Norms of mexican textile industry economics essay

4. 1. 1 Introduction

Mexico had a huge upswing in 1990s after entering into NAFTA (North America Free Trade Agreement) with Canada in 1994, becoming the world’s one of the largest textile manufacturers. With the NAFTA agreement the sales hiked and Mexico attained large chunk of market share. It assumed to provide US with the biggest Textile and Apparels market, but with Asian and Central American markets becoming cheaper, envisages did not turn out to be that fruitful. Over the past decade, Mexico’s textile sector has derived some of its greatest benefits from tariff reductions that resulted from the country’s numerous free-trade agreements. That’s especially true in the U. S. market, where Mexico has been the leader for years. However since 2000, Mexico is facing budding competition from China. This Asian gigantic has given headaches not only to the textile sector but to most Mexican productions, taking a lead in the market share of U. S. textile markets.

Mexico’s industrial policy and economic performance under import substitution (1940-1984)

From the 1940s until the second half of the 1970s, Mexicoís economic development was based on strong state intervention to foster industrialization through import substitution. The policy regime focused on the provision of moderate levels of effective protection to manufacturing with a limited, albeit ad-hoc and increasing, dispersion of tariff rates across industries. Trade protection measures included the requirement of permits prior to importation, setting official prices on certain imported goods, and outright bans on the import of a number of products purchased abroad. FDI was heavily regulated; it was accepted as a minority partner only in non-strategic areas of manufacturing, and excluded from the rest. Industrial policy operated through sector-specific programs, with the aim of building up a manufacturing sector capable of producing capital goods and somewhat complex intermediate inputs (Ros, 1994). To achieve this goal, tax cuts and trade restrictions were implemented, with strict requirements regarding, for instance, the degree of local content and net-export performance. The most successful sectoral programs included those of the auto, computer and pharmaceutical industries (CEPAL, 1979). These policies were complemented by intervention from state-owned companies to carry out investment projects that the private sector could not or would not undertake, such as the supply of strategic or basic intermediate inputs. In addition, a number of public enterprises were created through the Mexico: Economic growth, exports and industrial performance after NAFTAPurchase or expropriation of private firms either for security reasons or to avert bankruptcies and maintain employment (Rogozinsky, 1997). By 1982, the 1, 155 state-owned companies (not counting the recently nationalized commercial banks) had intervened in forty-one of the forty-nine branches of industrial activity. In some of these, they exercised significant market power (SHCP, 1994). A fundamental element of Mexico is industrial strategy was, and still is, the maquiladora program. This was initiated in 1966, partly to compensate for the elimination of the bracer program that had allowed Mexican farm workers temporary entry to the US. Its objective was to stimulate the establishment of labor-intensive, in-bond export processing plants (known as maquiladoras) along the northern border region, by offering them tax-free access to imported inputs and machinery, as well as exemption from sales tax (now VAT) and income taxes. In order to avoid a negative impact on local production, the program limited the maquiladoras’ sales in the domestic market to a low percentage of total sales. There were a number of other instruments also used to give fiscal incentives to exporters, including the Certificates for Tax Returns (Cedis) and the Certificates for Fiscal Stimulation (Ceprofis). In addition, development banks and some public entities, as well as private banks, granted subsidized financial support for industrial activities. However, these activities suffered from rather slack follow-up and supervision. During the import substitution phase, Mexicoís manufacturing sector thus received government support through four different channels1) artificially high wholesale prices of final products sold in the domestic market, due to trade protection; 2) low costs of key inputs, energy and other utilities due to subsidies and tax incentives; 3) subsidized credit from development banks, certain public entities, and the private banking sector; and 4) tax exemptions on certain imports of machinery and equipment (Moreno-Brid and Ros, 2004). The strategy was, on the whole, quite successful. It transformed the country from an agrarian to an urban, semi-industrial society. From 1940 to the mid 1970s, Mexicoís real GDP grew at an average annual rate of 3. 1% per capita. Manufacturing was the driving force of this growth process, with output expanding at a yearly average of nearly 8%, boosted by dynamic domestic demand. In this period the share of manufacturing in GDP rose from 15% to 25%. Nevertheless, in designing and applying this strategy, a number of obstacles on the nationís road to development were underestimated. The first of these was the uneven distribution of economic growth benefits. Second, was the failure to implement a fiscal reform that would strengthen tax revenues and thus reduce the public sectorís dependence on external debt. Third, with the exception of the maquiladora program and the small number of special development sectoral programs described above, there were few policies in place to efficiently promote exports. These limitations proved fatal. In the late 1970s, Mexicoís economic expansion lost momentum, slowed down especially by difficulties in substituting imports of high-technology capital goods. Public expenditure became the engine of growth. In 1977 the government launched an ambitious development program funded by the vast inflow of oil revenues and by external debt. This oil-driven boom was short-lived. Fiscal and foreign exchange revenues, increasingly dependent on petroleum exports, became very vulnerable to external shocks. In turn, imports of intermediate and capital goods rapidly swelled, causing a bulging trade deficit. The collapse of the international oil market in 1981, coupled with the rise in US interest rates, triggered a twin fiscal and foreign exchange crisis in Mexico which, in August 1982, forced President LÛpez Portillo to declare a moratorium on external debt service payments. This action ended Mexicoís forty-year economic expansion, and was the catalyst for a series of economic reforms directed towards positioning the private sector and market forces as the pivotal agents of investment and industrialization.

4. 1. 2 The Evolution of the Internal Institutional Framework

From the Mexican Revolution to the New Labor Culture

Current Mexican labor law, derived from Article 123 of the 1917 Federal Constitution and its 1931 regulations (collectively, the Federal Labor Law, LFT12), reflects the context in which it was forged, i. e., the Mexican Revolution. It was developed to correct social inequalities by protecting the vulnerable worker confronted with his or her presumably more powerful employer. The rights granted to wage earners were inspired by those offered by more developed countries, without taking into account the comparative backwardness of Mexico’s productive forces. The generous constitutional guarantees presented government authorities with the immediate problem of finding a means of implementation that allowed capitalist development, without openly breaking with the 1917 Constitution and going back on social protections, as company owners demanded.

