A Big Picture of International Trade and the U.S. Economy (updated Feb 2016)

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1. Trade keeps the US economy growing. Since 1960, trade in the US on average has grown at double the rate of growth of the economy as a whole. Exports of goods and services—produced by businesses employing millions of Americans—are fourteen times what they were six decades ago.

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2.Trade pushes countries to produce and export what they are relatively more efficient at making. This is called comparative advantage. The US has abundant skilled-labor and has become one of the world’s leading exporters of high-tech machinery, electrical equipment, vehicles and other capital goods. The same can be said for US exports of business, professional and technical services. The chart shows the trend of higher average earnings in manufacturing industries that export more per worker. More broadly, workers producing US exports are higher paid on average, by 16 to 18 percent more than other workers. And by all metrics, exporting industries are generally more productive than non-exporting industries.

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3.Imports are essential to US production and exports! Export competitiveness relies on access to high-quality, low-cost imports. US production processes rely on multiple countries forming parts of the supply chain.

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4. U.S. public opinion on trade has long been divided, although in recent years Americans appear to be more persuaded that the potential gains outweigh the costs. The unequal benefits from growing international trade, loss of manufacturing jobs and the downward pressure on wage level remain the top concerns of trade skeptics.

References:

  1. Council on Foreign Relations (2016) Trading up: U.S. Trade and Investment Policy
  2. Peterson Institute for International Economics (2015). Why International Trade and Investment Are Good for the US Economy: A Story in Eight Charts

The Global Journey of a Marks and Spencer Wool Suit

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An interesting BBC article describes the global journey of a Marks and Spencer (M&S) wool suit:

  1. The suit was designed by M&S in-house team in UK
  2. Wool that makes up the suit came from Australia
  3. Raw wool was shipped from Australia to China for topping.
  4. Wool top was shipped from China to Italy for dying
  5. Dyed wool was shipped from Italy to Romania to be spun into yarn
  6. Yarn was shipped to Yorkshire, UK to be woven into cloth
  7. Cloth was shipped from Yorkshire, UK to Cambodia to be made into finished suit
  8. Finished suit was shipped back to UK to be sold at M&S retail stores

As noted by the article, such a global-based production model for M&S’s suit is increasingly typical in UK. What makes the issue controversial, however is that, the suit is labeled as “100% British cloth”. As “defined” by M&S, “British cloth means it is woven, dyed and finished in the UK”.

Similar debates also exist in the United States. In the past, even if a garment was cut and sewn in California but made of imported items, the tag still had to say, “Made in USA of imported fabric, zippers, buttons and thread.” But a new law which takes into effect on January 1, 2016 allows California manufacturers to attach the “Made in USA” label as long as no more than 5 percent of the wholesale value of the garment is made of imported materials.

Discussion questions:

  1. What are the driving forces behind apparel companies’ global-based production model?
  2. Is the clothing label “Made in ___” outdated in the 21st century?
  3. Do you support the new law which allows apparel labeled “Made in USA” to contain certain value of imported material? Why? Do we need such a regulation at all? Why or why not?

Clothing Label Reveals the Global Nature of the Textile and Apparel Industry

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While shopping in SoHo (NYC), Nicole Farese, a student from FASH455, found the label of a Splendid sweater reads “Made of Italian Yarn” and “Made in China”. Splendid is a casual wear store which is known for their high-quality clothing sold at a premium price.

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Do you find any example of globalization from your clothing label or closet? Please feel free to leave your comment or send your pictures to shenglu@udel.edu (selected pictures will be shared through the blog).

Changes in the Final Text of TPP Regarding Textile and Apparel Rules of Origin

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The final text of the Trans-Pacific Partnership (TPP) released by the New Zealand Foreign Affairs & Trade in January 2016 has made a few changes to the textiles and apparel specific rules of origin compared with the USTR version released in November 2015:

  1. “5407.94” is replaced by “5403.49”
  2. “or heading 54.08″ is replaced by ” or heading 54.04 through 54.08″
  3. Minor wording changes are made regarding 55.03 and 55.06-55.11
  4. TPP originating input of “54.04 through 54.07” is now required for 54.08 (Woven fabrics of artificial filament yarn, including woven fabrics obtained from materials of heading 5405)
  5. Rules of origin for HS96.19 (Sanitary towels (pads) and tampons, diapers and diaper liners for babies and similar articles, of any material are newly added.

Details of the changes can be downloaded from HERE