Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital Jennifer Bair University of Colorado

Global Commodity Chains Old development model = Domestic Industrialization (ISI) New development model = Export-led growth via integration into global commodity chains Policy-oriented strand of GCC research focuses on how firms and regions can develop via participation in GCCs Under what conditions can GCCs stimulate jobs, export revenues, and industrial upgrading to higher value-added activities or industries? Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital University of Vienna, April 13, 2010

Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital University of Vienna, April 13, 2010 Post-NAFTA boom in apparel exports to the U.S… Source: US International Trade Commission, U.S. imports customs value, SITC 84

Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital University of Vienna, April 13, 2010 …and in Apparel Employment Source: Mexican government (INEGI data), various years.

Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital University of Vienna, April 13, 2010 La Laguna in north central Mexico

Indicators of La Laguna’s Post-NAFTA Boom Total output/wk. 500,000 4 million 6 million Max. output/company/wk.50, , ,000 % Mexican denim1-2%5%15% Employment 12,000 65,000 75,000 Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital University of Vienna, April 13, 2010 Source: Fieldwork carried out in summers 1998 and 2000

Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital “Local Clusters in Global Chains” In series of papers, Bair and Gereffi analyzed the causes and consequences of region’s post-NAFTA boom in blue jeans exports (2001; 2003; Gereffi, Martinez and Bair 2002) Based on fieldwork carried out in the Laguna in 1998 and 2000 Found that surge in local production and exports was caused by the changing organization of North American apparel commodity chain in post-NAFTA period Change in institutional context created by new regulatory regime (NAFTA rules of origin) Arrival of new types of buyers sourcing from or coordinating production in the region Positive development outcome/ Industrial upgrading

Evidence of Industrial Upgrading: La Laguna’s Lengthening Chain UNITED STATES LA LAGUNA TextilesTrim andDesign andCuttingAssemblyLaundry andDistributionMarketingRetail LabelsProduct Dev.Finishing UNITED STATES LA LAGUNA TextilesTrim andDesign andCuttingAssemblyLaundry andDistributionMarketingRetail LabelsProduct Dev.Finishing UNITED STATES LA LAGUNA TextilesTrim andDesign andCuttingAssemblyLaundry andDistributionMarketingRetail LabelsProduct Dev.Finishing Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital

The Blue Jeans Capital in Decline Fieldwork in March 2008 revealed that three of the five largest firms in 2000 were no longer in business. Production volumes declined in all but two (both foreign- owned) of the seven factories that remained open. Combined production of region’s largest companies fell from 2.6 million/week in 2000 to less than 1.1 million/week in Masculinization of local garment workforce: In all companies we interviewed, half of the sewing machine operators were men, ranging from 50% to 70%. Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital University of Vienna, April 13, 2010

From Boom to Bust in the Blue Jeans Capital… Production Capacities of La Laguna's Largest Manufacturers July 2000 and March 2008 compared RankFirmCapacity July Emp. July 2000 Capacity March 2008 Emp. March Wrangler480,0001,900est. 500,000NA 2 Kentucky-Lajat400,0005,500150,0002,500 3 Libra400,0005,000est. 50,000NA 4 Siete Leguas250,0003,20080,0001,800 5 Grupo Denim245,0003,300120,0002,800 6 Maquilas Pami240,0003,800CLOSED 7 Red Kap (RKI)156,0001,430NA 8 Pafer Huichita150,0002,450CLOSED 9 Impeccable150,0001,500CLOSED 10 OMJC135,0003,000185,0002,600 Total 2,606,00031,0801,085,0009,700 1 Pairs of pants per week. Source: Fieldwork conducted by Bair and Gereffi 2000; Bair and Werner 2008 Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital University of Vienna, April 13, 2010

Employment Declines, but More Men Sewing Number of monthly employees classified as workers (obreros), not seasonally adjusted. Source: INEGI, Banco de Infomacion Economica, Industria de Maquiladora series. Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital University of Vienna, April 13, 2010

Making Sense of La Laguna’s post-NAFTA Trajectory Boom to bust cycle underscores mobility of capital in contemporary global economy, but what explains emergence and timing of local export surges and declines? What happens to a place when it becomes “delinked” from a particular commodity chain? What lessons can be drawn from La Laguna’s experience for GCC analysis more broadly? Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital University of Vienna, April 13, 2010

The New Blue Jeans Capital: China’s exports surge, Mexico’s declines U.S. Apparel Imports in US$ billions, Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital University of Vienna, April 13, 2010

Fibers (production/ processing of natural/synthetic fibers) Yarn (spinning fibers into yarn) Fabric (knitting/weaving yarn into fabric) Production (Cutting of fabric Assembly of garment) Pre-production (design & Pattern/marker making) Retail (marketing, distribution and sale) Post-production (laundering & finishing) Fiber Segment Textile Segment Apparel Segment Apparel Retail Segment The Apparel Commodity Chain Revisiting Local Clusters in Global Chains: From Boom to Bust in Mexico’s Blue Jeans Capital University of Vienna, April 13, 2010