Bair Gereffi

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Local Clusters in Global Chains: The Causes and

Consequences of Export Dynamism in

Torreon's Blue Jeans Industry

JENNIFER BAIRYale University, New Haven, CT, USA

and

GARY GEREFFI *Duke University, Durham, NC, USA

Summary. Using a case study of the export-oriented blue jeans industry in Torreon, Mexico, theauthors discuss the role of US buyers in promoting full-package apparel production. While thenetworks associated with this model yield better development outcomes for rms and workers thanthose typical of the maquila industry, the Torreon cluster is not adequately described as a ``highroad'' industrial district. The global commodity chains framework is used to assess thedevelopmental implications of the apparel industry's growth in Torreon. By emphasizing therelationship between producers and foreign buyers, this approach provides a useful way to bridgethe globallocal divide in the literature on industrial clusters in developing countries. 2001Elsevier Science Ltd. All rights reserved.

Key words apparel and textile industries, global commodity chains, industrial districts,

maquiladoras, Mexico, North America

1. INTRODUCTION

The decade of the 1980s witnessed the wide-spread adoption of export-led growth strategiesand neoliberal policies prescribing openmarkets and privatization programs in much ofthe developing world. Development research inthe 1990s focused primarily on the implications

of these trends for the industrializing countriesthat are increasingly integrated into globalmarkets. The abandonment of import-substi-tuting strategies, which were inuenced by theneomarxist and dependency theories of the1960s and 1970s, and the implementation offar-reaching reforms corresponding to a neweconomic model have led to a watershed indevelopment studies. Researchers and policy-makers alike confront the challenge of how toanalyze the link between the global and thelocal. Latin America is a case in point. Spirited

debates have arisen about the local develop-ment outcomes associated with the adoption ofneoliberal reforms in this region and what

theories and paradigms can best explain theseoutcomes (Dussel Peters, 2000; Reinhardt &Peres, 2000).

Our paper contributes to this debate byfocusing on one dynamic exporting cluster inMexico, a country that has undergone a rapidand radical economic restructuring over thepast decade. Across a wide variety of sectors,

Mexico's exports have been booming since theimplementation of the North American FreeTrade Agreement (NAFTA) in 1994, increasingfrom $51.8 billion in 1993 to $166.4 billion in2000 (SECOFI, 2001). Aside from impressiveexport growth, Mexico has also managed toachieve many of the other objectives associatedwith Latin America's new economic model: astable currency, modest ination, and plentifuldirect foreign investment. Perhaps mostimportant, the presidential election of July2000, which saw the historic victory of

World Development Vol. 29, No. 11, pp. 18851903, 2001 2001 Elsevier Science Ltd. All rights reserved

Printed in Great Britain0305-750X/01/$ - see front matter

PII: S0305-750X(01)00075-4www.elsevier.com/locate/worlddev

* Final revision accepted: 19 May 2001.1885


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opposition candidate Vicente Fox, providedevidence that Mexico's decades long transitionto genuine democracy from one-party rule hasbeen consolidated.

Despite the seeming abundance of good

news, there is a growing sense that all is notwell in Mexico. While the liberalization strategythat Mexico enthusiastically embraced in the1990s has been successful in its own terms,critics have pointed out that Mexico's shiftfrom an import-substituting industrializationstrategy to an export-led growth model hasbeen associated with a more unequal incomedistribution and falling real wages for themajority of the country's workers (De la Garza,1994; Dussel Peters, 2000; Robinson, 199899).The most dynamic sector of the Mexican

economy in terms of exports and job creation isthe maquila industry of in-bond plants, whilesmall and medium enterprises have been hardhit by the country's rapid liberalization.NAFTA skeptics claim that the trade agree-ment, and the export-led growth model itrepresents, are leading to the ``maquilization ofMexico,'' with the entire country becomingconverted into an export-processing zone forlow value-added activities beneting largecorporations on both sides of the border. Thisposition contends that the economic growth

associated with the post-NAFTA era does notrepresent positive development outcomes forthe majority of Mexican workers or rms.

In this paper, we report on one of the mostvibrant sectors within Mexicothe export-ori-ented apparel industryand one of the mostrapidly growing production centers within thatindustry, the region surrounding the city ofTorreon in northern Mexico. In Section 2, welay out the theoretical debates involving twomain paradigms in developmental studiestheindustrial districts and global commodity

chains (GCC) perspectivesand we indicatehow they frame our case. Section 3 explainswhy we have chosen Torreon as our empiricalfocus and addresses the relevance of themaquila sector for our study. Section 4 discus-ses our methodology and Section 5 analyzesour ndings, focusing on the emergence ofpost-NAFTA, full-package networks forapparel production that link local manufac-turers in Torreon to a new set of US customers.In Section 6 we examine the local develop-mental outcomes associated with the emergence

of full-package networks in Torreon. In thenal section, we reassess the industrial districtsand GCC approaches in light of the data

presented in this paper. The industrial districtsliterature, which emphasizes the importance oflocal institutions and dynamics in promotingcompetitiveness, has been inuential in shapingresearch on clusters in developing country

contexts. We argue that studies of such clustersshould be supplemented by a GCC perspectivethat privileges the dynamics of global industriesand the role of foreign buyers in linking localrms into crossborder networks.

2. CLUSTERS AND CHAINS:COMPETING OR COMPLEMENTARYAPPROACHES TO UNDERSTANDING

DEVELOPMENT?

Throughout the late 1980s and 1990s, theindustrial districts model generated signicantenthusiasm in development circles. Using aWeberian ideal type based primarily on theexperiences of small and medium enterprises inthe Emilia-Romagna region of the so-calledThird Italy, the industrial districts literaturesought to explain how geographically boundedand sectorally specialized clusters of rmscombined successful export performance ofprimarily labor-intensive, light manufacturinggoods, such as footwear and apparel, with

relatively high wages paid to a skilled workforce (Sengenberger & Pyke, 1991). Although itemerged from a distinct social, cultural, andeconomic context, researchers wondered if theindustrial districts model might provide clustersof rms in developing countries a ``high road''to development as well.

A special issue of World Development(Humphrey, 1995a) was dedicated to thisquestion. The focus on industrial districts wasaccompanied by a review of recent literature onJapanese manufacturing methods and the lean

production model most closely associated withToyota. The various contributors to the specialissue examined the applicability of these twomodelsindustrial districts and lean produc-tionin developing-country contexts. Whatmakes both models distinctive is their focus oninterrm networks. While lean productioninvolves reorganizing vertical interrm rela-tionships along the supply chain, the industrialdistricts model emphasizes the importance ofhorizontal networks between rms locatedwithin the cluster: ``The crucial characteristic of

an industrial district is its organization. . .. It isthe rm as part of, and depending on, acollective network which perhaps more than

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anything else incapsulates the essence of thedistrict's character'' (Pyke & Sengenberger,1992, p. 1).

A second special issue of World Development(Schmitz & Nadvi, 1999a) devoted to the topic

of industrial clusters in developing countriessought to ``specify the circumstances in whichclustering boosts industrial growth andcompetitiveness'' (Schmitz & Nadvi, 1999b, p.1503). In the 1999 special issue, the earlierdiscussion of lean production as a phenomenonassociated with Japanese manufacturing meth-ods, such as Just-in-Time and Total QualityManagement, was not reintroduced. 1 Similarly,there was a move away from the terminologyand specicity of the industrial districts model infavor of a more inclusive and exible approach

to the study of clusters.2

The strongest researchnding to emerge from this second group ofstudies was the need to focus on linkages exter-nal to the cluster. While early formulations ofthe industrial districts model emphasized theimportance of intracluster networks, theempirical work on clusters, particularly indeveloping countries, suggests that the way inwhich rms in clusters are linked to externalactors has signicant implications for the clus-ter's performance and local development.