The contradiction within the Mexican model of regulation

The Mexican model of labor regulation has been undermined by the high cost of compliance13 and the low cost of failure to comply. As a practical matter, poor monitoring and enforcement of regulations effectively annul the cost of failure to comply by leaving an employer’s violations unpunished.

4. 1. 3 Legal protection of workers

Scope of constitutional and legal (LFT/LFTSE) protection

workers in the clothing industry enjoy the same rights as other workers. However throughout the last two decades, Article 123 of the Mexican constitution has been unable to curb abuses in the clothing industry, as evidenced by the fact that 62% of wage earners engaged between 2000 and 2004 did not receive legal benefits. 14 In practice, companies in the clothing industry often avoid Article 123’s requirements through the use of clandestine workshops and home-based labor.

4. 1. 4 Individual Rights

Employment contracts

Mexican labor law imposes severe restrictions on contractual freedom, promoting permanent employment by seeking to eliminate the employer’s discretion with respect to its duration. The general rule, in theory, is that labor relations continue indefinitely. However these principles have little to do with actual practice. For example 20% of the jobs registered with Mexico’s social security system between April 2004 and April 2008 were of a contingent nature.


Mexican labor law is one of the strongest in Latin America in regards to protecting rights related to employment security. Paradoxically, the turnover rate in Mexico is among the highest in Latin America, exceeding 40% annually. The turnover rate in Mexico’s clothing industry is even higher, reaching an annual average of 60%. This statistic suggests legal mechanisms to provide employment security simply do not function in an industry dependent upon international brands and characterized by high geographic mobility and poor working conditions.

Cost of dismissal and collective termination (closures)

Almost 95% of all individual labor disputes stem from arbitrary dismissal. Mexican labor law does not require a ” notice” period for termination, although a written letter of dismissal should be provided. Research shows that severance pay is one of the biggest issues in factory closures or reduction of a company’s activities. Workers are entitled to 20 days pay for each year of employment in those cases where workers do not have the right to be reinstated, as well as three months salary. The highest severance sum established by legislation (four months’ salary plus 20 days a year) applies when termination is due to introduction of machinery or new labor procedures, which may discourage innovation. In Aguascalientes and Yucatan, employers have often reached agreements with workers allowing them to avoid severance payments, on the understanding that the workers would be reemployed at some later point.

Evading legal obligations

Companies may thwart workers’ legitimate severance claims by requiring workers to sign resignation letters (when commencing their employment contract) and changing registered corporate names, which in turn allows them to evade labor and fiscal responsibilities by creating uncertainty as to the legal identity of the employer. Subcontracting regulations, designed to avoid the evasion of labor responsibilities by contractors, are difficult to enforce due to the deficiencies in the labor justice system.

Regulation in matters of working conditions

Mexican labor law includes guarantees against the unilateral modification of working conditions by employers, however, as with many other workers’ rights, enforcement is weak or non-existent. A survey in Aguascalientes and Yucatan found business owners generally covered the legal minimum salary payments, but at least 15% of workers received neither bonuses nor holiday pay. The survey also identified a significant number of companies with serious deficiencies in health and safety conditions and no functioning Worker/management health and safety committees.

Female labor and gender equity

Women are a growing presence in the labor force, but occupational segregation and salary differences continue to negatively impact women’s work situations and opportunities. Although payment of maternity leave benefits and nursery services are provided by the government social security program (Seguro Social) based on an employer’s previous contributions, independent of a specific maternity occurrence, the perception remains that women saddle employers with female-specific costs, such as maternity leave. As a result, although this practice is illegal, some employers do still demand proof a woman is not pregnant at the time of hire and throughout the employment relationship.

Home-based labor

Home-based labor is meticulously regulated in Mexico, however, due to the absence of a strong and effective enforcement apparatus, good regulations have not resulted in better protection for home workers. Numerous studies document the deplorable conditions of home-based labor. For instance, in Yucatan, pay for home-based workers does not meet individual needs and fails to meet the legal minimum.


Mexican labor law provides considerable flexibility with respect to the means of setting salaries (e. g. unit of time, unit of work, commissioned work). The National Committee of Minimum Salaries (CNSM) sets minimum salaries through a tri-partite structure, which includes representatives from government, employers and labor unions. The union representatives are typically from the large union federations allied to both the employers and the government so as to make worker representation illusory. Salary policy has been restrictive since 1976, and according to different estimations, real wages have declined more than 70%. Salaries in the MEI’s clothing sector tend to fluctuate between one and three minimum salaries and are lower than those in the textile sector. Home-based workers are paid per item and in practice can earn less than one minimum salary.

Non-salary compliance costs

Mexico’s non-salary labor costs (payroll taxes, severance pay, bonuses) are on the high end when compared to those in other Latin American countries. Brazil is the only country with higher labor costs. Because non-salary costs generally outweigh productivity in the clothing industry, companies tend to subcontract production to clandestine or home-based workshops, which offer workers no fringe benefits or social security.

4. 1. 5 Protection of collective rights

Mexican labor law supposedly favors trade unions and collective action as the primary means for the improvement of workers’ situations, however, state control over trade union registration and recognition has effectively impeded the development of independent unions, particularly in the last 10 years.

Trade union power and collective bargaining

Mexican trade unions, once registered and recognized, possess powers allowing them to expand and impose collective negotiation on their employers. However, ” protection contracts” with ghost unions, a widespread practice in the maquiladora clothing industry, effectively undermines independent trade unions and true collective action.

