Second, I hope FASH455 helps students shape a big-picture vision of the fashion apparel industry in the 21st-century world economy and provides students a fresh new way of looking at the world. Throughout the semester, we’ve examined many critical, timely, and pressing global agendas that are highly relevant to the textile and apparel industry, from the impact of COVID-19 on apparel sourcing and trade, the growing interest in expanding near-shoring from the Western Hemisphere, the debate on the textile and apparel provisions in U.S. free trade agreements to the controversy of forced labor in the apparel supply chain. It is critical to keep in mind that we wear more than clothes: We also wear the global economy, international business, public policy, and trade politics that make affordable, fashionable, and safe clothes possible and available for hardworking families.
Likewise, I hope FASH455 can put students into thinking about why “fashion” matters. A popular misconception is that “fashion and apparel” are just about “sewing,” “fashion magazine,” “shopping” and “Project Runway.” In fact, as one of the largest and most economically influential sectors in the world today, the fashion industry plays a critical and unique role in creating jobs, promoting economic development, enhancing human development, and reducing poverty. As we mentioned in class, over 120 million people remain directly employed in the textile and apparel industry globally, and a good proportion of them are females living in poor rural areas. For most developing countries, textile and apparel typically account for 70%–90% of their total merchandise exports and provide one of the very few opportunities for these countries to participate in globalization. The global pandemic, in particular, reveals the fashion industry’s enormous social and economic impacts and many problems that need our continuous efforts to make meaningful improvements.
Last but not least, I hope from taking FASH455, students will take away meaningful questions that can inspire their future studies and even life’s pursuit. For example:
How to make apparel sourcing and trade more sustainable, socially responsible, and transparent? What needs to be done further–fashion companies, government, consumers, and other stakeholders?
To which extent will geopolitics, such as the Russia-Ukraine war and US-China tensions, affect world trade patterns and fundamentally shift fashion companies’ sourcing and supply chain strategies?
How will automation, AI, and digital technologies change the future landscape of apparel sourcing, trade, and job opportunities? What may fashion education look like ten years from now given the shifting nature of the industry?
How to use trade policy as a tool to solve challenging global issues such as forced labor and climate change? Or shall we leave these issues to the market forces?
We don’t have solid answers yet for these questions. However, these issues are waiting for you, the young professional and the new generation of leaders, to write history, based on your knowledge, wisdom, responsibility, courage, and creativity!
So what do you take away from FASH455? Please feel free to share your thoughts and comments.
Discussion questions (proposed by students in FASH455, spring 2023)
Based on the videos, does the flying geese concept still work today? Why?
Do you think Western fashion brands and retailers’ increasing emphasis on sustainability and social responsibility in apparel sourcing reduces Asian suppliers’ competitive disadvantage? Why or why not?
With Asian countries increasingly leveraging their labor advantages alongside advanced technologies, is the prospect of expanding nearshoring even less likely? What is your assessment?
What is your vision for the recycled clothing supply chain? Why or why not do you think Asian countries will continue to dominate?
On April 17, 2023, the US International Trade Commission (USITC) released a new report analyzing the trade and economic impact of the African Growth Opportunity Act (AGOA). The report fulfills the investigation request by the US House of Representatives Committee on Ways and Means in January 2022.
The full report is HERE. Below are the key findings regarding the apparel sector:
The African Growth and Opportunity Act (AGOA) matters significantly to Sub-Saharan African countries (SSA)’s apparel exports to the United States
AGOA has been the primary competitive advantage for SSA’s apparel exports to the United States. For example, US apparel imports from AGOA beneficiaries have risen from $953 million in 2001 to $1.4 billion in 2021 (note: up to $1.76 billion in 2022). More than 96.4% of these imports claimed AGOA’s duty-free benefits, including 98.8% utilized the “third-country fabric” provision.
While twenty countries were eligible for AGOA’s apparel provision, over 90% of US apparel imports from AGOA members in 2021 originated in five SSA countries: Kenya (31.5%), Madagascar (19.9%), Lesotho (20.6%), Ethiopia (18.3%), and Mauritius (5.1%).
