What Free Trade Agreements Bring to the US Textile and Apparel Industry

As the US textile and apparel industry continues its gradual growth, with total value of textile and apparel shipments in the US reaching $74.4 billion in 2016, US Free Trade Agreements (FTAs) plays an important role in the sector. Although these free trade agreements may have caused the shrink of the domestic manufacturing sector, they also allow the US textile and apparel exporters benefit from duty-free entry into other markets.


Several free-trade agreements are impacting the US textiles and apparel market. The US National Council of Textile Organizations (NCTO) reported that $13 billion man-made fiber, yarn and fabrics were exported from the United States in 2016, of which $4.4 billion was sent to Mexico, $1.6 billion was shipped to Canada, $1.3 billion was imported by Honduras, and another $759 million shipments went to The Dominican Republic. All of these countries are members of either the North American Free Trade Agreement (NAFTA) or the Dominican Republic Central America Free Trade Agreement (CAFTA-DR).


NAFTA—the free-trade agreement between the United States, Canada and Mexico, is an extremely important trade deal agreement for the US textiles and apparel industry. Canada and Mexico are currently the largest textiles markets in the region, but for the last 23 years, NAFTA allows a certain amount of yarns and fabric produced outside the NAFTA region to be used in apparel production within the free-trade countries. Now, President Donald Trump is planning to revamp the agreement, causing tensions with Canada and Mexico.


Another important free trade agreement for the US is CAFTA-DR, which involves the United States and a group of smaller developing economies, including Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, as well as the Dominican Republic.  The CAFTA-DR promotes stronger trade and investment ties, prosperity, and stability throughout the region and along our Southern border.


According to a report from NCTO, The US exports of fibre, yarns, fabrics, made-ups, and apparel reached $26.3 billion in 2016, with shipments to NAFTA and CAFTA-DR countries accounting for 56% of all US textile exports. In 2016, the largest exports markets for the US textile and apparel products by region are: NAFTA ($11.5bn), Asia ($7.0bn), DR-CAFTA ($3.2bn), Europe ($2.8bn) and the rest of the world ($1.8bn).


All these free trade agreements, such as NAFTA, CAFTA-DR, and the Caribbean Basin Initiative (CBI), provide that certain exports from member countries may enter the U.S. market duty-free only if they are made from textiles produced in the region. This has encouraged manufacturers in Mexico and Central America to use U.S.-made yarns and fabrics in apparel, home furnishings, and other products. Exports to NAFTA and CAFTA-DR countries contributed to a U.S. trade surplus of $1.6 billion in yarns and fabrics in 2015.


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