Union autonomy vis-à-vis the state and employers

Mexican labor law does not fully guarantee union autonomy. Indeed, the registration procedure for trade unions gives government’s considerable discretion in the recognition of trade unions and in the granting of prerogatives which derive from registration and recognition. Employers also have a great influence in choosing their counterparts in Collective negotiation.

Democracy within trade unions

Generally trade unions have been designed to concentrate power at the leadership level rather than to guarantee internal democracy for worker all levels. To improve the quality of union representation, workers must be provided with the means to freely choose their leaders, demand transparency, manage resources, and influence strategy.

Scope of the right to strike

The Mexican Constitution guarantees the workers’ right to strike. Strikes may last indefinitely and no obligatory arbitration exists, but a JCyA with relevant jurisdiction may declare a strike ” illegal,” ” unjustified” or ” non-existent” on a thin pretext, thus requiring workers to return to their jobs or face dismissal.

Scope of union participation

Mexican labor law grants institutional power to trade unions, as well as ample representation in the state apparatus, but it does not allow for significant participation within company administration or management systems.

4. 1. 6 Mexican Official Norm


Commercial information: Labeling for textile goods, clothing, and accessoriesNOM-020-SCFI-1997

Commercial information: Labeling for leather, tanned natural hides, synthetic or artificial looking materials, and leather goods, as well as products made of such materials. NOM-024-SCFI-1998Commercial information: Packing material, instruction manuals. NOM-050-SCI-2004Commercial information: General product regulations.


4. 2. 1 Introduction

SEBI is also aiming to change Clause 49 of the listing agreement between companies and stock exchanges to align it with the proposed Companies Bill. Listing agreement deals with the rules that all listed companies should adhere to remain listed on the bourses. These rules, although aimed at making the Indian market a safer place in terms of corporate governance, could lead to shortage of good independent directors since remunerations for these people may not commensurate with the duties and responsibilities, practitioners in the corporate field said. Sebi’s paper proposed that all independent directors should be appointed by minority shareholders only and also suggested that there could be proportional or cumulative voting while electing such directors. In India, proportional voting is done while electing the President. It also proposed the position of a lead independent director in each company. Sebi also proposed that while resigning, an independent director should disclose the reasons for his/her decision. ” It has been suggested that the reason for the resignation of the independent director should be submitted to the Board of the company which in turn should circulate the same to shareholders and inform the stock exchange in this regard,” the Sebi paper said. Although professionals from the corporate advisory field lauded Sebi’s moves to adopt global best practices, they feel some of the proposals are too stringent, and the issue about remuneration packages for the directors should also be looked into. ” The rules will better the corporate governance process in the country, but they look too stringent,” said Pavan Kumar Viajy, MD, Corporate Professionals, a Delhi-based corporate legal and financial advisory firm. ” Also, Sebi should be clear about the remuneration package for such directors. Otherwise these strict clauses could emerge to be a deterrent in getting good independent directors,” Vijay, who also sits on the boards of some of the companies as an independent director

4. 2. 2 Government Policies Relating to the Textile Industry in India

The Indian textile industry is one of the largest industries in the world. The Ministry of Textiles in India has formulated numerous policies and schemes for the development of the textile industry in India. Some of them are detailed in the following sections.

National Textile Policy

The National Textile Policy was formulated keeping in mind the following objectives: Development of the textile sector in India in order to nurture and maintain its position in the global arena as the leading manufacturer and exporter of clothing. Maintenance of a leading position in the domestic market by doing away with import penetration. Injecting competitive spirit by the liberalization of stringent controls. Encouraging Foreign Direct Investment as well as research and development in this sectorStressing on the diversification of production and its up gradation taking into consideration the environmental concerns. Development of a firm multi-fiber base along with the skill of the weavers and the craftsmenSuch goals are set to meet the following targets: The size of textile and apparel exports must reach a level of US $50 billion by the year 2010. The Technology Up gradation Fund Scheme should be implemented in a strict manner. The garments industry should be removed from the list of the small scale industry sector. The handloom industry should be boosted and encouraged to enter into foreign ventures so as to compete globally. The National Textile Policy has also formulated rules pertaining to certain specific sectors. Some of the most important items in the agenda happens to be the availability and productivity along with the quality of the raw materials. Special care is also taken to curb the fluctuating price of raw materials. Steps have also been taken to raise silk to the international standard


To comprehend the purpose of textile industry that is to provide one the most basic needs of the people and promote it’s sustained growth to improve the quality of life. To acknowledge textile industry as a self-reliant industry, from producing raw materials to delivery of finished products; and its major contribution to the economy of the country. To understand its immense potentiality for creating employment opportunities in significant sectors like agriculture, industry, organized sector, decentralized sector, urban areas and rural areas, specifically for women and deprived. To recognize the Textile Policy of 1985, which boosted the annual growth rate of cloth production by 7. 13%, export of textile by 13. 32% and per capita availability of fabrics by 3. 6%. To analyze the issues and problems of textile industry and the guidelines provided by the expert committee set up for this specific purposeTo give a different specification to the objectives and thrust areas of textile industryTo produce good quality cloth for fulfilling the demands of the people with reasonable prices andTo maintain a competitive global market

Thrust areas

Government of India is trying to promote textile industry by giving emphasis on several areas of textile, which are as below: Innovative marketing strategiesDiversification of productEnhancement of textile oriented technologyQuality awarenessIntensifying raw materialsGrowth of productivityIncrease in exportsFinancing arrangementsCreating employment opportunitiesHuman Resource Development


Government of India has set some targets to intensify and promote textile industry. To materialize these targets, efforts are being made, which are as follows: Textile and apparel exports will reach the US $ 50 billion mark by 2010All manufacturing segments of textile industry will come under TUFS ( Technology Upgradation Fund Scheme)Increase the quality and productivity of cotton. The target is to increase 50% productivity and maintain the quality to international standardsEstablish the Technology Mission on jute with an objective to increase cotton productivity of the countryEncourage private organization to provide financial support for the textile industryPromote private sectors for establishing a world class textile industryEncourage handloom industry for producing value added itemsEncourage private sectors to set up a world class textile industry comprising various textile processing units in different parts of IndiaRegenerate functions of the TRA(Textile Research Associations) to stress on research works

Government policy on cotton and man-made fiber

One of the principal targets of the government policy is to enhance the quality and production of cotton and man-made fiber. Ministry of Agriculture, Ministry of Textiles, cotton growing states are primarily responsible for implementing this target.