AGOA benefits appear essential for SSA countries to maintain their apparel exports to the United States. USITC noted that in every case when a country lost AGOA eligibility between 2000 and 2021, there was a noticeable decrease in US apparel imports from that country, such as Rwanda and Madagascar. (note: according to OTEXA’s latest trade data, US apparel imports from Ethiopia, which lost its AGOA eligibility in 2022, dropped by 42% in the first two months of 2023 from a year ago, far worse than a 5.8% decrease of AGOA members as a whole.)
SSA garment manufacturers often find supplying the US apparel market a better fit than Europe, primarily because US brands tend to place orders for higher volume bulk basics, which allows workers to focus on a narrower set of skills.
The impact of AGOA on SSA’s apparel production and exports varied at the country level
Some SSA countries (e.g., Kenya and Lesotho) already had well-established apparel industries when AGOA was implemented in 2000. In contrast, other SSA countries (e.g., Madagascar, Ethiopia, Tanzania, and Ghana) received substantial investments from foreign-owned firms after AGOA was enacted, which helped jumpstart their apparel sectors.
USITC also identified two “unsuccessful” AGOA cases. For example, Mauritius was the largest AGOA beneficiary apparel supplier to the United States in 2000 but has since fallen to the fifth-largest in 2021, largely due to increased labor costs. Likewise, South Africa’s apparel export to the US was negatively affected by its disqualification from the “third-country fabric” provision under AGOA.
AGOA has had a limited impact on building an integrated regional textile and apparel supply chain in SSA
Currently, SSA countries primarily participate in the cut-and-sew operations of apparel based on imported textile raw materials from outside the region (mostly from Asia).
The USITC identified several challenges in building the local textile industry in SSA. For example, building a textile mill typically requires much higher investments (e.g., $200–300 million) than a garment factory (i.e., $25 million). Also, most SSA manufacturers cannot make the various types of yarns and fabrics in demand from U.S. buyers.
The dilemma is not new: Access to textile inputs from sources outside SSA is essential for garment manufacturers in SSA to meet the specifications of US buyers. However, relying on imported textile inputs reduces the incentives for investing in new textile production capabilities in SSA.
The USITC report found Mauritius an exception as it has developed a relatively competitive capability in producing cotton fabrics, which are supplied to garment factories in Madagascar. There is also some collaboration between cotton producers in Tanzania and Uganda and Kenya’s textile manufacturers.
US fashion companies generally see SSA as a promising emerging sourcing destination
Apparel producers in SSA are less established in global apparel value chains than manufacturers in other parts of the world. Therefore, it is not uncommon that fashion brands and retailers “work more directly with SSA apparel manufacturers to ensure product quality, particularly for new or expanding product lines.”
Most SSA garment factories only have cut, make, and trim (CMT) capability and rely on imported textile materials arranged by fashion brands and retailers.
USITC found that US companies increasingly import man-made fiber (MMF) apparel from AGOA members to benefit from greater import duty savings. (note: US tariff rates for MMF apparel were typically higher than those made with natural fibers like cotton. On the other hand, however, it’s worth noting that SSA countries generally have more competitive advantages in producing cotton apparel products than in producing MMF apparel).
SSA countries also have advantages over their Asia competitors. For example, “a shipment takes about 15–18 days to travel from the port in Lomé to the East Coast of the United States. From China or Bangladesh, lead times range from 40–50 days.”
Many fashion brands “have expressed interest in sourcing from greenfield factories with fewer legacy challenges posed by compliance and environmental impacts.”
US fashion companies’ sourcing diversification strategy to avoid risk exposure also contributed to the expansion of their apparel imports from AGOA members.
Uncertainty of AGOA renewals hurt US apparel imports from SSA
Apparel companies typically make sourcing decisions 12–18 months in advance. This practice underscores the importance of renewing AGOA early rather than granting extensions only within two to nine months of expiration, as in the past.
The USITC report mentioned, “Without the assurance of the “third country fabric” provision, many US apparel companies sourced from AGOA beneficiaries reported holding back orders from the region.”
More can be done to leverage SSA’s cotton production better
Cotton growing is widespread across about thirty SSA countries. SSA accounts for about 7 percent of the world’s cotton production, the fifth-largest globally.
