Debate on Used Clothing Import Ban: Discussion Questions from FASH455

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Background: In a proclamation released by the White House on July 30, 2018, President Trump announced to suspend Rwanda’s duty-free treatment for all African Growth and Opportunity Act (AGOA)-eligible apparel products until Rwanda “comes back into compliance with the AGOA eligibility requirements.” Losing the AGOA benefits means Rwanda’s apparel exports to the United States now will be subject to the most-favored-nation (MFN) tariff rate, which averaged 12.8% for knitted apparel (HS chapter 61) and 10.1% on woven apparel (HS chapter 62). 

Back in June 2017, the U.S. Trade Representative Office (USTR) announced to conduct an out-of-cycle review of Rwanda, Tanzania, and Uganda’s AGOA eligibility in response to a petition filed by the Secondary Materials and Recycled Textiles Association (SMART). The SMART petition asserts that a March 2016 decision by the East Africa Community (EAC), which includes Kenya, Rwanda, Tanzania, and Uganda, to phase in a ban on imports of used clothing and footwear is imposing significant economic hardship on the U.S. used clothing industry. 

Discussion questions:

#1 Is it worth it to ban imports of used clothing in East Africa? Isn’t reusing or repurposing used clothing will be beneficial to the environment, and will promote trade, and provide lower priced to the less fortunate?

#2 Why or why not do you believe that the import ban on used clothing will boost the cotton, apparel, textile, and leather local textile industries in EAC countries and allow for an increase in jobs and economic growth there?

#3 Notably, almost none of the used clothing exported from the US to EAC countries are actually “Made in USA”—they were originally imported from Asian countries such as China, Vietnam, and Bangladesh. Also, most U.S. used clothing exports to EAC were “free giveaways” by U.S. consumers. Is it ethical for SMART to oppose the used clothing import ban so that its own can make a profit?

#4 Most EAC members are the least developed countries. Should they have the rights to reject used clothing from developed countries and start the industrialization process, or should the principle of “free trade” apply to used clothing trade?

#5 If all parties involved in the dispute on the second-hand clothing ban were to come to a compromise, what could that potentially look like and how might we go about it? Is it even possible?

#6 Why or why not do you think the booming of the used clothing trade challenges the stage of development theory we learned in week one (i.e., a country’s textile and apparel industry theoretically will go through six development stages)?

[For FASH455: 1) Please mention the question number in your comments; 2) Please address at least two questions in your comments]

Recommended reading: Why is the used clothing trade such a hot-button issue

Social and Economic Impacts of Apparel Trade–Questions from FASH455

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Debate on Used clothing trade and AGOA

#1 What evidence can support the arguments that cutting off secondhand clothing imports from Africa will allow African nations to build their own textile industry? Likewise, what evidence can support the arguments that African countries overall benefit from importing used clothing from countries like the United States?

#2 Given the debate on used clothing trade on African nations, will you continue to donate used clothing? Why or why not?

#3 China holds a dominant position in textile and apparel production and exports because of their vast amounts of technology, workers, and resources. How do you think least developing countries like Africa will be able to keep up with such steep competition? Why or why not it is a wise decision for the United States to threaten to take away East African countries’ benefits under AGOA?

Social and economic impact of apparel trade

#4 Is factory employment in India a step in the right direction for the country’s gender equality? What effects, positive or negative, could such employment have in regards to gender issues?

#5 We keep arguing that globalization is negative because we are taking jobs away from U.S. workers. But by sending more work to factories in India, we’ve created jobs for these Indian women who, before working in the factories, were sheltered and only sent off into the world for arranged marriage. In this sense, is globalization still negative if we’re creating a sense of freedom and purpose for these women?

#6 As detailed in the article, the working conditions and treatment of workers is extremely unethical in some garment factories.  Can globalization help this issue or hurt it more? 

#7 How do you compare your life to the Indian girls in the article? And please just imagine: ten years later, what will the life of these Indian girls look like? How about yours?

Welcome to our online discussion! Please mention the question # in your comment.

Apparel Sourcing in U.S. Trade Preference Program Countries

Speakers:

  • Tarek Kabil – Egyptian Ministry of Trade & Industry
  • Ashraf Rabiey – QIZ Minister of Egypt
  • Gabi Bar – QIZ Minister of Israel
  • Mark D’Sa – Special Project Director for Haiti
  • Moderator: Gail Strickler – former Assistant US Trade Representative for Textiles

Discussion questions:

  1. What are the financial incentives for US brands and retailers to source apparel in preference program countries? Why do U.S. apparel imports from members of AGOA, QIZs and HELP overall remain at a fairly low level despite the trade preference programs? How to improve the situation?
  2. Overall, why or why not should the US keep the trade preference programs or any critical reforms are needed?
  3. Any other interesting points you learned from the video or questions you may have?

The African Growth and Opportunity Act (AGOA) and How it Will Affect Apparel Sourcing: Discussion Questions from FASH455

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#1 How will the United States specifically benefit from the AGOA? Who is on the opposing side of the AGOA?

