Regional Textile and Apparel Supply Chains–Questions from FASH455

References and tables_Page_1

NAFTA and Textile and Apparel Rules of Origin

#1 How do rules of origin (RoO) and free trade agreement (FTA) regulations affect speed to market in apparel sourcing? Do countries who are part of an FTA find it to be easier to get to market in a shorter amount of time if they are working with other FTA members? Or could RoO slow down the production process because producers have to be more careful about compliance with the complicated RoO?

#2 Why or why not the “yarn forward” rules of origin remains an effective way to promote textile and apparel production in the Western-Hemisphere?  What other options are available to improve the competitiveness of the Western-Hemisphere textile and apparel supply chain?

#3 What would happen to the Western-Hemisphere textile and apparel supply chain should NAFTA no longer exist?

#4 Should NAFTA be responsible for the loss of US apparel manufacturing jobs? Any hard evidence?

#5 If you were U.S. trade negotiators, what would you do with TPL in NAFTA given the competing views from the U.S. textile industry and U.S. fashion brands and retailers?

The Outlook of “Factory-Asia”

#6 From the perspective of the U.S. textile and apparel industry, is it a good idea for the United States to reach free trade agreement (FTA) with Asian countries? If so, what countries should be included in the new FTA? If not, why?

#7 How can U.S. companies get involved in the Asia-based textile and apparel supply chain?

#8 Why or why not is the “Flying geese model” unique to Asia? Can the model be replicated in America too?

(Welcome to join our online discussion. Please mention the question number in your reply)

Author: Sheng Lu

Professor @ University of Delaware

25 thoughts on “Regional Textile and Apparel Supply Chains–Questions from FASH455”

  1. #4: Should NAFTA be responsible for the loss of US apparel manufacturing jobs? Any hard evidence?

    NAFTA should not be held responsible for the loss of US apparel manufacturing jobs. The loss of these jobs is the result of advancing technology & automation as well as the general rising cost of labor. Even if we were to bring back manufacturing to the US, a limited number of jobs would be created because so much of the manufacturing process is now mechanized. It would not replace all of the jobs that were originally lost. There has been a downward trend in manufacturing jobs in the US with over 10,000 jobs lost during 2017. However, it should be noted that there has actually been an upward trend in apparel manufacturing productivity overall with an increase of about $40,000/person over the past 20 years.

    It would also be significantly more expensive to pay US employees when compared to expected wages in other Asian and South American countries. The culture of the US also leans towards an interest in capital-intensive jobs that require additional education rather than labor-intensive jobs. Not as many individuals in the US want manufacturing jobs.

    NAFTA has not hurt US manufacturing, but rather has allowed the US to protect its comparative advantage in other aspects of the textile & apparel industry such as capital-intensive textile production.

      1. While automation hasn’t grown as rapidly in apparel manufacturing as it has in the textile manufacturing industry, apparel manufacturing has declined rapidly in the United States during the past 20 years. This is due to the opportunity retailers have found over seas. Overseas, especially Mexico and Asia, there are much more labor intensive economies. Meaning retailers could import products at a much lower price than creating them in America. Employees in these developing nations accept much lower pay than American factory workers. As these trade agreements improved, retailers were incentivised by free/ inexpensive trade to begin importing goods, improving both America’s and the developing nations’ economies. But, this resulted the near extinction of American apparel manufacturing industry. Yet, with growing automation America is able to grow in a new area of manufacturing: Textiles. This is a more capital intensive industry, where poorer nations may not be able to invest in the machinery needed to make these endeavors worthwhile . And, while machinery will handle the bulk of the work involved in manufacturing these textiles, there is a new type of factory employee needed. These plants need machinery experts to maintain and repair parts, and well as supervisors to ensure textiles are created at top quality. Those who lost their manufacturing jobs have the chance to rejoin the industry as these new roles, although they may need technical school training. But with a wealthy country such as America, there is no reason these schools could not be offered as free to help these laid off employees rejoin the labor force as quickly as possible.

    1. I totally agree that the loss of jobs experienced by the U.S. is not completely to be blamed on NAFTA however as Professor Lu noted, apparel manufacturing is still labor intensive. I think what is important to also make note of is comparative advantage and in this case other countries have an advantage over us in terms of their ability to produce apparel at a lower cost and sometimes faster rate. This in part has to do with the skillsets that Americans have today in 2018. We do not grow up expecting to work in a factory making clothing because we, as a country, have developed enough where we are able to outsource things like apparel manufacturing.

  2. #3 What would happen to the Western-Hemisphere textile and apparel supply chain should NAFTA no longer exist?