Like several contributions to the second

issue dealing with the impact of trade liber-alization on developing-country clusters,Rabellotti (1999) examined the impact ofMexico's economic opening on one shoecluster in Guadalajara. Focusing on thecooperative behavior of local rms, Rabellottifound that trade liberalization producedgreater cooperation and increased horizontaland vertical linkages, and that this increasedcooperation had a positive eect on rmperformance. She also found that liberaliza-tion increased the heterogeneity within the

cluster, and that exporting rms were favoredby local suppliers. While only large manufac-turers were able to develop direct links withUS brokers because of the productionvolumes they require, the export dynamismgenerated by a few rms implied externalitiesfor the cluster because production for exportrequires rapid access to quality inputs. Thisupgrading of the local supply base, although itdisproportionately beneted the large export-ing rms that initiated it, was a positiveconsequence of liberalization. Rabellotti

concluded that trade liberalization producespositive externalities for the cluster, while alsoincreasing heterogeneity within it, mainly due

to the bifurcation of market channels betweenrms serving the domestic market and a fewlarge exporters.

Hubert Schmitz's analysis of the footwearcluster in Brazil's Sinos Valley showed how the

arrival of foreign buyers that handled thehigher value-added activities of product devel-opment, marketing, and quality control intro-duced new price pressures within the cluster. Henotes that while the industrial districts modelprovided a useful framework for his study, it isweak in two areas: ``it emphasizes specializa-tion, i.e., dierentiation by size; [and] it isstrong on linkages internal to the cluster butweak on external linkages'' (Schmitz, 1995, p.23). The importance of external linkages issharply underscored in Schmitz's sequel to the

Sinos Valley footwear case. His follow-up studyshowed that ``an ambitious upgrading projectfailed mainly because some of the leading andmost inuential entrepreneurs identied morewith their main overseas customer than withtheir local colleagues'' (Schmitz, 1999, p. 1647).This connection between local producers andglobal buyers is viewed as a central researchquestion (Schmitz, 2000).

These two special issues of World Develop-ment examined the value, rst, of the leanproduction and industrial districts models in

industrializing countries, and second, the roleof clusters more generally in developing coun-try contexts. Several key conclusions emergefrom this research trajectory:

The initial formulation of the industrialdistricts model was too stagnant and cul-ture-bound to capture the variety and heter-ogeneity of developing country experiences;

clusters in developing countries generallyhave a pronounced mix of small and largeenterprises, and the larger rms are likely

to yield disproportionate inuence in thecluster;

particularly in the context of trade liberal-ization in industrializing countries, verticalcooperation is high or growing within clus-ters;

despite the emphasis placed on coopera-tive competition in the early industrial dis-tricts literature, bilateral horizontalcooperation is low or decreasing; and

growth trajectories, rm performance, andlocal development outcomes are all to some

extent dependent on the external links thatconnect enterprises in the cluster to foreigncompanies and/or markets.

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The importance of external linkages, and thelimited empirical attention given to these link-ages to date, are often noted in the literature onclusters in developing countries. A useful anti-dote to this problem is the work on global

commodity chains (GCC) (see Gere &Korzeniewicz, 1994). The GCC perspectivestarts from the premise that analyzing thedynamics and structure of global industries is auseful way to understand the local conse-quences of globalization for rms and workers.Commodity chains are composed of links thatrepresent discrete, though interrelated, activi-ties involved in the production and distributionof goods and services. In the case of the apparelindustry, which is the empirical focus of ourpaper, the chain extends from raw materials

(e.g., cotton or petrochemicals), to theproduction of natural or synthetic bers andtextiles, then to the design, cutting, assembly,laundering, and nishing of apparel, and,nally, to the distribution, marketing andretailing of garments (Appelbaum & Gere,1994).

While the industrial districts approach tendsto focus on the role of institutions in shapinglocal development outcomes, the commoditychains approach when applied to clustersfocuses instead on rms, both in terms of

foreign buyers and local producers. Eachcommodity chain is driven by lead rms thatcoordinate and control the organization of theproduction process. One of the key hypothesesof the commodity chains literature is that thetype of lead rms that drive a commoditychain, and therefore the type of governancestructure that characterizes it, will shape localdevelopment outcomes in those areas where thechains touch down (Gere, 1999). Thus, theextent to which export-oriented clusters inindustrializing countries can achieve industrial

upgrading objectives and positive develop-mental outcomes will depend on the way inwhich rms in these clusters become incorpo-rated into global chains, who has power inparticular chains, and how that power is exer-cised.

The value of the commodity chains frame-work to the research on clusters was identiedby Humphrey, who called in the 1995 specialissue of World Development for greater atten-tion to the relationship between global chainsand local development:

Whether or not insertions into a commodity chain willcreate development potential for a cluster will depend

on both its position in the chain and the capacity ofrms and institutions to make use of or create sourcesof competitive advantage and opportunities forupgrading'' (Humphrey, 1995b, p. 158).

The utility of the commodity chains frameworkwas also underscored in a recent paper bySchmitz and Knorringa, who note that theGCC approach is useful in orienting studies ofdeveloping country clusters

because it identies the key feature of the context inwhich export manufacturers from developing coun-tries tend to operate: they feed into chains which areorganized by lead rms that source globally. However,this approach needs to be developed further in orderto specify where local upgrading is facilitated or hin-

dered by these global buyers (Schmitz & Knorringa,1999, p. 23).

In this paper, we use the commodity chainsframework to analyze the rm strategies,upgrading opportunities, and developmentoutcomes associated with the Torreon blue

jeans cluster. Ours is a two-part analysis. Inthe rst part, we show how the arrival of newlead rms, in particular US retailers andmarketers, have changed the organization ofthe local industry in Torreon by developing

full-package networks with several of the mostadvanced and innovative apparel manufactur-ers in the cluster. This part of the Torreonstory, in which the US buyers serve as acatalyst for the emergence of full-packagenetworks, shows the importance of externallinks in changing the organizational dynamicsof a cluster.

The second part of our analysis examineshow these full-package networks, now theindependent variable, shape rm performance,intracluster dynamics, and local development

outcomes in Torreon. The dierence betweenpre-NAFTA maquila networks and post-NAFTA full-package networks in terms ofdevelopment outcomes is underscored. Weexplain what kinds of local linkages andindustrial upgrading opportunities full-pack-age networks provide in Torreon, as well ashow the full-package shift aects rms andworkers. In short, our analysis shows: (a) howthe arrival of a new set of foreign lead rmsaects the organization of the Torreon clusterand allows for the emergence of full-package

networks; and (b) how these networks shapeintracluster dynamics and developmentoutcomes.



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3. THE NEW BLUE JEANS CAPITAL OFTHE WORLD: MORE THAN MAQUILAS?

Torreon is a dynamic industrial cluster of500,000 people in the northern Mexican state of

Coahuila, about four hours by car from theTexas portion of the US border. It is located inthe heart of the Laguna region, which is wellknown for its cotton and dairy products. Theapparel industry in Torreon straddles the near-by municipalities of Gomez Palacio and Lerdoin the neighboring state of Durango. Followingan economic recession in the early 1990s,Torreon has been one of the main beneciariesof Mexico's recent export boom. Although thearea is also home to other export-orientedmanufacturing sectors, such as autoparts and

machinery, the apparel industry has been themost dynamic in terms of exports and jobcreation.