#2 We know sourcing from Asia means “cheap” and sourcing from the Western-Hemisphere means “fast”. But what could be incentives for U.S. companies to source from Africa? In other words, what are the unique competitiveness of Africa as a sourcing destination?

#3 Will the “third-country fabric” provision in the AGOA discourage investment in Africa’s textile industry? Why or why not?

#4 Why do you think the AGOA doesn’t adopt the “yarn-forward” rules of origin? Should it?

#5 It is said that the AGOA has been “underutilized” by the apparel industry. What is your view?

#6 What are the considerations behind the 10-year extension of the AGOA in 2015? To decide whether to further extend the AGOA beyond 2025, what factors should be considered?

Please feel free to share your thoughts and recommend any additional articles/readings/resources relevant to the discussion. Please mention the question # in your reply.

2016 August Sourcing at Magic Debriefing

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New landscape of sourcing

  • Sourcing is turning from regional to global. In the past, U.S. apparel companies/fashion brands set up regional offices to handle sourcing. Nowadays, companies are building a global infrastructure to develop, source and market their products around world. Global rather than regional sourcing also allows companies to improve sourcing efficiency and reduce total product and distribution cost while maintaining quality of their product and services.
  • U.S. apparel companies/fashion brands are going with fewer but more capable vendors (“super vendors”). For example, executive from a leading U.S. apparel brand said their company has shrunk their sourcing base by 40% in the past few years. At the same time, they now expect their vendors to be able to supply on a global scale, including having multiple manufacturing facilities around the world and being able to provide value added services such as design and product development.
  • Related, sourcing is shifting from cut-make-and trim (CMT) to full package. This is consistent with our findings in the latest USFIA benchmarking study which suggests that vendors are highly expected to have the capacity of supplying raw material.
  • U.S. apparel companies/fashion brands are also investing to build a more partnership-based relationship with vendors— help vendors reduce cost, become more innovative and have the same vision looking at the whole picture of the supply chain. At the same time, U.S. apparel companies/fashion brands see vendors as their “ambassadors” and want to know more about them—what they believe, what they can bring to the table and how they treat their workers.
  • Companies are redefining the role of sourcing in their businesses. Sourcing is no longer treated as a technical function, but an integral part of a company’s overall business strategy.  

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Made in USA

  • There is a noticeable interest in sourcing textiles and apparel “Made in USA” at Magic. A dozen U.S.-based apparel companies attended the Magic show and their booths attracted a heavy traffic. According to representatives from these companies, U.S. consumers’ increased demand for apparel “Made in USA” has been a strong support for their business growth in recent years.
  • Nevertheless, apparel “Made in USA” often contain imported inputs today. I specifically asked a few vendors where their fabrics come from. All but one company said fabrics were imported because it was so hard to find domestic suppliers, especially for woven fabrics. Interesting enough, some companies feel OK to label their apparel “Made in USA” even though they use imported fabrics. According to them, apparel can be labeled “Made in USA” as long as “domestic content exceeds 60% of the value of the finished product.”
  • At a seminar, some entrepreneurs which make and sell “Made in USA” apparel and accessories said price and production cost remain one of their top business challenges. I asked the panel whether going high-end is the only option for the future of apparel “Made in USA” given the high labor cost in the country. They disagreed—saying technology advancement and design innovation could help reduce production cost. However, all panelists admit they carry some luxury product lines. Additionally, some companies choose to emphasize concepts other than “Made in USA”, such as “hand-made” and “Pride in Seattle”, in order to make their products look more personal to consumers and allow more flexibility in sourcing raw material.

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Updates of sourcing destinations

  • Ethiopia: as I observe, Ethiopia is THE star at this year’s Sourcing at Magic. The country was repeatedly mentioned by panelists at various seminars as a promising and emerging sourcing destination. Several events at the show were also exclusively dedicated to promoting apparel and footwear “Made in Ethiopia”. A couple of reasons why Ethiopia is so “hot”: 1) the ten year extension of AGOA creates a stable market environment encouraging sourcing from Africa and investing in the region (and for sure the duty free access both to the US and EU market).  2) Located in the middle of Africa, Ethiopia is regarded as a hub that has the potential to take a leadership role in integrating the apparel supply chain in the region. 3) It is said that Ethiopian government is very supportive to the development of the local textile industry.  4) Many U.S. fashion companies feel sourcing from Ethiopia involves less risks of trade compliance than sourcing from some Asian countries such as Bangladesh.  
  • China: China unarguably remains the No.1 textile and apparel supplier to the U.S. market—in terms of numbers, around 60% vendors at the Magic show came from China. But I notice that booths of Chinese vendors didn’t have much traffic this time, an interesting signal for sourcing trend in the upcoming season. Nevertheless, while U.S. apparel companies/fashion brands are placing more emphasis on supply chain efficiency, quality of products, speed to market and added value in sourcing, “Made in China” will continue to enjoy many unique advantages over other suppliers. Plus, Chinse factories are actively investing overseas, from Southeast Asian countries to Africa. This makes Chinese factories likely to grow into “super vendors” that western fashion brands/retailers are looking for. To certain extent, macro trade statistics alone may not be able to fully reveal what is going on in apparel sourcing and trade.   
  • Vietnam: Regarding the future of Vietnam as a sourcing destination for U.S. apparel companies/fashion brands, somehow I hear more concerns than excitements at Magic. The uncertainty surrounding the ratification of TPP by the U.S. Congress definitely has made some companies hold back their investment and sourcing plan in Vietnam. Another big concern is Vietnam’s labor shortage and limited manufacturing capacity: apparel factories in Vietnam are already competing with electronic industry for young skilled workers. US companies also have to compete with their EU counterparts for orders in Vietnam. The newly reached EU-Vietnam Free Trade Agreement (EVFTA), which is very likely to be implemented earlier than TPP, provides Vietnam duty free access also to the EU market. And EVFTA adopts a much more flexible rule of origin than TPP, making it easier for Vietnam factories to actually use the agreement.

