When the North American Free Trade Agreement (NAFTA) went into effect in 1994, many expressed fears that large job losses in the U.S. textile industry would occur as companies moved production from the United Stares to Mexico. NAFTA opponents argued passion ately, but unsuccessfully, that the treaty should not be adopted because of the negative impact it would have on U.S. employment. A quick glance at the data available 10 years after the passage of NAFTA suggests the critics had a point. Between 1994 and 2004, production of apparel fell by 40 percent and production of textiles by 20 percent and this during a period when overall U.S. demand for apparel grew by almost 60 percent. During the same timeframe, employment in textile mills in the United Stated dropped from 478,000 to 239,000 employment in apparel plummeted from 858,000 to 296,000 while exports of apparel from Mexico to the United States surged from $1.26 billion to $3.84 billon. Such data seem to indicate that the job losses have been due to apparel production migrating from the United States to Mexico. There is anecdotal evidence to support this assertion. For example, in 1995, Fruit of the Loom Inc., the largest manufacturer of underwear in the United States, said it would close six of its domestic plants and cut back operations at two others, laying off about 3,200 workers, or 12 percent of its U.S. workforce. The company announced that the closures were part of its drive to move its operation to cheaper plants abroad, particularly in Mexico. Before the closures, less than 30 percent of its sewing was done outside the United States, but Fruit of the Loom planned to move the majority of that work to Mexico. For textile manufacturers, the advantages of locating in Mexico include cheap labor and inputs. Labor rates in Mexico average between $10 and $20