Torreon is one of several rapidly growingpost-NAFTA apparel production clusters inMexico, reecting the increased importance ofthis industry to the country's overall exportprole in recent years. Mexico has emerged as aworld-class player among global textile andapparel exporters during the second half of the1990s. In 1991, Mexico was the seventh largestexporter of apparel to the United States. By the

decade's close, Mexico toppled China to gainthe number one spot, with the value of Mexicanapparel exports increasing from $1.2 billion in1990 to $8.8 billion in 1999 (SECOFI, 2001).

While overall apparel exports from Mexicohave increased dramatically over the past veyears, we focus on the leading item in Mexico'sgarment export repertoire: blue jeans. In 1999,the United States imported more than $2.6billion of trousers from Mexico, accounting for34% of total apparel imports from its southernneighbor (USITC, 2001). Torreon specializes in

denim blue jeans, which account for the lion'sshare of cotton trousers. In 2000, rms in theTorreon area were producing an average of six

million garments a week, of which 90% wereexported. Jeans accounted for 75% of theexported apparel, and thus the region madeover four million pairs of jeans each week. Incontrast, El Paso, TexasTorreon's predeces-

sor as the blue jeans capital of the world and amajor manufacturing center for Levi Strauss &Co. before the company closed its last factoriesthere in 1999produced two million pairs of

jeans a week at its peak in the early 1980s. Tokeep pace with this dramatic increase in output,employment in Torreon's 360 apparel factorieshas grown considerably from 12,000 jobs in1993 to an estimated 75,000 in 2000. In addi-tion, the proportion of Mexican denim used inTorreon's exported blue jeans increased from anegligible 12% in 1993 to 15% in 2000, and the

piece rates paid to rms for blue jean assemblyrose two- to threefold (see Table 1).

We have chosen Torreon as the empiricalfocus of our paper because it is a leadingapparel production cluster in Mexico, and thedynamism of Mexico's apparel exports inrecent years suggests that it has been one of theindustries most strongly aected by NAFTA.Some of the earliest research in the now vastmaquiladora literature examined in-bondsewing plants along the border as exemplars oftwo characteristics that would become closely

associated with the maquilas: a young,predominantly female workforce with loweducation and skill levels; and a highly routi-nized, low value-added manufacturing processthat involved simple assembly of importedinputs. 3 Apparel plants outnumber all othermaquila establishments and they employ moreworkers than any other maquila sector exceptelectronics. In 1993, the year prior to NAFTA'simplementation, there were 392 apparelmaquilas with 64,000 workers. By 2000, therewere 1,058 registered maquila plants in the

apparel industry throughout Mexico, employ-ing a total of 270,000 workers 4 (SECOFI,2001).

Table 1. Apparel industry indicators for Torreon /La Lagunaa

Variables 1993 1998 2000

Total output (garments per week) 500,000 4.0 million 6.0 millionOutput per company (garments per week) Max. 50,000 Max. 230,000 Max. 480,000Mexican denim in export production 12% 5% 15%Assembly price per piece US$0.901.10 US$1.202.05 US$1.603.00Employment 12,000 65,000 75,000

a Torreon is the center of La Laguna, a highly integrated economic region formed by two additional cities (GomezPalacio and Lerdo) and several rural communities. Although each city is a distinct political entity, they form anintegrated production zone.



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If the industrial districts model provides a``high road'' to competitiveness, the maquil-adora industry has long been associated with a``low road'' based on exploiting substantialwage dierences between the United States and

Mexico. The maquiladoras are in-bond factoriesthat produce goods primarily from importedUS inputs. 5 These goods are then re-exportedfor sale in the US market, with only a minimalduty paid on the value-added in Mexico. Whileproponents of the maquiladora regime assertthat it is a valuable source of export revenueand job creation for Mexico, the program'scritics claim that the maquila sector oersnothing but dead-end jobs, and traps develop-ing countries into providing cheap labor forlow value-added assembly operations. Because

the vast majority of inputs are imported, it hasbeen argued that the maquilas do not stimulategrowth in the rest of the economy (Sklair,1993). Furthermore, early work on the maquilasdocumented abusive or poor working condi-tions and suppression of workers' eorts toorganize (Fernandez-Kelly, 1983; IglesiasPrieto, 1985).

The prole of the maquila sector has changeddramatically since it was established by theBorder Industrialization Program in 1965.Although the maquilas were initially conned

to the northern border, this geographicalrestriction was later relaxed and maquila plantsnow exist throughout the country. Recentstudies contend that the maquiladoras haveevolved from low-value added assembly plantsto factories capable of more sophisticatedmanufacturing operations. This revisionistperspective emerged in the late 1980s and early1990s, when researchers began to call attentionto so-called second- and even third-generationmaquilas. Although local inputs to theproduction process remain low, the mix of

activities being performed by Mexican workersin the maquilas has become more diverse,expanding beyond the simple assembly opera-tions associated with earlier plants. Thesectoral focus of recent research includesautoparts production in northern Mexico,televisions and other electronics in Tijuana, andcomputers in Guadalajara. In each of theseindustries, the maquilas have matured fromassembly sites based on cheap labor to manu-facturing centers whose competitiveness derivesfrom a combination of high productivity, good

quality, and wages far below those prevailingnorth of the border (Carrillo, 1998; Gere,1996, 2000; Shaiken & Herzenberg, 1987).

While the maquilas existed for almost threefull decades prior to NAFTA, this in-bondsector of the Mexican economy has grownrapidly since NAFTA's passage. Over 400,000maquila jobs were created during 199498, the

rst four years after the implementation ofNAFTA (Buitelaar & Padilla, 2000). Growth inthe maquila sector was accelerated by thedevaluation of the Mexican peso in December1994. The devaluation had the eect of makingMexican labor even cheaper for US rms and ithas resulted in a major export boom since 1995.The rapid growth of the maquila sector hasgenerated widespread debate in Mexico, whichreects not only the importance of this sector ofthe economy, but also the concern generated byMexico's shift to an export-led development

strategy in the context of trade liberalizationand regional integration.

Our study of Torreon provides an opportu-nity to contribute to this debate about Mexico'sprospects for development in the NAFTA era,as well as to the literature on industrial clustersin developing countries. Does clustering andspecialization in Torreon's apparel industryprovide a ``high road'' to development, whererms can compete on nonprice factors such asquality and exibility and the local workforceenjoys relatively high wages? Or does Torreon

more closely resemble the old-style maquilamodel, where local production for export isconned to low-value added assembly activi-ties, there are minimal backward linkages tosuppliers, few horizontal networks connectrms, companies compete only on the basis ofprice, and unskilled workers receive low wages?Our research suggests that there has been asignicant shift beyond the traditional model ofmaquila production in the region, but theoutcomes for local rms and workers aremixed.

4. METHODOLOGY

Our on-site research in Torreon wasconducted during two trips, each of about twoweeks in duration, in July 1998 and July 2000. 6

Supplemental eldwork during this two-yearperiod consisted of interviews with US textileand apparel manufacturers in the United Statesthat provided us with information about theirglobal and North American strategies. Most of

these companies are located in the Piedmontregion of North Carolina, one of the majortextile manufacturing centers in the United



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States. 7 These interviews, carried out as part ofan on-going, larger research project examiningthe restructuring of the North Americanapparel industry, provided an initial set ofcontacts in the Torreon region. The primary

method of data collection consisted of open-ended strategic interviews with Mexican, US,and joint-venture rms, industry associations,and local government organizations, coupledwith plant visits and factory tours. We alsoused secondary materials, including productionand trade data and articles in local newspapers,to document recent changes in the industry.(For additional discussion of the strategicinterviews we conducted, see Appendix A.)