Information Technology

Information technology plays a significant role behind the development of textile industry in India. IT (Information Technology) can promote to establish a sound commercial network for the textile industry to prosper.

Human Resource Development

Effective utilization of human resource can strengthen this textile industry to a large extent. Government of India has adopted some effective policies to properly utilize the manpower of the country in favor of the textile industry.

Financing arrangement

Government of India is also trying to encourage talented Indian designers and technologists to work for Indian textile industry and accordingly government is setting up venture capital fund in collaboration with financial establishments.


Some of the major acts relating to textile industry includeCentral Silk Board Act, 1948The Textiles Committee Act, 1963The Handlooms Act, 1985Cotton Control Order, 1986The Textile Undertakings Act, 1995Government of India is earnestly trying to provide all the relevant facilities for the textile industry to utilize it’s full potential and achieve the target. The textile industry is presently experiencing an average annual growth rate of 9-10% and is expected to grow at a rate of 16% in value , which will eventually reach the target of US $ 115 billion by 2012. The clothing and apparel sector are expected to grow at a rate of 21 %t in value terms.

4. 2. 3 MP plans to ease pollution norms for textile units

Aiming to attract investments in textile sector, Madhya Pradesh government is contemplating to ease pollution control norms. Acting on the demands of textile industry, the government has sought opinion of the state Pollution Control Board ( MPPCB) on the idea of allowing textile mills to drain out untreated water. The state industrial advisory council, headed by chief minister Shivraj Singh Chouhan, has reportedly supported the idea. Sources said the state government, which is looking forward to attract an investment to the tune of Rs 10, 500 crore in textile sector for increasing its installed spindle capacity, is apparently under pressure to ease restrictions, including anti-pollution norms. Textile sector has reportedly pointed out to the state government that similar relaxations have been extended to this thrust sector by some other states also. However, the state pollution control board is firm on its stand of ” zero discharge” of industrial waste, despite pressure from the state government, insiders claimed. When contacted, State pollution control board chairman NP Shukla told TOI ” The board has been following Central Pollution Control Board (CPCB) norms of not allowing release of industrial wastes”. N P Shukla said, ” It’s for the state government to take a final call. As far as Pollution Control Board is concerned, we do not wish to relax any norms for industries, including for textile sector,” he added. In order to thrash out the issue, sources said a joint meeting of Housing and Environment and Industries department is scheduled for Monday in which chief minister Shivraj Singh Chouhan will be present. Meanwhile, the state PCB wants the government to promote Common Effluent Treatment Plant (CETP) concept for the industries for which soft loans and subsidies are available. Installation of the CETP can help solve the problem of water treatment of a cluster of industrial units. Beneficiaries have to incur just 10 per cent of its installation cost. It is being felt that government department is reluctant to promote the CETPs as it would have to provide land free of cost for the purpose in the industrial area concerned.

4. 2. 4 Rules and Regulations textile industry in india


In the interpretation of these Rules & Regulations the following words and expressions shall have the following meanings, unless repugnant to the subject or context:” Association” means the Textile Association (India) established as aforesaid.” Rules 8s Regulations” means Memorandum and the Rules & Regulations of the Association framed by the Governing Council from time to time.” Textile Industry” means all sectors of Textile industry and shall deem to include organized mills Power looms, handlooms, knitting, silk, woo lien. Jute and garments sector etc.” Textile Manufacturing” includes textile manufacturing, processing, garment making, designing, management and marketing.” Governing Council” means the council of the Association constituted by the elected representatives of its Units to administer the affairs of the Association.” Standing Advisory Committee” means the committee constituted by the President of Association as herein after provided.” Member” means any Honorary, Patron, Life, Ordinary or Organizational member including overseas and student member of the Association for the time being.” Member” word imparting masculine gender which also includes the feminine gender.” Register of Members” means the Register of all types of Members to be kept under Rules at Central Office.” Central Office” means the administrative headquarters of the Association.” Logo” means the symbol of the Association.” Financial Year” means April to March.” Term of Governing Council” means the date from which the Governing Council takes over the charge till it hands over to the newly elected Governing Council after two years. Singular number – word imparting the singular number include plural and vice versa.

Membership and fees

(a) Eligibility of Membership

The Membership of the Association shall be open to those falling under one or more of the following categories: Those engaged in technical, supervisory, administrative or managerial capacities in textile mills, power looms, handlooms, knitting, art silk, silk, woolen and jute Units of the industry and those employed in manufacturing and Trading of Textile Machineries, Fibers, Dyes, Chemicals and Auxiliaries connected with Textile Industry having a minimum qualification of graduation or diploma. Those engaged on the technical or administrative staff of any recognized Textile bodies. Technological or Research Institutes or Laboratories and those working as textile consultants. Those working as Textile Journalists connected with textile and allied periodicals and publications. All those qualified in Textile from universities, polytechnics and other technical institutions recognized by the Governing Council of the Association from time to time. Those who had worked at sometime or other in past in any one of the capacities enumerated in (i) or (ii) above.

(b) The student membership shall be open to those falling under one of the following categories:

Student of recognized Textile or Technological Institutes studying diploma or degree courses. Person working in Textile Industry or laboratories or Research Institutes not falling under the Regulation 2 (a) but desiring to enhance his qualifications by appearing ATA Examination for which he is eligible.

