The ITC estimated that the U.S. market for the subject fabrics decreased from 13-14 million square meters in 2001 to 12.5 million square meters in 2002. The decline in demand reflected a decrease in domestic production of men's tailored clothing, competition from imports of both the fabrics and tailored clothing, and uncertain economic conditions.

The ITC, an independent, nonpartisan, factfinding federal agency, released a public version of the report today. The report is the first of two issued as part of the ITC's general factfinding investigation, U.S. Market Conditions for Certain Wool Articles in 2002-04 (Investigation No. 332-449), which was conducted at the request of the United States Trade Representative (USTR). As requested by the USTR, the ITC is providing information on U.S. market conditions for men's worsted wool tailored clothing, worsted wool fabrics used in such clothing, and inputs used in such fabrics. This report provides the requested data for 2002 and year-to-date 2003. Highlights of the annual report follow.

• U.S. demand for men's wool tailored clothing generally declined during the period covered by the report, reflecting the popularity of casual dress in the workplace and weak and uncertain economic conditions. In general, the decrease in demand for coarse-micron tailored clothing more than offset the increase in demand for fine-micron clothing. Imports supplied most of the U.S. market for such clothing.

• A number of U.S. tailored clothing manufacturers contacted by ITC staff reported that they experienced a continuing decline in sales, pressure from retailers to reduce prices, and import competition. The manufacturers also attributed the decline in their domestic production to insufficient quantities and varieties of cost-competitive fabrics available in the United States compared with Canada and Mexico, major suppliers of tailored clothing that benefit from preferential market access under the North American Free Trade Agreement (NAFTA). According to the manufacturers, enactment of the Trade Act of 2002 that expanded trade benefits for fine-micron fabrics improved their competitiveness in clothing made from such fabrics, but high U.S. import tariffs on coarse-micron fabrics continue to put them at a competitive disadvantage vis-a-vis their counterparts in Canada and Mexico.

• U.S. production capacity for worsted wool fabrics in 2002 declined from the 2001 level to about 21 million square meters, although this figure may overstate the actual level of capacity that may be available for the tailored clothing manufacturers. A significant increase in purchases of domestic fabrics for the manufacture of men's tailored clothing in the United States is unlikely, since U.S. clothing manufacturers seek access to fabrics from many different mills worldwide. Domestic clothing manufacturers seek to minimize their dependence on any one supplier, thereby spreading financial risk, and to obtain diversity of fabrics, because no one mill in the United States or abroad can design or make the range of fabrics necessary to ensure product differentiation.

• The Trade and Development Act of 2000, as amended by the Trade Act of 2002, created two tariff-rate quotas (TRQs) for the purpose of reducing import tariffs on worsted wool fabrics for use in men's tailored clothing for 5 years through 2005. For 2002, the first TRQ permitted 3.5 million square meters of "coarse-micron" fabrics to enter at 18.4 percent ad valorem, and the other permitted 2.5 million square meters of "fine-micron" fabrics to enter free of duty. Imports in excess of these quantities were subject to the normal trade relations duty rate of 27.2 percent ad valorem.

U.S. Market Conditions for Certain Wool Articles in 2002-03 (Investigation No. 332-449, USITC Publication 3641, October 2003) 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.