Our 1998 sample included nine apparelcompanies and two textile mills. Of these 11

rms, two were subsidiaries of US multina-tional corporations, three were joint venturesbetween US and Mexican companies, and sixwere wholly-owned Mexican manufacturers. Inour second visit to Torreon, we interviewed 10apparel companies, including follow-up inter-views with the six largest rms we talked within 1998. This sample consisted of threesubsidiaries of US apparel companies, one jointventure, and six wholly-owned Mexicancompanies. In both 1998 and 2000, we alsointerviewed the local branch of the national

apparel industry association as well as ocialsin the local oce of the federal governmentministry concerned with commerce and indus-try. Given the disproportionate role played byforeign rms in the sector and our interest inunderstanding the power dynamics that exist inthe industry, our study focused on the 10largest apparel manufacturers in Torreon.Although about 360 dierent garment rmsoperate in the Laguna region, the 10 biggestcompanies in our sample in 2000 directlyproduced or coordinated about one-third of the

total apparel output of the region. (SeeAppendix B for a list of the authors' interviewsin Torreon.)

Interviews were conducted primarily inSpanish with the company's plant manager,director of foreign operations, or owner, andthey lasted an average of two hours. Theinterviews were usually followed by a tour ofthe production facilities. In Torreon theseincluded the traditional sewing factory, textilemills, laundries, nishing plants (where thegarments are pressed, inspected for quality, and

packed), and a distribution center. In additionto providing an opportunity to evaluate theworking conditions and industrial relations (as

suggested by plant oor interactions betweenthe workers and managerial sta), these toursalso permitted us to speak with additionalinformants, such as production trainers andline supervisors, whose perspectives on the

operation complement the data collected in theinitial interview.

5. TORREON'S NAFTA-ERA NETWORKS:THE ARRIVAL OF NEW LEAD FIRMS

The Laguna region where Torreon is locatedhas long been a center for textile and apparelproduction. The presence in the region of oneof the oldest textile companies in the country,Compa~na Industrial de Parras, established the

area early on as an important source of cotton-based textiles and apparel for the nationalmarket. From the beginning, rms in Torreonspecialized in denim trousers, rst as workwearfor the area's growing industrial labor forceand later as fashion apparel when blue jeansbecame a mainstream clothing staple. The earlyperiod of the cluster's development in the 1940sand 1950s coincided with an import-substitut-ing industrialization strategy, protectingnational companies in virtually every sectorfrom foreign competition and essentially guar-

anteeing healthy prots to rms in the closeddomestic market.

The opening of Mexico's economy with thecountry's accession to the General Agreementon Taris and Trade in 1986, along with majordevaluations of the peso in 1982, 1985, and1988, contributed to an extremely dicultperiod for apparel rms in Torreon andthroughout the country. As the purchasingpower of Mexican consumers decreased, theyalso faced a wide array of new and cost-com-petitive imported apparel products. Together

these factors resulted in declining employmentand output in Mexico's apparel and textileindustries, with small and medium rms espe-cially hard hit. While the domestic industryfaced a period of crisis throughout the 1980s,the maquila sector of in-bond plants ourished,primarily along the border. Many of the localrms that had survived the leanest years inplaces like Torreon recognized that exportingwas the only viable option for nationalproducers, and so they too focused theirattention on producing blue jeans for the US

market.The transition of many rms from domestic

manufacturer to export producer transformed



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the Torreon cluster. While several localcompanies had developed and marketed theirown lines of jeans in the Mexican market, theyquickly discovered that they could not meet thequality or quantity standards demanded by US

buyers. Thus, they exported through the onlymechanism that was available to them: theybecame maquiladora plants assembling jeansfor the US market. The implementation ofNAFTA in 1994 coincided with a sharpdevaluation of the Mexican peso in Decemberof the same year, from 3.4 to 6.8 pesos to onedollar. The immediate eect of the devaluationwas to lower the relative cost of Mexican labor,expand manufactured exports, and therebyboost the country's maquiladora sector.

As a result of NAFTA, the Torreon apparel

cluster has experienced a qualitative change inthe type of networks connecting local rms toexport markets. This transition is associatedwith the arrival of a new set of foreign buyerswhose sourcing needs are dierent than those ofthe apparel manufacturers that used to domi-nate the region's export-oriented apparelproduction. Table 2 highlights the magnitude ofthis shift. In 1993, the major US customers forthe blue jeans made in Torreon were four largemanufacturers: Levi Strauss, Wrangler, Farah,

and Sun Apparel. By 2000, these companieswere joined by the top US retail chains (JCPenney, Sears, Kmart, Wal-Mart, and Target),the two leading specialty retailers for apparel(Gap and Limited), and the marketers who sell

a wide range of fashionable brands (such as LizClaiborne, Donna Karan, Tommy Hilger,Calvin Klein, and Polo/Ralph Lauren).

The contrast between manufacturers andother big buyers (retailers and marketers) intheir capabilities and needs gives rise to thedierence between assembly and full-packagenetworks. Figure 1 shows the typical manu-facturer-dominated assembly network, whichwas prevalent in Torreon from the mid-1980sto the mid-1990s. The assembly plants on theMexican side of the border received cut parts

from US manufacturers or brokers. In turn,these assembly plants often subcontracted out aportion of their production to smaller rmsknown as submaquilas. These cut parts were tobe sewn into garments and then re-exported tothe United States under the maquila/807regime. The prole of foreign lead rms inTorreon at this time was undierentiatedUSmanufacturers, most of whom had someproduction in their own plants north of theborderand there was no variation in the type

Table 2. Main clients for Torreon apparel exportsa

Type of clients 1993 2000

Manufacturers Farah (M) Sun Apparel-Jones of NY (M)Sun Apparel (M) Aalfs (M)

Kentucky Apparel (M)Grupo Libra (M)Siete Leguas (M)

Red Kap (M)

Brand marketers Levi's (BM, M) Levi's (BM, M)Wrangler (BM, M) Wrangler (BM, M)

Action West (BM, M)

Polo (BM)Calvin Klein (BM)

Liz Claiborne (BM)Old Navy (BM)

Tommy Hilger (BM)Donna Karan (BM)

Guess (BM)Chaps (BM)

Retailers Gap (BM, R)The Limited (BM, R)

K-Mart (R)Wal-Mart (R)JC Penney (R)

Sears (R)Target (R)

a M: Manufacturers; BM: Brand Marketers; R: Retailers.



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of assembly networks these manufacturersestablished in the region.

In Figure 2, the assembly networks typical ofthe maquila phase have diversied to include thefull-package networks characteristic of buyer-driven commodity chains. In this full-packagemodel, a local manufacturer receives detailed

specications for garments from the buyer andthe supplier is responsible for acquiring theinputs and coordinating all parts of theproduction process: the purchase of textiles,cutting, garment assembly, laundry and nish-ing, packaging, and distribution. Prior toNAFTA, the lead rms in the apparel

Figure 2. Post-NAFTA full-package networks in Torreon.

Figure 1. Pre-NAFTA maquila networks in Torreon.



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commodity chain (retailers, marketers, andbranded manufacturers) sourced primarily fromEast Asia because countries such as Hong Kong,South Korea, and Taiwan were home to contractmanufacturers that could producer orders for

nished apparel according to these buyers'specications 8 (Gere, 1999). After NAFTA,retailers and marketers became eager to transferas much of this business to Mexico as possiblebecause NAFTA's rules of origin give apparelproduced under full-package arrangements thesame preferential access to the US market asapparel exported under the maquila/807 regime,as long as it is manufactured from NorthAmerican textile inputs (Gere & Bair, 1998).Buyers placing orders for full-package apparel inMexico generally do not have to worry about

taris or quotas, as they do when importing fromother apparel exporting countries.