    Without NAFTA, it would be more difficult and costly for Mexico to make and sell apparel to the US and the US textile industry would be severely threatened as well. Since the US is pretty much the only big textile manufacturer in North America, they are reliant on NAFTA. The US is especially reliant on Mexico to import US textiles, in order to be able to manufacture apparel and export it back to the US. Getting rid of NAFTA would increase the overall cost of importing apparel goods to the US from Mexico and increase the cost for Mexico to import textiles, so businesses and factories may be in trouble. NAFTA has a lot of great benefits (including fast transportation & duty free access). Without NAFTA, America will increase apparel imports from Asia, which will increase apparel prices for consumers. US textile mills may decrease in number because Asian countries might not import USA made textiles as much as Mexico would.

  3. #4
    I do not think that NAFTA should be blamed for the loss of US apparel jobs. I think that the buying habits of consumers in this market have changed in that all they care about is fast fashion and getting the lowest price possible. Consumers are buying clothes very frequently and do not want to pay a high cost for them. I think that apparel manufactures in the US simply cannot keep up with the demand of high replenishment rates. Furthermore, the factories do not have the amount of workers and do not have enough to pay them in order to fill this high consumer demand.
    However, I think that the manufacturers in the United States have adapted to this change and have switched to producing more textiles rather than apparel.

  4. #3 What would happen to the Western-Hemisphere textile and apparel supply chain should NAFTA no longer exist?
    If NAFTA was dissolved, the western hemisphere supply chain would cease to exist. This would negatively impact every country involved. The US would no longer have any demand to export its textiles to Canada and Mexico because they are able to find them cheaper in other parts of the world. The textile industry in the US would collapse. Additionally, The US would no longer buy items manufactured in Mexico and Canada because without the benefits give to them by NAFTA, the prices would no longer be competitive. The US consumer would choose products produced in other countries because they are able to produce them cheaper and sell them at a lower cost to the consumer even with a tariff.

  5. #3:
    If NAFTA did not exist I think trade would slow down in the United States because we would perhaps import goods from countries other than Canada or Mexico if prices were cheaper. If we were importing from other countries that were farther from us than Canada or Mexico because the prices were cheaper then this would slow the trading process down. I also think if NAFTA did not exist we would not export as many textiles as we do today. Mexico would possibly import textiles from other countries at a cheaper cost, which would in turn hurt the United States’ textile industry. If NAFTA shut down one final outcome would be a decrease in exports of apparel from Mexico. Instead we may import apparel from other countries if we are able to obtain the goods at a lower cost. This in turn would negatively impact Mexico’s economy.

    1. great thoughts. Just curious, in your view, should NAFTA strengths the rules of origin (eg: eliminating the tariff preference level) to encourage more regional textile and apparel production? why or why not?

  6. #4 Should NAFTA be responsible for the loss of US apparel manufacturing jobs? Any hard evidence?

    I believe that the overall reason for loss of U.S. apparel manufacturing jobs is because of the cost of labor increasing. Everything is more expense then how it used to be and this is forcing people to find jobs with better pay. Since the wages are so low for manufacturing jobs people are finding different careers. U.S. also is struggling to keep up with fashion when not all resources are located in the U.S. The U.S. is not performing as fast as other countries such as Bangladesh because we lack necessary resources and things are much more expensive in the U.S.

  7. #3
    Without NAFTA, there wouldnt be any western trade globally. We would probably try to find other places to source our products in the cheapest way. This would potentially slow down trade as a whole. Canada and Mexico would be negatively effected because of the lack of demand. Say the US pulls out of NAFTA, tariffs would rise substantially. Supply chains would be convoluted because of the reliance canada and mexico have on the united states.

  8. #3

    If NAFTA no longer existed, I believe this would hurt the Mexican apparel producers and U.S. textile companies. Mexico would have no incentive to have everything from the yarn forward come from the U.S., therefore, they would probably use cheaper options for their textiles such as those from Asia. It would also cost them more to export to the U.S., so they could make fewer profits, but they may be able to make up for the high tariffs if hey can source from other countries cheap enough.

  9. Without NAFTA, the Western Hemisphere supply chain will most likely disappear. US exports the majority of their textiles to Mexico, which are in turn made into apparel that is sold in the US market. Mexico is forced to import the majority of their textiles from the US because of the yarn-forward rules of origin even though they are not the most competitively priced. Without NAFTA’s yarn-forward rules of origin, Mexico could source cheaper textiles from Asia and the US would lose a large part of their textile export market. Also, the Mexican apparel producers would lose some of their existing export market because they cannot produce at a price that is as competitive as Asian suppliers. This would interrupt the Western Hemisphere supply chain and it would begin to disappear all together.

