real estate developer in Syracuse. ''The American market came to accept 'Made in Canada' as equal to 'Made in the U.S.' ''
Mr. Pietrafesa said that American clothing manufacturers were unable to unite to protect their interests until recently. ''We were not an industry that worked together at all,'' he said. ''When Nafta was evolving, we should have been there.''
A big part of the cost advantage of Canadians in the 1990's came from another facet of American trade law, a 36 percent duty levied on fabric from non-Nafta countries -- a provision meant to protect American textile mills from cheaper imports. Canada imposed duties of only about 6 to 8 percent on imported fabric.
Where did the cost advantage of Canadian men’s clothes manufacturers come from?
''It didn't matter how competitive you were on labor,'' Mr. Pietrafesa said. ''The rub was always the fabric issue.'' The pricing by the Canadians ''for comparable quality suits was just so compelling,'' he added.
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Prodded by American clothing makers, the United States reduced the fabric tariffs in 2000, to a range of 6 to 19 percent, depending on the type of material. But Canada responded with tariff reductions of its own last year, in many cases eliminating duties altogether.
The Tailored Clothing Association has asked the Bush administration to let its members import more woolen fabric at lower tariffs, because the handful of surviving textile mills in the United States cannot make enough of the fabric they require. Under the present customs rules, they say, it is more attractive to import finished garments than the textiles to make them.
Canadian manufacturers have also benefited from the steady weakening of the Canadian dollar from 80 American cents in the early 1990's to just 63 cents now, effectively making their labor and other costs cheaper in American-dollar terms.
And they have won respect for their products and their service. ''They've done a really good job of understanding the market, seeing the niche and going after it,'' said Mr. Giddon of Rothman's.
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William Blum, president of Butch Blum, a clothing retailer in Seattle, said that he began ordering men's trousers from the Coppley Apparel Group of Hamilton, Ontario, about 18 months ago, and now relies on Coppley for about 10 percent of his supply.
Coppley, which has been shipping trousers to the United States for a decade, makes 40 percent of its sales there, said Richard Pihlainen, the company's product manager. Mr. Blum said that dealing with the Canadians had been very gratifying. ''Anytime there's any kind of problem, no matter how big or small, they attend to it immediately,'' he said. ''There's no question that we're going to continue doing business with Canada, and even buy more.''