6. UPGRADING THROUGH NETWORKS:TORREON'S SUCCESS AND ITS

LIMITATIONS

The arrival of a new set of foreign buyerschanged the nature of Torreon's role in theapparel commodity chain: pure assemblynetworks typical of the maquila sector were

replaced with a mix of assembly and full-

package networks. In this section, we explainthe relevance of these networks for localdevelopment outcomes, focusing on four areas:upgrading at the level of the industry, upgrad-ing at the level of the rm, the hierarchical

organization of Torreon's inter-rm networks,and the implications for labor.

(a) Upgrading at the industry level

Upgrading is clearly occurring at the industrylevel in Torreon as a result of full-packagenetworks established by new lead rms. Prior toNAFTA, the only link in the apparel commod-ity chain that was strong in Torreon's export-oriented blue jeans cluster was assembly, since

this was the activity that the maquila/807 regimeencouraged. As more US buyers began tochange their sourcing and production networksto take advantage of new activities graduallyliberalized under NAFTA's phase-in schedule,other activities in the chain began to touch downin the region. Figure 3 shows the expansion ofthe apparel commodity chain in Torreon over19932000. In 1993, the only link on the Mexi-can side was assembly; by 1996, textile produc-tion as well as the post-assembly stage oflaundering and nishing, one of the rst

production processes liberalized under

Figure 3. USTorreon apparel commodity chain activities and location.



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NAFTA, were added. In 2000, the full range ofproduction activities was taking place in Torr-eon. The other links of the chain that have beentransferred to Torreon mean that more back-ward linkages and value are being added in the

region beyond the assembly activities that weredominant prior to the emergence of full-packagenetworks.

Figure 3 shows that three links in the apparelcommodity chaindesign and product devel-opment, marketing, and retailhave remainedpredominantly in the United States. These arethe highest value-added activities in the chain,and they are also the ones with signicantbarriers to entry closely guarded by the foreignrms that control them. US lead rmswhether manufacturers, marketers, or retail-

ersview these links of the commodity chain ascore competencies, and they see design andproduct development in particular as critical interms of dierentiating their fashions and stylesfrom competitors. A number of the full-pack-age manufacturers in Torreon that we inter-viewed have begun to work more closely withtheir clients on product development, but this isgenerally conned to translating the buyer'sspecications into practical knowledge that isnecessary for production. 9

No manufacturer in Torreon markets its own

apparel brands in the United States, althoughsome companies still have a presence in thedomestic market, and no Torreon producer of aUS brand is able to sell its branded output

directly in Mexico (everything is exported tothe United States). One company that weinterviewed planned in the future to launch itsown line of apparel in the US market, but theamount of capital necessary to promote and

market a new brand makes such endeavorsrisky. Strategies that local rms are consideringin order to reduce these risks include marketingtheir products specically to Mexican-Ameri-can or Mexican consumers in the United States(whose fashion preferences are presumablycloser to their own), and targeting regionalretail chains and boutiques, which have lowervolume needs and are less likely to choose theirsuppliers based solely on price.

(b) Upgrading at the rm level

Upgrading is also occurring at the rm levelin Torreon, although here the picture is morecomplex. A signicant portion of full-packageorders in Torreon is being handled by a smallnumber of rst-tier manufacturers with thecapabilities and capital needed to coordinatefull-package networks. Table 3 lists the top 10rms in Torreon according to their productionvolume and the type of activities they perform.Four of these 10 rms are ``full-package''manufacturers, meaning that they receive an

order from a client and deliver a nishedproduct. Four more are what may be termed``half-package'' producers, meaning that theycarry out all the production activities (cut, sew,

Table 3. Top 10 apparel manufacturers in Torreon, MexicoJuly 2000

Rank Firm Capacitya Employment Capabilityb Ownership

1 Wrangler 480,000 1,900 C, S, W US subsidiaryc

2 KentuckyLajat 400,000 5,500 F, C, S,W Mexicand

3 Libra 400,000 5,000 F, C, S, W Mexican4 Siete Leguas 250,000 3,200 F, C, S,W Mexican5 Grupo Denim 245,000 3,300 C, S, W Mexican

6 Maquilas Pami 240,000 3,800 C, S, W US subsidiarye7 Red Kap (RKI) 156,000 1,430 S US subsidiaryf

8 Pafer Huichita 150,000 2,450 F, C, S, W Mexican9 Grupo Impeccable 150,000 1,500 C, S, Mexican10 Original Mexican

Jeans Co. (OMJC)135,000 3,000 C, S, W Joint ventureg

Total 2,606,000 31,080

a Pairs of jeans per week.b Capabilities: F: fabric, C: cutting, S: sewing, W: washing and nishing.c Wrangler's parent company is the VF Corporation.d KentuckyLajat was set up in 1995 as a joint venture between Kentucky Apparel, a US-based jeans manufacturer,and the Lajat Group in Mexico, but Lajat bought out its US partner in July 1999.e Maquilas Pami is owned by Sun Apparel, which was purchased by Jones Apparel of New York in 1998.fRed Kap is a division of VF Workwear, Inc.g OMJC is a joint venture between Aalfs, a US-based jeans manufacturer, and the Martn Group in Mexico.



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and launder), but do not buy the fabric. Thedierence between full-package and half-pack-age is indicated in Table 3, where the capabil-ities of some rms include an ``F'' denoting thatthey purchase the fabric for the orders they ll,

while others have only C, S, and W listed forcut, sew, and wash, respectively.

All four of these full-package manufactur-ersKentucky-Lajat, Libra, Siete Leguas, andPafer Huichitaare Mexican-owned compa-nies. The emergence of local full-packagecompanies competing alongside a US-ownedcontractor like Maquilas Pami (the sixth-larg-est manufacturer in Torreon and a subsidiaryof Jones Apparel of New York) is signicant.Having gained experience through maquilaproduction for US clients and having earned

the trust of foreign buyers, Mexican rms arenow developing direct links to export markets.These full-package rms are upgrading byeliminating middlemen like brokers or tradingcompanies, which allows them to enjoy thehigher prots full-package production oers ascompared to maquila orders.

(c) Vertical network structure and hierarchicalorganization of the industry

While upgrading is occurring in Torreon,both at the level of the industry and for somespecic rms, we are not sanguine about all theoutcomes associated with the emergence of full-package networks in the region. Due toincreasing concentration on both sides of theborder, more orders are in the hands of fewerforeign buyers and they are being given to arelatively small number of Mexican suppliers.The social foundation of this concentration isrevealed by the fact that six of the 10 rmslisted in Table 3 are owned by family members

related by blood or marriage. 10 This isparticularly striking considering that three ofthe remaining four rms are subsidiaries of UScorporations. Thus, the development of full-package networks in Torreon is primarilybeneting a wealthy domestic elite whosecontrol over the local industry is being furtherstrengthened by its exclusive access to the UScustomers placing orders in the region. Whilethese orders are received by a few large, full-package manufacturers in Torreon, they areactually being lled by a burgeoning array of

contractors and subcontractors organized intotiers of hierarchical networks controlled by thedominant rms in the cluster.

This hierarchical organization of the industryapplies two sorts of pressures on local rms.First, the US buyers are benchmarking Mexi-can full-package manufacturers against otherglobal suppliers. Consequently, these manu-

facturers are under pressure to reduce theirproduction costs to a minimum in order to oera competitive price. Second, these rst-tiermanufacturers then exert pressure on theirsubcontractors as they try to procure assemblyservices for the lowest possible price per piece.The end result of this vertical competitivedynamic is signicant downward pressure onthe manufacturers' prot margins, and conse-quently on workers' wages.

