Martin’s Textiles, Pp. 299-300

In: Business and Management

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Part Three Case: Martin’s Textiles, pp. 299-300

BA 2430 – International Management

Edward Ruppel

Summary
Martin’s Textiles is very much in doubt with the enactment of the North American Free Trade Agreement (NAFTA), which is an agreement between Canada, Mexico, and the United States for free trade, that would not only eliminate tariffs but also allow an increase in quota from Canada and Mexico to ship textiles to the United States. Compounding the issues, Martin’s Textiles has been experiencing small losses over the past several years and has received threats of losing long-term customers. Nonetheless, John Martin, Martin’s Textiles CEO, has to make the decision whether or not to move his company’s production, currently based in New York where the company has strong family like relations with its employees, to Mexico in order to reduce labor cost or wait for an imminent bankruptcy.
Martin’s Textiles was founded in 1910 and has spanned four generations of the Martin family. However, with the implementation of NAFTA, all tariffs between the Canada, Mexico and the United States would be eliminated within the next 10 to 15 years with most tariffs cut in 5 years. For Martin’s Textiles the plan’s provision that all tariffs on trade of textiles amount the tree countries would be removed within 10 years would be the especially impactful. Yet, what was even more overwhelming for the textile industry was that the quota for Canada and Mexico to ship clothing and textiles to the United States each year would rise slightly over the first five years of the agreement. Thus, the reason why many textiles competitors have moved operations to Mexico in response to increase the cost of competition since the textile industry involves low-skilled and labor intensive business. Although moving Martin’s Textiles production to Mexico would be the solution to cut labor cost, there…...

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