Class of membership

There will be seven classes of members: a. Honorary MembersThe Governing Council is authorized to award Hon. Membership to a person in recognition of his outstanding services rendered by him for the advancement of Textile knowledge and/or Textile Technology or served the cause of textile industry, after taking into consideration the recommendations of the affiliated Units provided, however that not more than one person shall be awarded Hon. Membership during one year. Such person after the award shall be deemed to be Hon. Member for Life and shall enjoy the same status and rights as Patron Member. b. Patron MembersPersons eligible to become member under Rule 2 (a) can be enrolled as Patron member by paying fees as per bye-laws. A Life Member can become a Patron member on payment of fees as per bye-laws on completion of five years as Life Member. c. Life MembersPersons eligible to become member under Rule 2 (a) can be enrolled as Life Member by paying fees as per bye-lawsd. Ordinary MembersPersons eligible to become member under Rule 2 (a) can be enrolled as Ordinary Member by paying annual subscription as per bye-laws. e. Overseas Members – Class AA Member of the Association who leaves the country to serve or do business in any part of the world or decides to settle permanently in other country and if he desires to receive notices of the meetings, other communications and journals etc., from headquarters he will be required to pay annual subscription as per bye-laws and his membership will be attached to the Central Office as overseas member Class-A. Overseas Members – Class BAny Indian or foreign national who has obtained degree/ diploma from Indian Universities/Institutions or foreign Universities/Institutions and is settled in other countries, will be eligible to become member of the Association provided he fulfills the eligibility criteria given in Rule 2 (a) on payment of annual subscription as per bye-laws and will be attached to the Central Office as overseas member Class B. f. Organisational MembersThis membership will be open to the Textile Units. Fibre manufacturers. Textile machinery manufacturers. Dyes, Chemicals and Auxiliary manufacturers etc., connected with the Textile Industry and Textile Research Institutions and Laboratories. The Organisational Membership shall be for ten years and its fees shall be as per bye-laws. Such organisational members will have a right to depute two persons for participating in the activities organised by the Association. Such nominees will enjoy all the facilities of Life Membership. g. Student Members • Class-AA student of the recognized Textile or Technological Institutes can apply with a letter from the Head of his Institutes certifying that he is a bonfire student of the Institutes. Every year while renewing his membership, the student member will have to produce similar certificate. His annual membership fees will be as per bye-laws. Student Members – Class – BA person working in Textile Industry or Laboratories or Research Organizations or other organizations (recognized by the Association) desiring to appear for ATA Examination can enroll as a student member (Class-B) provided that he has passed SSC or equivalent examination with English, Math, Physics’ and Chemistry. Such Member will have to appear for ATA Examination within a period of two years of his membership, otherwise his membership will not be renewed. His annual membership fees will be as per bye-laws. The eligibility criteria of membership mentioned above will have to be verified and confirmed by the Units at the time of the application except in the case of members already on the roll of the Association as on the date of the amendments to these Rules become effective. But in case of ordinary members such verification will be done every year at the time of renewal of his membership. The Governing Council shall from time to time frame Rules for entrance and membership fees which shall be finally approved by the General body. Persons or organizations fulfilling the eligibility criteria or conditions mentioned in Rule 2 as the case may be is desirous of becoming member of the Association shall apply in the prescribed form of the Association supported by 2 members having 2 years membership of the Association. The admission of the membership shall be governed by the procedure of enrollment of membership as per the bye-laws. Persons becoming member of the Association except 5 (a, b & f) will pay an entrance fee as per bye-laws. While changing membership from one class to another class no entrance fee will be charged. Entrance fees will be credited to the Central Reserve Fund. Ordinary Members admitted to membership of the Association from 1st April of a financial year or thereafter shall pay full annual fees and the fees so paid will be accounted for the current financial year and his membership will be valid up to 51st March of the said financial year. Every member of the Association shall be attached to any one of the affiliated Unit, preferably of the area in which he resides or work at the moment. In case he moves to another area thereafter he may transfer his membership to the Unit of that area in which he then resides or works. Such transfer can be made provided that the Central Office is informed accordingly. Mo fees shall be charged for such a transfer. Student members, overseas members and the persons nominated by the organizational members will be entitled to attend all the functions and General Body meetings of the Association but will not be eligible to vote at the meetings or stand for the election of the Governing Council or Managing Committee of the Units of the Association. A person/organizations being admitted to the Membership of the Association, he or the nominees of the organizations will be deemed to have agreed to abide by the rules and regulations and bye-laws of the Association that may come into force from time to time. Members shall continue to enjoy all rights as Patron or Life Members during their life time as the case may be. Patron Members will be given badges with logo of the Association showing their membership of the Association. Badges will be provided by the Central Office. Any member whose subscription has remained in arrears for three months and who has not paid in within one month after a written notice given by Hon. Gen. Secretary calling for such payment shall cease to be a member and his name shall be removed from the Register of Members and will not be entitled to vote in the election. The termination of membership of such defaulting members shall be informed to the Governing Council. Membership fees collected will be shared between the centre and the affiliated Units as per bye-laws. The share of the centre out of the fees of Patron members will be credited to a special fund earmarked for capital expenditure of any nature as decided by the Governing Council. The affiliated Units will be free to spend its share of membership fees in a manner as it deem fit for the furtherance of the objects of the Association. Register of MembersA Register of members shall be kept in which such information about members like name, date of birth, qualifications, residential address, occupation / employment, office address and his affiliated Unit for the time being, the date at which he was enrolled as a member, all changes in membership from Life to Patron and his affiliated Units shall be incorporated. In case of organizational members such information like the name of organization, its registered office, nature of business, date at which it was enrolled as organizational member, all changes in name of the representatives, the period of its membership etc., shall be incorporated in the Register of members. The Register shall be updated every 2 years with the help of the Units. It shall remain open for inspection during office hours of the Association on giving such intimations in advance.