As noted in the previous section, severalMexican companies have emerged as leading

full-package manufacturers in Torreon. To theextent that this puts ownership and control inlocal hands, it is a positive developmentaloutcome. But, these Mexican rms exert thesame kinds of pressure and control on theirlocal subcontractors as US-owned companiesimpose on them. From the perspective of thesecond- and third-tier suppliers in Torreon'sassembly networks, the dierence betweenreceiving an order from a Mexican intermediaryor a US buyer is probably negligible. To avoidbeing squeezed by the local full-package

manufacturers, the obvious upgrading path forthese subcontractors is to become full-packageproducers themselves, but this transition isdicult to make for two reasons. First, full-package business requires signicant amountsof working capital to purchase piece goods (i.e.,fabric), and credit is both scare and expensive inMexico. Second, full-package manufacturersneed direct links to US clients who are lookingfor their services, and access to this customerbase is jealously guarded by the US and Mexi-can companies in Torreon that already have it.

(d) Implications for labor

How has the arrival of full-package networkscoordinated by new US buyers aected workersin Torreon? We examined ve main issuesrelating to the implications of this process forlabor: (i) employment growth, (ii) skillsupgrading of the local labor force, (iii) workingconditions, (iv) unionization, and (v) wages.Dramatic employment growth in the apparelindustry is the most obvious impact of Torreon's

export boom on the local labor market. Appareland textiles have become the major source ofemployment in the region. During 199398,



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apparel jobs increased 300%, while during thesame period employment in commerce andservices only grew 3%, construction 80%, and theauto industry 100%. In 1993, the area employed12,000 workers in the apparel and textile indus-

tries; by 2000, the number had grown to 75,000(see Table 1). It is equally important to note thatactivities associated with the deepening of thesupply chainsuch as textile production, laun-dering, and cuttingare bringing new types of

jobs to the region to complement the growingnumber of sewing workers.

The development of full-package networks inthe cluster has resulted in some upgrading ofthe local skills base, as jobs in Torreon's cuttingrooms and laundries entail more training andbetter pay than is oered to the average sewing

machine operator. The dierent levels ofinvestment that rms make in the humancapital of workers reveal not just the varyingcomplexity of specic jobs, but also the way inwhich gender straties the local labor market.During our eldwork in Torreon, we saw onlymen working in the laundries and cuttingrooms. While management would attribute thisto the physically strenuous nature of the work,sex segregation also reects the reluctance ofcompanies to invest in enhancing the skills offemale employees. Women workers are expec-

ted to remain in the workforce only until theybegin families, typically withdrawing from thelabor market in their mid-20s. Despite the factthat the ratio of male to female sewing machineoperators in several of Torreon's larger plantsis approaching 50%, the internal labor marketwithin the factories continues to be stratied bygender in subtle ways. Male sewers are far morelikely than female sewers to be promoted tohigher-wage jobs in the cutting rooms orlaundries, and often even the most dicult andbest paying assembly line jobs, such as sewing

the inseam in a jean, are given to men becausesupervisors believe they are more easily able tohandle the heavy denim fabric.

Due to the tightness of the local labormarket, turnover is high across every job cate-gory in Torreon's apparel industry. The aver-age turnover rate in many of the sewingfactories in Torreon was estimated at 10% perweek. Thus, rms have little incentive to investin training their workers. While there are moreopportunities for skill upgrading than therewould be in the absence of full-package

networks, the boom in Torreon's apparelexports is characterized by very uneven devel-opment of the local labor force.

Our evidence from Torreon suggests thatthere has been an improvement in workingconditions in the region associated with thearrival of US buyers that are sourcing theirbrand name apparel locally. The presence in

the region of widely recognized clients withupscale labels (such as Calvin Klein, Polo, andTommy Hilger) has prompted an improve-ment in working conditions. Large retailersand marketers do not want their brandsassociated with the exploitation of workers orwith unsafe working conditions. Companiessuch as Gap and JC Penney have issued Codesof Conduct related not only to the nalquality of the product, but also to the workprocess itself. Any plant or company that failsto fulll these requirements, including

compliance with local labor laws, safetypractices, and even the conditions of thebathrooms, is in danger of losing its contracts.In addition, since most factories have beenconstructed since 1994, they were designedwith modern standards to provide a relativelysafe working environment with proper venti-lation, lighting, ergonomic equipment, etc. Ingeneral, the working conditions of many ofthese new Mexican plants are not only betterthan those oered by local competitors, butfrequently better than those in comparable US

apparel factories.Currently the topic of sweatshops is receiving

a great deal of attention in both the academicand popular press, thanks to a number ofpublicity campaigns sponsored by variousconsumer organizations, student groups, andorganized labor (National Interfaith Commit-tee for Worker Justice, 1998; Ross & Kerna-ghan, 2000). Activists have called attention tothe abusive working conditions that prevail inmany sewing factories, both in the UnitedStates and abroad, and they challenge leading

companies in the industry to do a better job ofensuring their apparel is produced in a sweat-free environment. A commodity chainsapproach has been implicit in many of thesecampaigns, as activists demand that US rmstake responsibility for the working conditionsprevailing in any plant where apparel bearingtheir label is produced, including subcontrac-tors in developing countries. Blatant sweatshopconditions were not evident in any of the largeplants we visited. Most of the factoriesappeared clean, well lit and ventilated, and

reasonably ecient. They had Codes ofConduct from their clients displayed whereworkers could see them, although in at least



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one case they were displayed in English. Thevisibility of these Codes in the plants that wevisited increased between 1998 (when it wasuncommon to see them posted in a factory) and2000 (when posting them had become a stan-

dard practice).Because we primarily studied large rms,

additional research is necessary to evaluateworking conditions in the numerous smallercontractors and submaquilas in the Torreonregion. Limited evidence from Torreon andeldwork conducted elsewhere in Mexicosuggests that small, lower-tier subcontractorsgenerally have worse working conditions andlower wages (Bair, 2000, 2001).

While the arrival of new buyers has createdjobs in Torreon and appears to have improved

working conditions in some factories, the evi-dence in terms of wages and industrial relationsis disturbing. The status of organized labor inthe Torreon apparel industry mirrors the situ-ation throughout Mexico. In tandem with theliberalization of the economy and in pursuit ofthe labor exibility so prized by foreign rms,the Mexican government has reduced thepower of unions to a minimum (Carrillo, 1994;De la Garza, 1994). The role of unions in theapparel industry in the Torreon region has beenlimited in many cases to helping the rms and

their managers ``deal'' with the workers.Eective representation and collectivebargaining have virtually disappeared and here,as elsewhere in Mexico, ``protection contracts''(i.e., collective contracts signed with company-friendly ``unions,'' often without the knowledgeof workers, designed to prevent the entrance ofa genuine union) are the norm. In the absenceof eective representation, workers exercisetheir limited power by moving from onecompany to another fairly often. They use theirmobility as a source of bargaining to obtain

small wage increases and nonmonetary bene-ts, such as transportation, free lunch, classes,raes, and prizes. This is a benet contingent,however, upon a continued high demand forlabor.

In terms of wages, the evidence is moremixed. Workers in the apparel industry arepaid according to a piece-rate system wherebythey receive a base wage, which is typically amultiple of the local minimum wage, plusadditional earnings ``per piece'' when theyachieve certain productivity levels or fulll set

production quotas. It is widely agreed thatMexico's minimum wage, which varies bygeographic region, is not a living wage, and

consequently many companies pay a multipleof it, such as 1.5 times or two times thelegally allowed minimum. When we completedour initial eldwork in Torreon in July 1998,the local minimum wage was 182 pesos per

week (US$ 21.00). Base wages in the compa-nies we interviewed generally ranged between220 and 280 pesos a week, but most workersearned more due to the piece rate system.Maximum average salaries ranged from 500pesos (US$ 57.50) to 750 pesos (US$ 86.20) aweek.

