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Ottawa, December 14, 2004
2004-078

Government of Canada Introduces New Measures to Increase the Competitiveness of the Textile and Apparel Industries

Related documents:

• Backgrounder

Minister of Finance Ralph Goodale and Minister of Industry David L. Emerson today announced a number of initiatives designed to help Canada’s textile and apparel industries better compete in changing world markets.

"Canadian textile and apparel companies face a challenging global trade environment," said Minister Goodale. "These challenges will only increase on January 1, 2005, when international trade agreements oblige countries to eliminate any remaining textile and apparel quotas. The measures announced today will help provide these two industries with the tools needed to lower costs and invest in competitiveness through a focus on productivity improvements, new products and market opportunities."

As part of today’s announcement, the Government of Canada will:

• Eliminate tariffs on fibre and yarn imports (worth up to $15 million per year) and on imports of textile inputs used by the apparel industry (worth up to $75 million per year), effective January 1, 2005.

• Provide $50 million in additional funding to the Textile Production Efficiency Component (CANtex) over the next five years to encourage Canadian textile companies to shift to higher value-added products, focus on niche markets and improve productivity.

• Extend current duty remission orders benefiting textile and apparel manufacturers for five years, gradually phasing out benefits over the final three years.

"Increasing CANtex funding to more than $70 million over five years will help Canadian manufacturers, in particular those of textiles for the downstream apparel market, diversify production towards new product lines and growing niche markets," said Minister Emerson. "The Government is committed to the long-term viability of both the apparel and textile industries in Canada, as evidenced through the success of the measures already implemented, as well as those announced today."

To help ensure tariff relief does not adversely affect current domestic production, tariffs will remain on imports of fibres, yarns and textiles also produced in Canada. The Minister of Finance will ask the Canadian International Trade Tribunal, an independent body responsible for providing advice on economic- and tariff-related matters, to consult with the textile industry to identify textile products currently produced in Canada. Once this consultation is complete and final decisions are implemented, importers will be able to request a refund of duties paid since January 1, 2005, on imports of fibre, yarn and textile products that are not currently manufactured in Canada.

CANtex encourages companies to improve productivity through projects such as lean manufacturing and the implementation of new information technology and logistics systems. Starting in fiscal year 2005–06, the additional funding is intended to encourage excellence and competitiveness in the manufacture of technical, specialty and industrial textiles, including assisting manufacturers producing textiles for the traditional apparel sector to reorient production to other textile product markets. CANtex will allow companies to apply for up to $3 million in repayable contributions for projects including equipment and machinery acquisition.

Over the next few years the Government will review the current administration of the duty remission orders program and revise it as necessary to address any problems.

The measures announced today are designed to address the findings of the October 2004 Report of the Standing Committee on Finance, Duty Remission and the Zero-Rating of Tariffs on Textile Inputs: The Canadian Apparel Industry. They are in addition to over $70 million in federal support for the textile and apparel industries over the past two years, and will more than triple the annual level of assistance to these industries.

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For further information:

Backgrounder

The Government of Canada’s New Initiatives for the Textile and Apparel Industries

Canada’s textile and apparel industries face an increasingly competitive environment. Competition from low-wage developing countries will increase in 2005 when all countries remove their quotas on textiles and apparel, as agreed to in 1994 as a result of World Trade Organization negotiations.

Today’s announcement is designed to help Canadian textile and apparel companies better compete in the increasingly challenging global marketplace all nations must face.

Tariff Relief

Effective January 1, 2005 the Government will remove tariffs on textile imports used in apparel production and on fibre and yarn imports. This measure is expected to reduce input costs for both textile and apparel manufacturers by up to $90 million per year.

However, duties will be retained on products where Canadian production can be substantiated. To identify Canadian production, the Canadian International Trade Tribunal will be instructed to consult with Canadian fibre, yarn and textile companies. Importers will be required to pay duties while the consultation takes place and until final decisions are made regarding which imported inputs will see tariff relief. Thereafter importers will be able to request a refund of duties paid on those products since January 1, 2005.

Assistance to the Textile Industry

Today’s announcement will provide an additional $50 million over five years to the Textile Production Efficiency Component (CANtex). CANtex was given $26.7 million in February 2004 to help Canadian textile manufacturing firms become more competitive and take advantage of new market opportunities. The initiative builds on the $33-million Canadian Apparel and Textile Industries Program, which has funded over 300 projects to assist apparel and textile companies in enhancing their productivity, lowering costs, improving efficiency and identifying new markets.

Beginning in 2005–06, this additional funding is designed to encourage excellence and competitiveness in technical, specialty and industrial textile manufacturing. It will also assist manufacturers currently producing textiles for the traditional apparel sector to reorient production to other textile product markets. CANtex will allow companies to apply for up to $3 million in repayable contributions for projects, including equipment and machinery acquisition.

Duty Remission Order Extension and Phase-Out

Duty remission orders were introduced in 1997–98 as temporary measures to help textile and apparel firms adjust to a more competitive trade environment. They gave companies in six textile and apparel subsectors the right to a remission of duties paid on certain imports. Benefits have averaged $30 million annually over the past three years, with 90 per cent of the benefits going to apparel manufacturers in the tailored collar shirts and women’s wear subsectors. The current orders are set to expire on December 31, 2004.

Today’s announcement will extend these orders for another five years, but will now include a phase-out period over the final three years. Remission order benefits will decline to 75 per cent of original levels in 2007, 50 per cent in 2008 and 25 per cent in 2009. They will expire entirely on December 31, 2009. This phase-out period will allow beneficiary firms the opportunity to adjust to this 2009 expiry date.

Today’s initiatives are in addition to over $70 million in federal support for the textile and apparel industries in recent years. Recent government textile and apparel announcements consist of the following.

June 2003: Recognizing increasing competition worldwide, the $33-million Canadian Apparel and Textile Industries Program was introduced to improve the competitiveness of Canada’s textile and apparel industries.

June 2003: $10.9 million was provided to the Canada Border Services Agency to counter the illegal transhipments of textile and apparel products.

February 2004: The $26.7-million Textile Production Efficiency Component was announced.

In addition, in February 2004 the Government announced $26.7 million in tariff reductions to benefit the apparel industry. Today’s announcement on the elimination of tariffs on all imported fibre, yarn and textile inputs that are not also produced in Canada supersedes and goes beyond the $26.7-million tariff relief initiative. The Minister of Finance will ask the Canadian International Trade Tribunal to consult with the textile industry to identify those fibre, yarn and textile products produced in Canada on which import duties will be retained.

The textile industry employs approximately 47,000 Canadians. As the Canadian Textiles Institute has noted, over the last 25 years Canada’s textile manufacturing industry has transformed itself through significant investments in equipment and today is a substantial user of innovative technology. The subsector producing textiles for apparel use comprises approximately 25 to 30 per cent of the Canadian textile industry. The industry also produces a wide array of textiles including carpeting and industrial and specialty products.

The apparel industry employs more than 97,000 Canadians and is centred in Montréal, Toronto, Winnipeg and Vancouver. Jobs in the apparel industry are an important source of employment for new Canadians—approximately 40 per cent of apparel workers are first-generation immigrants. Ranging from 5 to 14 per cent, textile tariffs are much higher than tariffs on inputs used by other Canadian manufacturing sectors.