4. 3. 1 Tariff And Tariff Administrative MeasuresTariff PeakIn Mexico, some tariff rates of imported goods go beyond 35. 0 percent and the highest rate of agricultural products reaches 72. 0 percent. Among the agricultural products, the average bound tariff rate of animals and related products is 36. 5 percent, and its average applied tariff rate is 42. 3 percent; the average bound tariff rate of dairy products is 33. 8 percent, and its average applied tariff rate is 42. 2 percent; the average bound tariff rate of tobacco products is 52. 5 percent, and its average applied tariff rate is 53. 1 percent. All these statistics have shown that among the three major categories, the tariff rates of some products are on the high side. Tariff EscalationMexico levies much higher average tariff on processed products than on raw materials, and the most concerned industries include textiles, clothing, leather, and basic metal industry. The average tariff rate of the processed textile products is 20 percent higher than that of the raw materials, and this, to some extent, has restricted China’s textiles exportation to Mexico. In 2005, the tariff rates of some textile raw materials were reduced by 10 percent, which further widened the gap between the tariff rate of the processed textiles and that of the raw materials. As to pharmaceuticals, although the average tariff rate of the semi-processed products is a litter lower than that of the raw materials, the average tariff rate of the processed products is still much higher than that of the raw materials. Tariff QuotasIn 2005, tariff quotas were implemented on 0. 5 percent of the total Mexican subject goods. 5. 2 percent of the agricultural products were affected by tariff quota, including poultry, animal fat, milk, cheese, beans, tomato, coffee, wheat, barley, corn and products rich in sugar. In addition, Mexico applies different kinds of tariff quotas schemes to the trading partners with whom Mexico has signed some preferential agreements. The numerous different tariff quotas schemes contribute to the complexity of Mexico’s import regime. 4. 3. 2 Import RestrictionsAt present, Mexico conducts import licensing administration for certain imported goods, such as petrochemical products, motors, large freight vehicles and cars, weapons, office equipment, etc. The written application for import license must be accompanied by the quoted invoice issued by the foreign exporter, and the validity of the import license is 9 months and can be extended to another 3 months if necessary. For used vehicles and used machines, the Ministry of Economy issues import licenses only when the foreign product has no domestically produced substitute. The tariff items of the products which are subject to import licensing are to be published in the Official Journal, but the introduction of frequent changes to the tariff items and the vagueness of the conditionality of import licensing undermine the predictability of access to the Mexican market for the products affected. 4. 3. 3 Barriers To Customs ProceduresThe Mexican government sets reference prices or officially established evaluation prices for some 200 goods, including categories of liquor, apparel, chemicals, footwear, steel, hand tools, appliances, plywood, apples, rice, poultry, etc. If the declared customs value is less than the established reference price, a guarantee must be posted to represent any difference between duties and taxes. The Mexican government have the right, within six months, to decide whether to start a formal investigation or to release the guarantee. These measures do not specify the process of verification or determination regarding the customs value of the imported goods, and therefore lack the corresponding remedy measures, thus bringing about possible unfair treatment to parties concerned. In addition, the Mexican government requires a guarantee for a product whose declared value is lower than the reference price. The 6-month long decision- making period is too lengthy and may constitute difficulties in capital turnover on the part of importers involved. This measure obviously impedes low cost imports from entering into Mexican market. In 2005, The Mexican Customs Ministry announced modifications to the designated ports of entry for certain agri- food products such as apples, beans, corn, fish, fat, sugar, meat, animal skins, and alcoholic beverages. This practice has caused great inconveniences to Chinese exporters of agricultural products. 4. 3. 4 Discriminatory Taxes And Fees On Imported GoodsMexico imposes a 20 percent tax on the transfer or, as applicable, the importation of soft drinks and other beverages that use any sweetener other than cane sugar. The services related to those products, for example, consignment, agency, etc. shall be levied a 20 percent distribution tax as well, but drinks sweetened with Mexican cane sugar are not subject to these measures. In addition, the taxpayers of the above two taxes must also meet the bookkeeping requirements. In 2004, the United States appealed to the WTO for establishing a panel to deal with the above-mentioned practice of Mexico. On October 7, 2005 the WTO Dispute Settlement Body ruled that Mexico’s practice of imposing soft drink tax and distribution tax on imported soft drinks and syrups (final products), together with its bookkeeping requirements, was discriminatory and inconsistent with the national treatment in Article 3. 2 and Article 3. 4 of the GATT 19944. 3. 5 Technical Barriers To TradeOn September 23, 2005, the Mexican Ministry of Environment and Natural Resources, Ministry of Energy Resources, and Ministry of Economy jointly published the Draft Official Standards on Environment Protection of Fossil Fuel, which sets the environmental protection standards for both liquid fossil fuel and gas fossil fuel in Mexican market. The standards are binding both to producers and importers of these products. China will keep a close watch on the development and implementation of the above mentioned draft documents and standards. 4. 3. 6 Trade RemediesAnti-DumpingMexico is an active user of anti-dumping measures and ranks among the top ten countries which have initiated anti-dumping investigations against China. In 2005, Mexico initiated 5 anti-dumping investigations against Chinese products. The involved products are toothbrushes, tires for station wagons and light trucks, leather and similar goods, canned mushrooms, and plastic pencil sharpeners. The investigations against toothbrushes and leather and similar goods have finished and the Mexican Ministry of Economy has decided not to impose anti-dumping duties; in the case of plastic pencil sharpeners, Mexico has decided to levy a temporary anti-dumping duty of US$34. 5 per kilogram and will continue the investigation. In addition, the Mexican Ministry of Economy still imposes an anti-dumping duty of US$18 per piece on the 1. 5-20 ton hydraulic bottle jacks imported from China, and a high temporary anti-dumping duty of 191. 