  10. #2 “Yard forward” allows textiles and Apparel to benefit from tariff free treatment in the NAFTA countries when the yarn, fabric, and apparel are created within North America which has increased production for the US, Canada, and Mexico. This rule ensures a large yarn and fabric market for the US because of limited quantities solely produced in Mexico and Canada. For this reason, the US textile industry would want to keep the “yarn-forward” rules of origin as an effective way to promote textile and apparel production in the Western-Hemisphere. However, apparel brands and retailers are concerned with the limitation of their sourcing and manufacturing’s flexibility under the “yarn forward” rules. The textile and apparel industry generally oppose this particular rule of origin and would rather adhere to other simplified free trade agreements.

  11. #2
    The U.S. textile industry favors the “yarn-forward” rules of origin because it has so far been a big success and it is necessary to keep it in already existing agreements, and future trade agreements. It is not perfect, however, and needs to be slightly improved in the area of exceptions, such as the short supply list. The rules of origin is supposed to limit the benefits of a free trade agreement to only its members, however the exceptions create loopholes and can cause damages to the U.S. textile industry. Without yarn-forward, Vietnam’s apparel exports from places such as South Korea or China are qualified for duty-free access to the U.S. market which poses an even bigger threat to the U.S. textile industry. On the contrary, U.S. apparel brands and retailers dislike the yarn-forward rules of origin because it prevents apparel companies and retailers from taking in the duty-free benefits under the Free Trade Agreement since the region that manufactures the products is not always a part of the agreement.

  12. #4 I don’t believe that NAFTA should be blamed for the loss of US apparel manufacturing jobs. We, as consumers, have put a huge emphasis on the need for the cheapest possible thing, which is why fast fashion has become so popular. In order to get that cheap fashion that we desire, companies are going to the factories with cheap labor costs, which are more available in countries outside of the US. In fact, we have are a huge leader in textile production, so I think NAFTA has actually helped us in that sense. Because we aren’t a leader in apparel production, NAFTA allows us to protect our advantage in the textile industry and still remain a production leader in this industry.

  13. #8 The flying geese model is certainly not unique to Asia. This model can be applied to American countries as well as European. As one or two economies rise to become capital intensive, they must rely on LDC neighbors that are labor intensive for low-cost production.

  14. #4 Should NAFTA be responsible for the loss of US apparel manufacturing jobs? Any hard evidence?

    There is no hard evidence to blame NAFTA for the lack of manufacturing jobs within the United States. The agreement between North American countries are in no way related to the low wages that can be found in other eastern countries. Brands from around the world, as well as US native brands, are looking to lower production costs as much as they can. The agreement in NAFTA has zero affect on whether or not these brands choose to produce their goods in lower costing factories. If anything it helps keep more fashion jobs within the United States, benefitting the US.

  15. #2: The main reason why “yarn-forward” rules of origin remain an effective way to promote textile and apparel production in the Western-Hemisphere is because the US produces a lot of textiles and because other countries such as Vietnam currently uses textiles mostly from China who is not a TPP member. The US also supports the yarn-forward rule because they want to disrupt Vietnam’s supply chain. This means that if this rule is adopted, Vietnam has to find new source of textiles, and they don’t have many options. Importing from US is not feasible due to distance so the lead time is very high. The threat to the Western Hemisphere supply chain would be much less if they give up the duty free treatment benefits. However, the yarn-forward rules cannot totally save the US textile industry because globalization is not just about trade but investment. A lot of investment pours into the Vietnam textile industry, like the investment for textile mills. This is due to TPP. If US opens mills in Vietnam, it will fulfill the yarn-forward rule and this helps Vietnam have the capacity to locally make textiles, which will ultimately make them even more price competitive.

  16. Question #3:
    I think if NAFTA were to no longer exist, there would be a sense of chaos and the textile and apparel industry would suffer the consequences. I think the NAFTA really helps to keep trade organized and beneficial for both parties involved. While the yarn forward rules do lead to some restrictions, it’s necessary to have those in place so that products can be manufactured in the best areas and trade can run smoothly.

  17. I think the US is actually benefitting from NAFTA in the sense that we are a leader in textile production but not in apparel production. Trade with other countries is what keeps our textile production so high. Jobs are being lost mostly because of automation.

  18. #3
    If NAFTA were to no longer exist it would strain the previously good trade between the US, Mexico and Canada. It would no longer incentivize the countries from trading and effectively working together in the textile and apparel industry. Mexico would no longer need the textiles produced by the US, when they could get cheaper ones from other countries such as Asia. I believe the time that trade takes would rise as where before Mexico, Canada and the US were all trading amongst one another, now they are trading with countries overseas. This makes for more travel time as well as higher travel costs. I think that if NAFTA no longer existed it would be negative for the overall T&A industry.

  19. Answer to question #2:

    The yarn forward rule is no longer an effective way to promote textile and apparel production in the Western-Hemisphere because the U.S. apparel brands and retailers want to source certain yarns and fabrics that are either not available in North America or are too expensive in North America. Therefore, the only solution would be to outsource to other countries for yarn and fabric.

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