By July 2000, average sewing wages hadrisen in Torreon to around 650 pesos (US$68.40) a week. 11 Several of the rms inter-viewed reported that good sewers with highproductivity were earning as much as 800

1,000 pesos (US$ 84.20 to $105.30) a week.12

Companies repeatedly told us that in Torreon'stight labor market ``no one works for mini-mum wage'' and many of the sewers in theregion's factories were earning well in excess oftwo times the legal minimum. Apparel wageincreases in Torreon have generally beenrunning ahead of ination, which was about12% in 1999. But, real wages are only nowreturning to the levels reached prior to the 1994devaluation, which has led some analysts toconclude that many Mexican workers have

actually experienced a decline in their standardof living over the past ve years (The Econo-mist, 2000).

Although the high turnover and tight labormarket in Torreon have been driving wages upin the region's apparel plants, this trend hasnot gone unnoticed by the factory's owners.High and persistent turnover was repeatedlycited in our interviews as the most pressingproblem employers face. In the summer of1998, the employers initiated discussionsamong themselves in an eort to nd a ``solu-

tion'' to the problem of rising wages as a resultof Torreon's increasingly tight labor market.The employers particularly were concernedwith the practice of companies pirating awayeach other's workers with wage increases. ByJuly 2000, their eorts in this regard had notbeen successful. Some entrepreneurs in thelocal industry expressed resentment towardsthe foreign rms that arrived in Torreon afterthe passage of NAFTA. They complain thatbecause foreign rms can aord to pay higherwages than their Mexican counterparts, they

often hire away the better and more experi-enced workers whose skills the local companieshave developed.



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7. LESSONS FROM TORREON: THEVALUE OF A COMMODITY CHAINSPERSPECTIVE FOR RESEARCH ON

CLUSTERS

Our analysis of the blue jeans industry inTorreon shows how the types of links thatconnect local rms to global chains shapedevelopment outcomes in export-orientedmanufacturing. Recent literature on manufac-turing clusters in developing countries hasargued that the local-global link, and inparticular the role of foreign buyers, is not wellunderstood. Our study is intended to help llthis gap. The global commodity chains frame-work that we applied to the case of Torreonallows us to explore how the structure of

competition within a global industry aects theexperiences of local rms and workers inspecic production locales.

Many of the factors that the industrialdistricts literature would expect to be importantin explaining local outcomes in clusters were notevident in Torreon. For example, we found thatnetworks in Torreon tended to be hierarchicaland vertical as opposed to cooperative andhorizontal. During the course of our conversa-tions with owners and managers, we learnedthat trust and collaboration between companies

in Torreon is very uncommon. One of ourinformants described the networks betweenlocal rms as a ``cadena de disconanza,'' or achain of distrust. ``Information here is notshared. If you want to know how many jeansare being made across the street, you have tobribe someone.'' Relations between companiesoften appear distant or even strained, not closeand collaborative, despite the fact that severalof the major rms are owned by relatives.

Several decades ago, researchers inuencedby dependency theory claimed that transna-

tional corporations had negative implicationsfor local development in Latin America. Theywould not have been surprised by the low levelsof trust, weak horizontal ties, and hierarchicalnetworks that characterize Torreon's apparelexporting cluster. It is not accurate, however, tosuggest that all foreign rms establish verticalnetworks that are uncooperative in nature, northat all local companies build horizontalnetworks that promote collaboration and trust.The climate of distrust also aects relationsamong Mexican-owned rms. In fact, some of

our informants spoke more favorably of theforeign clients they did business with on aregular basis than the local entrepreneurs with

whom they competed for orders and workers.More research is needed to understand theboundaries of solidarity in clusters like Torreon,but it is clear that they are not determined solelyby foreign versus domestic ownership, nor are

they inevitably fostered by the existence offamily ties.

Supporting institutions, such as trade asso-ciations and industry-specic educational/training programs, apparently have not playedan important role in Torreon's emergence as amajor blue jeans cluster. In the case of the localapparel industry association, its growth seemsto have been more a response to Torreon'sexport boom than a cause of it. In short, theinstitutional environment characterizingthe Torreon cluster is radically dierent from

the stylized prole (e.g., trust and eectivesanctions, strong sociocultural ties) found inthe industrial districts model. In his valuablediscussion of upgrading in exporting clusters,Schmitz notes, ``Strategic response to globalcompetitive pressures cannot just rely onprivate joint action but require public agenciesas catalysts or mediators'' (Schmitz, 2000, p.15). Our research in Torreon yielded little evi-dence of private collaboration in the form of

joint action among local rms, and even lessevidence to suggest that the cluster benets

from the support of public agencies capable ofmediating relations between the companies thatcomprise it. We have argued that the arrival ofnew buyers in Torreon has resulted in upgrad-ing, both at the industry and at the rm level.But, the absence of an institutional environ-ment that would help further diuse the bene-ts of Torreon's export boom beyond the rsttier of full-package rms means that there arelimits to this process of upgrading, and theymay have already been reached.

Recent events in Torreon indicate that links

to the global economy can produce disruptionas well as growth. A slowdown in the USeconomy has had a dampening eect on theexport boom in Torreon at the end of 2000, andthe eects have continued through the rst halfof 2001. Conversations with industry repre-sentatives in May 2001 revealed that 8,000apparel jobs have been lost since October 2000,and production is down 20% as compared withthe same period last year. A commodity chainsapproach would lead us to expect that joblosses and plant closings will be concentrated

among the small subcontractors located at thebottom tiers of the chain. Furthermore, wewould expect that companies possessing the



16/19

additional capabilities associated with full-package production are less negatively aectedthan the assembly-oriented maquilas. Evidencefrom Torreon conrms that the companies thathave suered most to date are smaller, locally

owned subcontractors. The negative implica-tions of the slowdown could spread beyond thisgroup of rms, however, and the absence ofinstitutional support mechanisms in Torreonmeans that the adjustment to a sustainedeconomic downturn will be harder to managegiven the heavy reliance on the US market asthe source of export growth.

Both the commodity chains and industrialdistricts approaches address the issue of devel-opment, conceived largely as a process ofindustrial upgrading, and both can be used to

draw policy implications about the best way toachieve local development and upgradinggoals. The literature on clusters has shown thatunder a particular set of conditions, it ispossible to use industrial policy and localinstitutions to promote the creation of indus-trial districts as a ``high road'' to development.In many developing countries, however, theseconditions are not present. This is likely to be

even more true in an era marked by theincreasing (if contested) hegemony of theWorld Trade Organization and institutionssuch as the International Monetary Fund,which privilege the adoption of neoliberal

programs that promote open trade anddiscourage industrial policy. It is in this envi-ronment, characterized by hyercompetitionbetween industrializing countries pursuingexport-led growth strategies, that the specter ofcompetitive devaluations and immiserizinggrowth haunts poorer countries' dreams ofdevelopment (Kaplinsky, 1999).

Given that the governments of industrializingcountries have limited power to ``get the insti-tutions right,'' the question becomes how rmscan use their participation in global commodity

chains to pursue developmental goals. In thecase of Torreon, foreign buyers have providedlocal rms with a full-package link to the USmarket that gives them better upgrading pros-pects. In the context of Mexico's export-ori-ented growth strategy, guring out how localrms can improve their position within globalindustries is a preeminent topic for producersand policymakers alike.

