Canadian Apparel

• The Market
• About Canadian Apparel
• The Industry
• Adoption of e-business
• Investment Policy
• Canada - Open for Business
• Investment Services
• Sources of Financing
• Trade Policy
• World Trade Organization
• North American Free Trade Agreement
• Canada-Chile Free Trade Agreement
• Canada-Israel Free Trade Agreement
• Canada-Costa Rica Free Trade Agreement
• Duty Remission
• Canadian International Trade Tribunal

The Market

The Canadian apparel market registered $10.5 billion in 2004, marginally higher than the previous year, with domestic shipments of $3.9 billion (37.4 percent) falling 10.1 percent and imports of $6.6 billion (62.6 percent) rising 7.7 percent. In the four-year period of 2000-2004, the market increased 2.8 percent reflecting the impact of annually rising imports coupled with annually declining domestic shipments. In 2004, the domestic shipments share of the market showed a 10.4 percent decline from the previous year and a 22 percent decline from four years ago.

⁽¹⁾ Apparent Canadian Market equals Domestic Shipments + Imports (return)
Source: Apparel & Textiles Directorate, Manufacturing Industries Branch (MIB), Industry Canada, and data from Statistics Canada.

The continued loss of market share to offshore suppliers by Canadian apparel manufacturers underlines the importance of sustained export market expansion. In 2004, the export share of total shipments edged up to 39.3 percent, a gain of 2.8 percent from the previous year but just 2.6 percent higher than four years earlier.

Source: Based on data of Table 1:1.

Notwithstanding the rising export share of shipments over time, apparel exports fell for a second year in a row, declining 6 percent in 2003-2004 from $2.7 billion to $2.5 billion. By export commodity, in 2003-2004, men's and boy's apparel exports fell 7.7 percent from $761.2 million to $755 million, women's and girl's apparel exports fell 3.5 percent from $1 billion to $0.9 billion, while children's apparel exports rose 1.7 percent from $12.3 million to $12.5 million. Men, women and children's apparel accounted for 66.7 percent of all apparel exports in 2004. The United States, accounting for some 92.1 percent of Canadian apparel exports in 2004, continues to be Canada's main market. The U. K., Germany and Japan followed but together accounted for a low 4 percent of apparel exports. Imports of $6.5 billion in 2004 rose 7.7 percent from the previous year. Their market share rose 1.1 percent to 58.3 percent in 2004, and was 20.3 percent higher from four years ago. By import commodity, in 2004-2005, men's and boys' apparel imports rose from $1.6 billion to $1.7 billion, a rise of 6.7 percent, women's and girls' apparel imports rose from $2.4 billion to $2.5 billion, a rise of 6.3 percent, and children's apparel imports rose from $128.6 million to $151.2 million, a rise of 17.6 percent. Men, women and children's apparel accounted for 68 percent of all apparel imports in 2004. In 2004, the People's Republic of China accounted for 35.6 percent of all imported apparel and the U.S.A. accounted for a much lower 8.9 percent. Finally, Canada continues to carry an apparel trade deficit determined primarily by imports from low-wage countries lead by the People's Republic of China including Hong Kong, Bangladesh, India and Mexico. In 2004, the textiles trade deficit rose for the fourth year in a row reaching $4 billion, an 18.7 percent increase from the previous year.

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About Canadian Apparel

Mass production of apparel in Canada began in the mid-19^th century in urban centers, which supplied needed semi-skilled labour, and, at the same time, were the major consumer markets. Historically, the apparel industry has been highly dependent on women (as high as 94 percent in some apparel sectors) and immigrants (approximately 50 percent of the total workforce) with lower levels of formal education compared to the overall Canadian workforce. The industry functions as a stepping stone for new immigrants, in the sense that once workers acquire some more language and work skills, they move on to better paying jobs and are replaced by a new wave of immigrants.

"As one of Canada's largest manufacturing sectors, the Canadian apparel industry has grown from rather modest beginnings to a reliable supplier of a wide range of consumer, industrial and institutional apparel to meet the needs of both domestic and foreign markets. To remain competitive within the world's increasingly liberalized trading environment, the industry is aggressively innovating to higher value-added products, the latest technologies, and more efficient, flexible and lower-cost manufacturing processes."-- Eileen Melnick McCarthy, Director - Communications, Canadian Apparel Federation.