5 percent on Chinese mushrooms. On July 26, 2005, the Mexican Ministry of Economy decided to investigate the alleged evasion of anti-dumping duties on concrete steel valves imported from China. This is the first anti-circumvention investigation against China in the past few years. The unfair practices in the Mexican anti-dumping measuresIn 2005, the Mexican Ministry of Economy decided to maintain high anti-dumping duties of 533 percent, 312 percent and 181 percent respectively on baby garments, selected hardware tools, and brass and bronze padlocks imported from China. Since the above mentioned baby garments and hardware tools are not manufactured in Mexico, these Chinese imports will not cause injury to Mexican domestic firms. Mexico’s imposition of anti-dumping duties on imported products which are not produced domestically is inconsistent with Article 3 of the WTO Anti-dumping Agreement and Articles 28 and 29 of the Mexican Foreign Trade Act. According to the WTO Anti-dumping Agreement, anti-dumping investigation is conducted to determine whether the involved products are dumped during the investigation period. However, since Mexico selected an irrelevant time period to investigate the case, the result would not truly reflect the actual situation. This practice may lead to judicial decisions unfavorable to Chinese side. The Mexican Foreign Trade Act specifies that all interested parties shall submit to the investigators their arguments, information and evidence within a period of 28 days from the day following the publication of the initiating resolution. By using the date of publication of the initiation notice instead of the date of receiving a questionnaire as the starting point for the timeperiod for questionnaire responses, the Act in effect shortens the time period for the affected Chinese firms to make response. This practice on the part of Mexico is inconsistent with the unequivocal requirement in the Anti-dumping Agreement and Agreement on Subsidy and Countervailing Measures to provide both parties with 30 days for them to respond to questionnaires. The Mexican Foreign Trade Act coercively stipulates that the principle of ” acquired facts” shall be applied to the producers who fail to respond to a lawsuit or to furnish information timely and properly or who have furnished incomplete information and that highest dumping margin shall be adopted. This stipulation is inconsistent with the Anti-dumping Agreement and the Agreement on Subsidy and Countervailing Measures. The Mexican investigation bodies did not inform the affected exporters or producers of the consequence of not providing information or providing incomplete information. As a result, some affected Chinese firms, without knowing the consequence, had not provided or provided only incomplete information. These firms suffered a loss because they had been subject to the ” acquired facts” and the highest dumping margin meted out by the Mexican government. Article 68 of the Mexican Foreign Trade Act stipulates that annual reviews can be applied to producers whose margin of alleged dumping or subsidization was found to be negative as the result of the original investigation. This is inconsistent with the Anti-dumping Agreement and the Agreement on Subsidy and Countervailing Measures which clearly provide that an investigating authority should terminate the investigation ” in respect of” an exporter found not to have a margin above de minimis. Owing to the unfair practice carried out by the Mexican government, anti-dumping duties were imposed on some affected Chinese firms, even though their anti-dumping margins were not positive. The Mexican Foreign Trade Act enacts a provision to penalize any firm that imports products which are subject to investigation. This is not in conformity with the GATT 1994, the Anti-dumping Agreement and the Agreement on Subsidy and Countervailing Measures. The Mexican Foreign Trade Act stipulates that once the judicial proceedings against anti-dumping or countervailing measures begin, the investigation body shall immediately terminate all the administration reviews, new exporter reviews or changed circumstances reviews, which should not be resumed until the completion of the judicial proceedings. This stipulation deprives the Chinese exporters of the rights to apply for reviews which they are entitled to enjoy in line with the Anti-dumping Agreement and the Agreement on Subsidy and Countervailing Measures. In addition, the Mexican authorities, in their anti-dumping investigations, denied China’s market economy status. Subsequently, they have adopted the surrogate country method in determining the normal value of Chinese products. Article 48 of the Foreign Trade Act specifies the conditions for a country to be deemed as a market economy, but the stipulation leaves ample room for interpretation and a high degree of discretion to the Mexican government in anti-dumping investigations. Under the circumstances, the involved Chinese firms are most likely to be subject to high anti-dumping duties. The Fulfillment of Mexico’s Commitment to its Reserved Anti-dumping Measures as Described in the Protocol on the Accession of the People’s Republic of ChinaMexico used anti-dumping measures on many Chinese products before China’s entry into the WTO. Mexico has committed to have the measures lifted gradually after China’s accession and to bring its existing anti-dumping measures in conformity with the WTO Anti-dumping Agreement. The transitional period is 6 years (until January 1, 2007). Mexico’s fulfillment of its commitments up till December 31, 2005 is as follows:(1) Anti-dumping measures have been removed from the products including wrought iron joint, fluorspar, furazolidone, some toys, inner and outer tires of bicycles, generators, electrical appliances, equipment and related parts, high-frequency receiving and emitting instruments, instant coffee machines, and selected organic chemicals.(2) Anti-dumping measures remain effective on the products including bicycles, shoes and boots, brass and bronze padlocks, baby carriage, door locks, gas- fuelled, non-refillable lighters, some hardware tools, textiles, toys, pencils, apparels, some organic chemicals (consisting of 26 products including citric acid, sodium citrate, etc.), porcelain tableware and other wares, concrete steel valves, candles, and wireless dust collector4. 3. 7 Safeguard MeasuresOn October 23, 2005, the Mexican Ministry of Economy published in its Official Journal the Guidelines on the Implementation of the Transitional Safeguard Mechanism specified in China’s WTO Accession Protocol. The guidelines stipulate that in line with the relevant Mexican laws, the General Administration of International Trade Practices under the Ministry of Economy shall, in the name of the federal government, conduct investigations on Chinese products and adopt corresponding special safeguards. The Guidelines also contains specific stipulations on conditions of implementation of the special safeguards, investigation proceedings, confirmation of damages, and time of implementation. However, Mexico is believed to negotiate with China before adopting the special safeguard measures. 4. 3. 8 SubsidiesCurrently, the Mexican government provides subsidies amounting to 26. 6 billion Peso (about US$2. 3 billion) for farmers producing basic agricultural products through its ” target income plan” every year. Other financial support schemes include supply of diesel oil, electricity and other necessities. These schemes belong to the amber box (trade-distorted subsidy) of the WTO Agreement on Agriculture and affect market price and production. Among the developing countries, only Mexico boasts a high ratio of 34 percent in terms of the ratio of amber box aggregate measurement of support to its total agricultural output. In other developing countries, it is on average less than 4 percent. Therefore, Mexican domestic agriculture is greatly supported by the government and its agricultural products can enjoy a competitive advantage over foreign agricultural products.

