Imports supply most of the U.S. market for men's wool tailored clothing, according to the U.S. International Trade Commission (ITC) in its report Certain Wool Articles: First Annual Report on U.S. Market Conditions.

The ITC, an independent, nonpartisan, factfinding federal agency, released a public version of the report today. The report is the second of three to be issued as part of the ITC's general factfinding investigation U.S. Market Conditions for Certain Wool Articles (Investigation No. 332-427), which is being conducted at the request of the United States Trade Representative (USTR). The third report is scheduled to be submitted to USTR by September 16, 2002.

In the request letter, the USTR noted that the Trade and Development Act of 2000 temporarily reduces tariffs and establishes tariff-rate quotas (TRQs) on imports of worsted wool fabrics for use in men's (and boys') suits, sport coats, and trousers. As requested by USTR, the Commission is providing information on U.S. market conditions for men's worsted wool clothing, worsted wool fabric and yarn used in such clothing, and wool fibers used in such fabric and yarn. Highlights of the annual report follow.

• U.S. consumption of men's wool tailored clothing grew in unit volume during 1996- 2000, as demand for sport coats and trousers generally rose, while demand for suits fell in 1999 and 2000. In 2000, the import shares were estimated at 78 percent for suits, 83 percent for sport coats, and 71 percent for trousers. U.S. production of such clothing fell during most of 1996-2000.

• The U.S. market for men's worsted wool tailored clothing during 1996-2000 experienced growing demand for goods made from "fine-micron" fabrics having an average fiber diameter of 18.5 microns or less (often marketed under such terms as Super 100s). Industry sources stated the decline in U.S. consumption of wool suits has been concentrated in those selling for less than $500 each at retail, which tend to be made from "coarse-micron" fabrics.

• A number of U.S. tailored clothing manufacturers reported they are experiencing financial difficulty, mainly because of declining sales, pressure from retailers to reduce prices, and intense competition. The manufacturers said the overall production decline in tailored clothing largely reflected insufficient quantities and varieties of cost-competitive fabrics available in the United States relative to Canada and Mexico, major foreign suppliers of tailored clothing benefiting from preferential market access under the North American Free Trade Agreement (NAFTA). The U.S. manufacturers also stated that high U.S. import tariffs on worsted wool fabrics have put them at a disadvantage vis-a-vis their competitors in Canada and Mexico.

• Official statistics show U.S. demand for worsted wool fabrics has decreased significantly in recent years because of reduced domestic production of men's tailored clothing, the major market for U.S. producers of such fabrics. The decline in fabric demand has been concentrated in coarse-micron fabrics, the larger of the two markets. In contrast, there has been little reduction in demand for fine-micron fabrics, because of consumer preference for clothing made of fine wool fabrics.

• Official statistics show that U.S. worsted wool fabric production fell 51 percent during 1996-2000, while imports rose 24 percent during the same period. U.S. fabric producers have substantial excess production capacity.

• The Commission estimates that the size of the U.S. market for worsted wool fabrics used in the manufacture of men's tailored clothing totaled about 19 million square meters in 2000. Coarse-micron fabrics account for the majority of the market, while fine-micron fabrics account for a comparatively small but growing market share.

• The U.S. fabric industry has sufficient capacity to produce the quantity of worsted wool fabrics required by the U.S. tailored clothing industry, whether for fine-micron or coarse- micron fabrics. However, several non-capacity factors, including number and variety of fabric styles, fabric quality and consistency, minimum order sizes, and diversification of supplier sourcing, make any significant increased utilization of U.S. fabric capacity unlikely. U.S. clothing manufacturers claim that they need to purchase fabrics from many mills worldwide to obtain fabric diversity that will enable them to differentiate their clothing in the domestic market and to diversify financial risk by minimizing their reliance on any one supplier.

Certain Wool Articles: Interim Report on U.S. Market Conditions (Investigation No. 332-427, USITC Publication 3454, September 2001) will be posted in the Publications section of the ITC's Internet site at www.usitc.gov. A printed copy may be requested by calling 202-205-1809 or by writing to the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington DC 20436. Requests may be faxed to 202-205-1821.

ITC general factfinding investigations, such as this one, cover matters related to tariffs or trade, and are generally conducted at the request of the U.S. Trade Representative, the Senate Committee on Finance or the House Committee on Ways and Means. The resulting reports convey the Commission's objective findings and independent analyses on the subjects investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the ITC submits its findings and analyses to the requestor. General factfinding investigation reports are subsequently released to the public unless they are classified by the requestor for national security reasons.