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The high-tech rebirth of Canada's textile industry Add to ...

Patrick Riga, a Montreal-based commercial account manager with Bank of Montreal who has worked with Quebec's textile industry since 1993, has heard about immigrant families dissuading their children from working in the business.

"A lot people were working for 30, 35 years at the same corporation and ended up the next day with nothing - no pension from the company," Mr. Riga says. "It created a hardship on a mainly immigrant community, especially in Quebec."

In an industry with a looming talent shortage and an aging work force, the image problem is making it difficult to attract skilled workers, says David Kelly, executive director of the Textiles Human Resources Council.

Mr. Berger of MW Canada thinks the industry's past-it public image is simply out of date. "When you say the word 'textile' to the average person, they think of a sweatshop or T-shirts. You know, the old Norma Rae movie. That's really not what we are," he says.

"It is an old image problem," agrees Ronald Audet, chairman of FilSpec Inc., a Sherbrooke, Quebec-based producer of specialty yarns. "The industry is stronger than we've been." Like MW Canada, FilSpec has jumped up the value ladder, illustrating the hopeful trend in the industry. But its bumpy ride also speaks to how easily firms' prospects can by capsized by the changing tides of trade rules.

Founded in 2004, FilSpec rose from the ruins of Cavalier Textiles, a commodity supplier. Like many firms in the Canadian textile industry, particularly the large Quebec contingent, Cavalier prospered under the Canada-U.S. free-trade agreement and North American free-trade agreement, which opened up the U.S. and Mexican markets in 1989 and 1994, respectively. Exports by the Canadian industry increased fourfold between 1992 and 2000, according to a report by the Quebec government.

The latter year, however, was the industry's apex. As free trade gave, it also took away, with the admission of China to the World Trade Organization in 2001 and the expiration in 2004 of the Multifibre Arrangement, which had imposed quotas on developing countries' exports of products like yarn, fabrics and clothing.

The Canadian industry was suddenly faced with competition from lower-cost producers, not to mention the dampening affect of the high-flying loonie on exports. But as it has staggered back from those body blows, the industry has also learned that "free trade" is a sometime thing. Although the United States promoted North American free trade at its inception and is a signatory to NAFTA, the country that accounts for 81 per cent of Canada's textile exports has also enacted other measures to protect its domestic industries. New bilateral trade agreements have had the side effect of hip-checking some Canadian products out of the American market, while preferential procurement policies have more explicitly shut the door to Canada.

"Measures that preclude the use of Canadian textiles by U.S. customers, or that favour U.S. textile manufacturers, are proliferating," says Elizabeth Siwicki, president of the Canadian Textile Industry Association. Ms. Siwicki contends that an ongoing reluctance by the federal government to address problems with NAFTA is eroding her membership's access to the U.S. market.

The most aggravating new American trade agreements are a pair signed in 2000 and 2004 that open up the U.S. market to more than a dozen countries in Central America and the Caribbean - the site of much of the offshoring of the commodity side of the textile business from both Canada and the U.S.

With very limited exceptions, the treaties effectively bar the use of yarns and fabrics that are not produced in the U.S. - so if a Canadian input like, say, yarn, is used to make products in the Dominican Republic, the finished goods do not qualify for duty-free entry into the U.S.

"That is a big issue because all of a sudden our customers that we developed and nurtured under NAFTA say to us, 'Sorry, we can't buy from you,'" Ms. Siwicki says.

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