4. 5) Business Opportunities With Mexican Textile Industry

In Mexico, the textile industry has undergone several growth phases. Today, it is one of our top industrial sectors. Between 1993 and 2001, this industry grew at an average annual rate of 15 percent, and in 2001 it employed 800 thousand workers. During 2002, this sector accounted for 1. 6 percent of total GDP, and 7. 5 percent of manufacturing GDP. There is no doubt that the liberalization of the sector, under NAFTA, helped the industry to increase its production and exports. Since 1996 growth in this industry has outpaced our GDP growth. Consequently, in 1998 Mexico became the largest supplier of textile goods to the US market. In 2001, our textile and apparel exports to the US market were 9 billion US dollars. This growth was also the result of huge investments in the Mexican textile industry. Since the entry into force of NAFTA in 1994, and up to the end of 2001, foreign direct investment in the industry reached 1. 7 billion US dollars, which came not only from US companies, but also from Asian and European firms. These investments allowed Mexico to develop a competitive textile industry that was able to fully take advantage of preferential access to the US market. However, despite such an impressive growth and the kind of preferential access that NAFTA provides, in 2002 Mexico lost its place as the top supplier to the US. While in 1995 Mexico had 5% of the US market in this sector, in 2000 it reached 14%. However, we have been unable to maintain this market share, and we have actually lost market share to other producers, particularly China. Why did that happen when our industry already has a strong degree of integration with the US? Simply put, Mexico has suffered from increased global competition. NAFTA prompted an increase in Mexican exports to the US, but the benefits granted by the agreement were diluted as time passed, to the point where original benefits of NAFTA´s tariff elimination were not enough to continue stimulating growth. On the other hand, we were unable to adjust to new technologies that allowed our industry to move the production into more-value added goods with larger consumer appeal and a higher market value. Competition from other textile-exporting countries, such as China, India and more recently Central America, has grown dramatically. While it is true that most of these countries do not have the kind of access that NAFTA grants to Mexico, they compete based on other characteristics, especially cheaper labor. In order to meet the challenge of increasing our competitiveness vis á vis the rest of the world, in the process of developing the Program for the Competitiveness of the Textile and Apparel Industry. The program has been elaborated in consultation with the sector representatives, to 0guarantee that the measures included in the plan correspond to the reality of the sector. Its main goal is to recover and expand the textile and apparel market for Mexican producers in this sector and is based on three main strategies: First, reduce illegal activities in this sector and incorporate the informal activity into the formal economy. Second, promote the adoption of the so-called ” complete package” operations to allow production and marketing of fibers, textiles, and apparel. This will enable us to move from pure assembly to production in all stages of the production chain. More importantly, we will guarantee the incorporation of Mexican value added throughout the entire production process -from fabric up to garment production. The ” complete package” orientation will enable Mexican firms to respond to fashion and design seasonal demands, and will require that firms and labor adapt to production processes that can deliver both high-quality and low cost products in a timely manner. Our ultimate goal is to develop a competitive production chain from the fiber and textile to the actual delivery of garments both in the domestic and the international markets. Third, modernize the legal framework that applies to this industry. The competitiveness program provides for the reduction of redtape and bureaucratic obstacles to the operation of the industry, which is also part of a larger effort of deregulation of Mexico´s economy. One of the main goals is to simplify the paperwork that companies have to fulfill in order to operate. Mexico’s program for the competitiveness of the textile industry is not simply a response to the liberalization of textile quotas in 2005. It represents a coordinated effort undertaken by the Mexican government to address the process of internationalization of the Mexican textile industry, so that our entrepreneurs can be in a better position to compete in the world. As face the Doha Development Agenda, the challenges ahead are impressive, and will demand great efforts on the part of all countries involved. One of the most pressing objectives of the Doha Agenda is to create the conditions that may allow developing countries to fully benefit from the multilateral trading system. That is, after all, why we are calling this the ” Development Round”. Mexico believes that the final outcome of liberalization in industrial goods must consist of a balance that includes all industrial sectors, and avoids the temptation of negotiating on a sector-by-sector basis. A sectoral breakout of the negotiations works against the interests of smaller countries, which may have one or two very specific strengths. Such an approach could weaken these countries’ position if their strengths are not taken into consideration as part of a comprehensive package that includes all industrial sectors. The need to create opportunities in the textile sector, simply reducing trade barriers at the multilateral level may not be enough. Experience shows that countries such as China have been able to penetrate the most important markets in the world, without enjoying preferential trade agreements, and without – until very recently – belonging to the WTOSome developing countries have had success in the international arena, not through trade liberalization, but through aggressive cost reduction – basically labor – and marketing strategies that have been very successful. Perhaps the conclusion to be extracted from this is that free trade in textiles does not, by itself, benefit all developing countries to the same extent. In a context of strong international competition, countries are better off concentrating on internal measures that are needed to revitalize their textile industries, and thus contribute to the increase of their international competitiveness. Mexico believe this is the best way to recapture markets and grow our textile industry.