The impact of Chinese textiles and products on the world market has placed the DR’s industrial free zones in a race against the clock to meet the challenge of quota removal in 2005, as reported in El Caribe newspaper. This will open the doors of the United States market to any and every textile producer in the world, especially China. For the Dominican Republic, one of the principal regional suppliers to the United States marketplace, this means finding new sectors of the market that the Chinese cannot get into, as well as necessitating a vertical integration, which the Chinese already have. As reported here some time ago, the Dominican textile industry is already taking steps to preserve its market share. According to Arturo Peguero, the head of the Dominican Association of Free Zones (ADOZONA), for more than a year and a half the different companies that produce for the American market have been taking steps to diminish the impact of the Chinese competition in what used to be their “backyard.” Part of the process of change has been to convert the factories from simple assembly lines of pre-cut materials into total production facilities turning out what is called the “full pack” in the industry. This includes the total work associated with the manufacture of a garment, from the sourcing of the cloth and various other components, to the assembly and finally to the finishing and presentation of a product that is ready to sell at the client’s outlets. One of the major sticking points is that the parity agreements with the US oblige the Dominican manufacturers to use textiles and purchase thread from the United States. This flies in the face of the Chinese thread and cloth, considered to be of better quality and lower price then the American product. These issues comprise the vital subjects that must be addressed by local manufacturers and negotiators. As such, the Free Trade Agreement (DR-CAFTA) is the only road open for the manufacturing sector to survive, according to Peguero.
The El Caribe report also explains that the mix of type of manufacturing operations in the DR free zones has diversified in recent years, and thus is less vulnerable to massive job reduction. Federico Cuello, former Dominican ambassador to the World Trade Organization, told the newspaper that Chinese competition only affects 53% of companies operating in free zones. He said that from 2002, more non-apparel manufacturing operations have been opening shop here than apparel operations. From January to August of this year, some 26 new apparel companies were approved, but at the same time, some 52 non-apparel industries got clearance to do business in the DR. Cuello is confident the new diversity and the adapting of present textile operators to handle more sophisticated apparel with increased value added processes will enable the country to compete in the world market. The newspaper, nevertheless, points out a recent Nathan Associates study that recommends companies to ensure that customs clearance is efficient and fast.