The apparel industry is classified to the North American Industrial Classification System (NAICS) to code NAICS 315 comprising: 

1. Hosiery and Sock Mills (NAICS 315110);
2. Other Clothing Knitting Mills (NAICS 315190);
3. Cut and Sew Clothing Contracting (NAICS 315210);
4. Men's and Boys' Cut and Sew Underwear and Nightwear Manufacturing (NAICS 315221);
5. Men's and Boys' Cut and Sew Suit, Coat and Overcoat Manufacturing (NAICS 315222);
6. Men's and Boys' Cut and Sew Shirt Manufacturing (NAICS 315226);
7. Men's and Boys' Cut and Sew Trouser, Slack and Jean Manufacturing (NAICS 315227);
8. Other Men's and Boys' Cut and Sew Clothing Manufacturing (NAICS 315229);
9. Women's and Girls' Cut and Sew Lingerie, Loungewear and Nightwear Manufacturing (NAICS 315231);
10. Women's and Girls' Cut and Sew Blouse and Shirt Manufacturing (NAICS 315232);
11. Women's and Girls' Cut and Sew Dress Manufacturing (NAICS 315233);
12. Women's and Girls' Cut and Sew Suit, Coat, Tailored Jacket and Skirt Manufacturing (NAICS 315234);
13. Other Women's and Girls' Cut and Sew Clothing Manufacturing (NAICS 315239);
14. Infants' Cut and Sew Clothing Manufacturing (NAICS 315291);
15. Fur and Leather Clothing Manufacturing (NAICS 315292);
16. All Other Cut and Sew Clothing Manufacturing (NAICS 315299); and
17. Clothing Accessories and Other Clothing Manufacturing (NAICS 315990).

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The Industry

The Canadian apparel industry, the 10^th largest manufacturing sector in Canada, continues to restructure itself to exploit export opportunities and compete effectively with import competition.

"The industry is an important source of employment for highly skilled professions, as well as entry-level positions for new immigrant workers and women, who account for the majority of sewing machine operators and other production related jobs. Apparel is manufactured in all provinces and territories, with Quebec accounting for 55 percent of the industry while significant concentrations of firms are found in Ontario, Manitoba and British Columbia. As of 2004, Canadian apparel industry shipments total $6.5 billion annually." -- Eileen Melnick McCarthy, Director - Communications, Canadian Apparel Federation.

The majority of apparel companies are Canadian-owned. Foreign-owned firms, which are mainly subsidiaries of U.S. multi-national corporations, account for about 2 percent of the total. Comprising the larger firms in the industry, they are heavily involved in manufacturing large volumes of standardized products such as jeans, underwear and foundation garments. Notwithstanding the adoption of computer-assisted technology in several stages of apparel production, for example, computer-assisted design, computer-assisted pattern making/ grading, computer-assisted marking, automated cutting, and automated spreading, the apparel industry remains fragmented, labour intensive and a low barriers-to-entry industry.

With more than 88 000 employees working in 2700 establishments, the apparel industry accounts for around 2 percent of Canada's total manufacturing gross domestic product, 0.4 percent of manufacturing investment and 4.5 percent of total manufacturing employment . The majority of apparel companies are Canadian-owned. Foreign-owned firms, which are mainly subsidiaries of U.S. multi-national corporations, account for about 2 percent of the total. Comprising the larger firms in the industry, they are heavily involved in manufacturing large volumes of standardized products such as jeans, underwear and foundation garments. Notwithstanding the adoption of computer-assisted technology in several stages of apparel production, for example, computer-assisted design, computer-assisted pattern making/ grading, computer-assisted marking, automated cutting, and automated spreading, the apparel industry remains fragmented, labour intensive and an low barriers-to-entry industry.

In 2004, the industry shipped some $6.5 billion of apparel, of which $2.5 billion (39.3 percent) was exported. Total apparel shipments in 2004 recorded a decline of 8.6 percent from the previous year, with domestic shipments falling 10.1 percent from $4.4 billion to $3.9 billion and exports declining 6.9 percent from $2.7 billion to $2.5 billion. In 2003, the latest year for which investment expenditures are available, the apparel industry allocated some $127.3 million for new machinery, equipment and buildings, with about 72 percent occurring in the cut and sew apparel sector.