NOTES

1. More generally, there has been considerable

research contributing to our understanding of the lean

production model and its critique. See, for example,

Harrison (1994), Boyer (1998) and Freyssenet (1998).

2. The need to adopt a more exible approach to

industrial districts was already recognized in Pyke and

Sengenberger (1992). See, for example, Zeitlin's conclud-

ing chapter, which calls for ``a `thin,' `open' model

capable of generating a variety of empirically observable

forms'' (Zeitlin, 1992, p. 285).

3. The word ` maquiladora'' is used to refer to any

factory in Mexico, owned by international or local

capital, that has a permit from the Mexican government

to import and export products under a special tari and

income tax regime. The term often evokes images typical

of the rst generation ofmaquiladorasvery large plants

along the northern border owned by multinational

companies. But, there is tremendous diversity within

the maquila sector, ranging from giant, wholly-owned

subsidiaries of multination corporations to small rms

that export only a portion of their production under themaquila regime to supplement sales on the domestic

market.

4. While this growth in the maquila sector is impres-

sive, ocial statistics actually understate export-oriented

apparel production and employment in Mexico since

they reect only those establishments that have regis-

tered as maquiladoras with the Mexican government.

Traditionally, registering as a maquila provided a

number of incentives, the most important being the

ability to import duty-free foreign-made inputs. But,

NAFTA changed the rules of the game for this kind of

crossborder production sharing by introducing free

trade between the three signatory countries. Materialscan ow freely between Canada, the United States, and

Mexico without duties as long as they meet the North

American rules of origin established by NAFTA.

Consequently, companies with crossborder production

networks that are using North American inputs no

longer have as strong of an incentive to register Mexican

assembly plants as maquilas.

5. In the United States the analog of the maquila regime

is the 807 program, so-named for the clause of US trade

law that describes the status of goods assembled in

export-processing factories like Mexico's maquilas. Therelevant clause was later changed to 9802, so this type of

production sharing is often referred to as 807/9802.



17/19

6. Martha A. Martnez, a graduate student in the

Sociology Department at Duke University, collaborated

on the rst phase of our eldwork in Torreon.

7. Major textile and apparel corporations headquar-

tered in the Piedmont region of North Carolina include:Burlington Industries, Cone Mills Corporation, Sara

Lee (which owns Hanes and several other well-known

apparel brands), and VF Corporation (which manufac-

tures and markets several lines of jeans, including Lee

and Wrangler).

8. Although traditionally retailers have sold garments

made by apparel companies, most retailers now have

their own store brands called private labels. Examples of

private label jeans include JC Penney's Arizona brand

and Sears' Canyon River Blues line.

9. Schmitz and Knorringa (1999, p. 20) reported a

similar nding from their interviews with global foot-

wear buyers, who seemed more willing to assist their

suppliers in acquiring the skills needed to ``translate

designs into technical specications'' than with helping

them develop new and innovative designs. Our analysis

points to the same conclusion that these authors

reached: buyersupplier relationships can help develop-

ing country manufacturers upgrade their production

activities, but they rarely oer manufacturers the

opportunity to develop skills, such as design and

marketing capabilities, that would elevate them from

the status of supplier to potential competitor. Schmitz

(2000) concludes that foreign buyers may assist local

rms in process and product upgrading, but they do not

encourage functional upgrading that involves moving

into new stages of the value chain.

10. The owners of Libra and Grupo Impeccable are

brothers, and cousins of the two brothers that own Sieta

Leguas and Grupo Denim. The families that own

Kentucky Lajat and OMJC are also related by marriage.

A full discussion of the family networks that crisscross

the Torreon apparel cluster is beyond the scope of this

paper, but will be explored in future analyses.

11. The US$ exchange rate in Mexico increased from

8.7 pesos in 1998 to 9.5 pesos in 2000.

12. Wages in the apparel industry, and in the maqui-

ladoras more generally, vary dramatically across

Mexico. In Guanajuato, where growth in the maquila

sector was dramatic under then-governor, now presi-

dent, Vicente Fox, average weekly salaries ranged from

300 to 450 pesos (US$ 31.60 to US$ 47.40) in July 2000

(Martnez, 2000). In addition to abundant coverage in

the Mexican press, the country's booming maquiladora

program has been the subject of several recent articles in

US newspapers. Examples include Thompson (2001),

Dillon (2001) and Jordan (2000).

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APPENDIX A. STRATEGIC INTERVIEWS

Strategic interviews were carried out withcorporate managers and other knowledgeableinformants in the textile and apparel sector in theUnited States and Mexico in order to understandthe diverse factors contributing to the restruc-turing of the North American apparel industry inthe 1990s. These interviews include a mix of

standard and open-ended questions, and thusthey depart from traditional survey instrumentsthat only ask a pre-determined set of closed

questions and seek xed responses. For oureldwork in Torreon, we used a semi-structuredprotocol that listed key questions to insure thatcritical issues were addressed with esach respon-dent. Respondents were asked to provide ahistorical description of their rm (e.g., In whatyear was it founded? Did it serve the national

market, and if so through what channels andwith what products?), as well as a current prole(number of employees, number of customers,



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production volume, main clients, main suppli-ers). Our interviews typically lasted an average oftwo hours in length, and included questionsregarding:

The kind of link (direct or indirect, and if

indirect, through what kind of intermediary)connecting the exporting rm to foreignmarkets;

the type of production networks charac-terizing the rm and its relationship withclients and suppliers (e.g., maquila versusfull-package relationships);

the existence and nature of vertical and/orhorizontal relationships with local rms and

the role of local institutions, such as industryassociations, in promoting the cluster;

how the Torreon region and the experi-ences of local rms have changed since bothMexico's initial trade liberalization of the

mid-1980s and the implementation ofNAFTA; and

a set of issues addressing industrial andhuman relations (average wage, turnoverrate, training procedures, union presence inthe plant), as well as characteristics of theworkforce (age, gender, marital status,previous work experience, educational back-ground).

APPENDIX B. INTERVIEWS IN TORREON, 1998 AND 2000

In cases of multiple interviews per rm, thenumber is indicated in parentheses (see Table 4).

Table 4. Interviews in Torreon 1998 and 2000

Firmsa Ownership 1998 2000

Original Mexican JeanCompany (OMJC)

Joint venture X (3) X (4)

Maquilas Pami US subsidiary X (2) X (2)Wrangler US subsidiary X XKentucky-Lajat b Joint venture (1998); X X

Mexican (2000)

Libra Mexican X XSiete Leguas Mexican X XGrupo Denim Mexican X (2)Grupo Impecable Mexican XPafer Huichita Mexican XRed Kap International US subsidiary XParras Conec Joint venture XCreaciones Lobo Mexican XDustin Mexican XFabricas de Ropa Manjai Mexican XViesca 2000 Mexican X

Total number of rm interviews 14 15

Other interviewsCamara Nacional de la Industria del Vestido

(CNIV) (Laguna branch)dX X

Secretara de Comercio y Fomento Industrial(SECOFI)e

X X

Fomento Economico de Laguna de Coahuila(FOMEC)f

X X

a Additional information regarding the rst ten rms is provided in Table 3.b In July 1998, KentuckyLajat was a USMexican joint venture that produced denim fabric as well as apparel. InDecember 1998, KentuckyLajat sold its denim mill to Parras, a Mexican textile rm. Then in July 1999, the MexicanLajat Group bought out its US partner, Kentucky Apparel, and later that year expanded its operations to includeapparel design as well as production in Mexico.c Produces denim fabric only.d The local branch of the national apparel industry association.e The local oce of the federal ministry of commerce and industrial promotion.fA local development company in the Laguna region.


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