Is the Western Hemisphere Textile and Apparel Supply Chain in Trouble?

Within the Western-Hemisphere (WH) textile and apparel supply chain, the United States serves as the leading textile supplier, whereas developing countries in North, Central, and South America (such as Mexico and countries in the Caribbean region) assemble imported textiles from the United States or elsewhere into apparel. The majority of clothing produced in the area is eventually exported to the United States or Canada.

WH countries still form a close supply chain partnership in textile and apparel production. For example, close to 70% of US textile exports went to WH members in 2020, a pattern that has stayed stable over the past decades (OTEXA, 2021). Meanwhile, the United States serves as the single largest export market for most apparel exporting countries in the WH For example, in 2019, close to 89% of apparel exports from CAFTA-DR and USMCA (NAFTA) members went to the US.

However, the WH textile and apparel supply chain is not without significant challenges. For example, CAFTA-DR and Mexico are increasingly using textiles inputs from outside the WH region, which weakens the US role as a dominant textile supplier. Notably, most of the market shares lost by US textile suppliers are fulfilled by Asian countries, including China and other members of the RCEP (Regional Comprehensive Economic Partnership). Theoretically, using cheaper textile inputs from Asia may help apparel producing countries in the WH improve the price competitiveness of their finished garments and diversify their export markets beyond the US.

Meanwhile, despite the apparent popularity of “near-sourcing”, no evidence suggests that US fashion brands and retailers are sourcing more from WH countries, including CAFTA-DR and USMCA (NAFTA) members. Neither the US-China trade war nor COVID-19 seems to have shifted the trends. Instead, close to 75%-80% of US apparel imports still come from Asian countries (OTEXA, 2021). Studies further show that a vast majority of US apparel imports from WH concentrate on a limited category of products, such as tops and bottoms, which is far from sufficient to meet retailers’ sourcing needs.

On the other hand, technical textiles and industrial textiles account for a growing share in the total US textile exports, and Asia is a particularly fast-growing market. However, there is few US free trade agreement with Asian countries, making it a disadvantage to promote “Made in the USA” products in these markets. It is debatable what should be the priority for the US textile and apparel trade policy: to continue to protect the exports of yarn and fabrics to the WH or open new export markets for technical and industrial textiles outside the WH region?

by Sheng Lu

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Author: Sheng Lu

Professor @ University of Delaware

6 thoughts on “Is the Western Hemisphere Textile and Apparel Supply Chain in Trouble?”

  1. I think that the US needs to focus on protecting its exports of yarn and fabrics while taking steps to complete the WH supply chain. A big reason developing countries in the WH source from Asian countries is because not all yarns and textiles are accessible in this region, such as silk which is primarily produced in China. These developing countries are also more than likely to source from the least expensive destinations to reduce their overall cost and keep their product prices competitive. If the US and surrounding countries can further develop the WH supply chain to better satisfy the needs of brands and retailers while still being beneficial for the US, they may overcome some of the current challenges. For example, the EU has an almost complete supply chain, all of their sourcing is done within the region and the finished products are exported internationally and imported to the various countries. The US needs to bolster its regional markets for technical and industrial textiles however it could be beneficial for them to enter markets outside the WH.

  2. Some of my key takeaways from this article were that even though there is a trade agreement, CAFTA – DR, U.S. fashion companies are still trying to source their textiles from cheaper regions such as Asian countries. This ultimately hurts the U.S. textile market as it prevents them from keeping their market so lucrative. Another point I have seen and still surprised about is how there is no key evidence supporting that U.S. fashion companies are switching to near-shoring. This may be on a small scale but not large. This ultimately shows that U.S. fashion companies are keeping their trading practices while disregarding what happened to them during COVID-19 and the China tariffs.

    In my opinion, I think we should prioritize the U.S. textile and apparel trade policy to continue to protect the exports of yarn and fabrics to the WH. This can generate a lot of revenue for the U.S. as well as continue to have sourcing partners who are closer to us. Although they are more expensive than Asian countries, it will allow us to become less dependent on over seas sourcing regions. However, I do see a flaw with this trade agreement. It does allow U.S. fashion companies to have the option to source from cheaper regions. I think if you are a partner within this agreement the rules need to be more strict. If U.S. fashion companies have the option of sourcing from Asian countries anyway, why even join the trade agreement? There needs to be bigger benefits and punishments in order for U.S. fashion companies to stay in the agreement.

    1. The point that U.S. companies are still trying to source their textiles from cheaper regions such as Asian countries also really shocked me a bit. I have a feeling that Asian economies are so labor-intensive and cheap that switching to near-shoring at the moment is not worth it. Plus, Asia has massive mega factories that are difficult to replicate in Latin America (older populations, low birth rates, smaller working-age populations in comparison)

      Also, I agree that trade policy to continue to protect the exports of yarn and fabrics to the WH. It’s important to focus on what the US is much better at. However, it seems that other factors are in play here too. American goods aren’t necessarily catered to high-end materials or things that are exclusive like European goods. Asia has taken over in that segment because they can produce things very cheaply. American firms have to either produce textiles at really cheap rates or compete with higher-end textile manufacturers, or may be create new textile markets that have a well-established customer base.

  3. Something I noticed after reading this article was that the concept of near-shoring was not mentioned. In class, we have learned that after the current pandemic, this concept has been heavily considered. After the outbreak U.S. brands began to look to bring products closer to shore so as problems came about abruptly or not they would not feel so unprepared as people did during the pandemic. The lack of mentioning this makes me think that companies are starting to forget this helpless feeling they had when they were not prepared by keeping the same business and trade practices they have had prior to the outbreak.

  4. After reading this article, I believe that the US needs to protect themselves in this situation and keep making their own textiles. It creates a lot of revenue and jobs for our country and we would be hurt without it. The problem with this is it is hard to stop the US fashion companies from getting their textiles from China because the companies want to buy from their cheapest options. This is weakening the US’s position as one of the strongest textile suppliers. In my opinion, there might need to be a more strict agreement or else the US textile business will continue to go down hill because it is more expensive compared to others. Other countries will continue to grow and take over the textile business.

  5. After reading this article, I wonder how other countries see us as we are the largest export market for most apparel. 70% is a big jump when talking about the United States exports going to WH members in 2020. Going off of the theory that using cheaper textile inputs from Asia may help apparel producing countries in the WH improve the price competitiveness of their finished garments and diversify their export markets beyond the United States, I think we should really focus on the United States textile to ensure that the exports of yarn and fabrics to the WH are getting to where they need to be. That is because the United States would make more money that way rather than relying on oversea transactions.

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