Sustainability

The awareness of social responsibility and sustainability has much improved: everyone in the industry is talking about them and have a view on them. On a voluntary basis, some companies are making efforts to improve traceability of their products, i.e. to help consumers know exactly where their clothing comes from and what is happening at the upstream of the supply chain. Yet, how to encourage factories to share their information and control tier 2 and tier 3 suppliers remain a challenge. 

by Sheng Lu

Note: Sourcing at Magic is one of the largest and most influential annual textile and apparel sourcing events hosted in the United States. Special thanks to the Center for Global and Areas Studies at the University of Delaware for funding the trip.

Turning Africa into a Global Textile and Apparel Hub

Before the 2016 Source Africa Trade event in June 2016, CNBC interviewed Tim Armstrong, Investment Promotion Director for the Textile Development Unit at the Ministry of Industry and Trade in Tanzania. Three questions were discussed during the interview:

  • Are free trade agreements/trade preference programs such as the African Growth and Opportunity Act (AGOA) translating into tangible results we can see that help African clothing exporters?
  • What has AGOA extension done to the textile and apparel industry in Africa, particularly in the context of Tanzania? What are the impacts of rules of origin on investment in the region?
  • Can apparel “Made in Africa” compete in the global marketplace when raw material such as yarns and fabrics has to be sourced from elsewhere?

What is your view on these issues?

2016 U.S. Fashion Industry Benchmarking Study Released

The 2018 U.S. Fashion Industry Benchmarking Study is now available
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The report can be downloaded from HERE

Key Findings of the study:

I. Business environment and outlook in the U.S. Fashion Industry

  • Overall, respondents remain optimistic about the five-year outlook for the U.S. fashion industry. “Market competition in the United States” is ranked the top business challenge this year, which, for the first time since 2014, exceeds the concerns about “increasing production or sourcing cost.”

II. Sourcing practices in the U.S. fashion industry

  • U.S. fashion companies are more actively seeking alternatives to “Made in China” in 2016, but China’s position as the No.1 sourcing destination seems unlikely to change anytime soon. Meanwhile, sourcing from Vietnam and Bangladesh may continue to grow over the next two years, but at a slower pace.
  • U.S. fashion companies continue to expand their global reach and maintain truly global supply chains. Respondents’ sourcing bases continue to expand, and more countries are considered potential sourcing destinations. However, some companies plan to consolidate their sourcing bases in the next two years to strengthen key supplier relationships and improve efficiency.
  • Today, ethical sourcing and sustainability are given more weight in U.S. fashion companies’ sourcing decisions. Respondents also see unmet compliance (factory, social and/or environmental) standards as the top supply chain risk.

III. Trade policy and the U.S. fashion industry

  • Overall, U.S. fashion companies are very excited about the conclusion of the Trans-Pacific Partnership (TPP) negotiations and they look forward to exploring the benefits after TPP’s implementation.
  • Thanks to the 10-year extension of the African Growth and Opportunity Act (AGOA), U.S. fashion companies have shown more interest in sourcing from the region. In particular, most respondents see the “third-country fabric” provision a critical necessity for their company to source in the AGOA region.
  • Free trade agreements (FTAs) and trade preference programs remain underutilized in 2016 and several FTAs, including NAFTA and CAFTA-DR, are utilized even less than in previous years. U.S. fashion companies also call for further removal of trade barriers, including restrictive rules of origin and remaining high tariffs.

The benchmarking study was conducted between March 2016 and April 2016 based on a survey of 30 executives from leading U.S. fashion and apparel brands, retailers, importers, and wholesalers. In terms of business size, 92 percent of respondents report having more than 500 employees in their companies, while 84 percent of respondents report having more than 1,000 employees, suggesting that the findings well reflect the views of the most influential players in the U.S. fashion industry.

For the benchmarking studies in 2014 and 2015, please visit: https://www.usfashionindustry.com/resources/industry-benchmarking-study