The Canadian apparel industry's investments in machinery and equipment and its labour skills upgrading reflect the industry's drive to sustained international competitiveness. In terms of human capital, it is estimated that immigrants comprise an estimated 50 percent of the apparel workforce, with women accounting for about 75 percent of the workforce. To promote a viable and internationally competitive apparel industry, the Apparel Human Resources Council was established to cater to the industry's training and human resources development needs. Its goals are to ensure that the industry has the skilled workers it requires, to support effective training services for employees at all levels, and to provide a one-stop information service to help companies and employees deal more effectively with technological change and/or restructuring implications. The Apparel Human Resources Council is located at 9310 St-Laurent Blvd., Suite 1114, Montreal, Quebec, H2N 1N4, Tel.: (514) 388-7779, Fax: (514) 388-6926. Jean Rivard is the Executive Director and can be reached at (514) 388-7779, extension 102 .

As well, to encourage further investments in the industry, effective January 1, 2005, Canada eliminated tariffs on imports of fibre and yarn (worth up to $15 million per year) and textile inputs used by the apparel industry (worth up to $75 million per year), and extended current duty remission orders benefiting textile and apparel manufacturers for another five years, gradually phasing out benefits over the final three years. These assistance measures build on the record of the Canadian Apparel and Textile Industries Program (CATIP) which has funded 394 projects to assist apparel and textile companies to enhance their productivity, lower costs, improve efficiency, and find new markets for their products.

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Adoption of e-Business

With the rise of the electronic economy, e-business has become an essential practice to promote viable and internationally competitive apparel and textile industries in Canada. Policies and practices of industry and government need to coalesce to maintain a healthy environment for e-business to grow. Canadian textiles manufacturers need to go boldly into required electronic systems and equipment, and provide continuous employee e-training.

Regarding the drive to an e-business textiles industry, CAF will establish a Canadian Apparel Portal and Electronic Business Infrastructure for use by Canadian industry suppliers, apparel manufacturers, domestic and international retailers, and industry professionals. The portal will: 

1. create an efficient, interactive electronic communications vehicle for the industry;
2. provide a wide range of industry-critical information over the Internet;
3. provide a venue for interactive peer to peer discussion/ exchange through moderated forums;
4. allow Canadian apparel manufacturers to have a web presence through individual company websites created using template/wizard tools; and,
5. create a Virtual Human Resource Advisor for the industry.

For companies, the portal will: 

1. educate and familiarize companies with e-commerce technologies;
2. bring e-commerce to companies in the apparel industry at affordable rates;
3. use e-commerce as a means of increasing exports and domestic sales through the use of online technologies;
4. use e-commerce to improve the effectiveness of the business process and the supply chain management;
5. use e-commerce to create the proper online business vehicle that will enable CAF members to provide buyers with access to up-to-date product and order status information. Suppliers can improve their customer service, attract new customers, promote a self-service environment, reduce marketing and customer service costs and deliver products on a timely basis;
6. bring/integrate e-commerce into managerial function to companies;
7. lower e-commerce costs for usage and implementation;
8. bring better access to up-to-date products and order status information;
9. bring improved and faster customer service;
10. make available a suitable and customized entry point for apparel companies;
11. accelerate the e-commerce rate of adoption;
12. bring incremental revenues from sales as a result of the online catalogue;
13. allow better access to global market; and
14. supply instant efficient communication with trading partners.

For the apparel industry, the portal will: 

1. integrate CAF/AHRC communications, domestic/foreign marketing activities;
2. encourage cost-effective virtual promotion;
3. initiate technology development;
4. facilitate marketing/sales/communication activities; and
5. improve the availability of apparel industry critical business information.

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Investment Policy

Currently, with globalization increasingly driven by investment flows and foreign direct investment decisions aimed at locating business operations where they are most efficient in a company's global business strategy, the challenge facing Canada is to make Canada a location of choice for new business minvestment in the NAFTA and world markets. Canadian Investment Policy is embodied in: (1) The Investment Canada Act, (2) One Stop Shopping Centre for Investment Services and (3) Sources of Financing.

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