However, most SSA cotton is sold to international buyers and exported to Asian mills that process it into yarns and fabrics. In contrast, the consumption of domestic cotton in SSA is limited.
The SSA cotton industry produces high-quality, “sustainable” cotton that can be used in several high-value end products sold globally. However, because of a lack of mechanization, SSA cotton production struggles to increase supply to meet demand.
Also, cotton-growing regions in SSA tend to be poorer and less politically stable than other parts of the region.
Based on the blog post and class discussions, how competitive or attractive are AGOA members as apparel-sourcing destinations for US fashion companies, especially compared with suppliers from Asia and the Western Hemisphere?
Based on the blog post, what improvement can be made to make AGOA or any problems that need to be addressed?
Any other thoughts related to the patterns of apparel trade and sourcing based on the blog post?
The Asia-Pacific region includes several mega free trade agreements:
ASEAN (Association of Southeast Asian Nations) is a regional intergovernmental organization comprising ten countries in Southeast Asia (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam). In 2021, ASEAN members have a combined GDP of $3.11 trillion and a population of 673 million.
CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) is a free trade agreement signed by 11 countries in the Asia-Pacific region, including Japan, Malaysia, Vietnam, Australia, Singapore, Brunei, New Zealand, Canada, Mexico, Peru, and Chile. The CPTPP covers a market of 495 million people with a combined GDP of $13.5 trillion in 2021. The United States was originally a participant in the Trans-Pacific Partnership (TPP) negotiations, but in January 2017, former US President Trump withdrew the US from the agreement. The Biden administration has indicated no interest in rejoining CPTPP. Additionally, China is actively seeking to join CPTPP.
RCEP (Regional Comprehensive Economic Partnership) is a free trade agreement signed by 15 countries in the Asia-Pacific region, including China, Japan, South Korea, Australia, New Zealand, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam. In 2021, RCEP members collectively represented a market of 2.3 billion people with a combined GDP of $26.3 trillion. India was an RCEP member but withdrew from the agreement due to concerns about import competition with China.
IPEF (Indo-Pacific Economic Framework for Prosperity) is a US-led economic cooperation framework that aims to “link major economies and emerging ones to tackle 21st-century challenges and promote fair and resilient trade for years to come.” IPEF is NOT a traditional free trade agreement, and it does not address market access issues like tariff cuts. Instead, IPEF includes four pillars: trade, supply chains, clean economy, and fair economy. IPEF members in the Asia-Pacific region include the United States, Japan, Australia, New Zealand, South Korea, India, Fiji, Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. The IPEF is designed to be flexible, meaning that IPEF partners are not required to join all four pillars. For example, India chooses not to join the trade pillar of the framework. In 2021, IPEF countries collectively represented a market of 2.1 billion people with a combined GDP of $23.3 trillion. The potential economic impact of IPEF remains too early to tell.
Notably, ASEAN, CPTPP, RCEP, and IPEF members play significant roles in the world textile and apparel trade. Specifically:
ASEAN and RCEP members have established a highly integrated regional textile and apparel supply chain. For example, a substantial portion of ASEAN and RECP members’ textile imports came from within the region.
ASEAN and RCEP members’ supply chain connection with China has substantially strengthened over the past decade. In contrast, the US barely participated in Asia-based textile and apparel supply chains. For example, other than CPTPP, the US accounted for less than 2% of ASEAN, RCEP, and IPEF members’ textile imports in 2021.
ASEAN and RCEP members also hold significant market shares in the world textile and apparel export (over 50%). Meanwhile, the US and EU are indispensable export markets for ASEAN and RCEP members.
Because of the United States, IPEF represented one of the world’s largest apparel import markets (i.e., 33.7% in 2021, measured in value). Similarly, in 2022, about 26% of US apparel imports came from current IPEF members. Should IPEF address market access issues, it could potentially offer significant duty-saving opportunities for textile and apparel products.
Additionally, UK’s membership in CPTPP may have a limited direct impact on the textile and apparel sector, at least in short to medium terms. For example, current CPTPP members only accounted for about 6% of UK’s apparel imports in 2021.
PVH Corporation (PVH), which owns well-known brands including Calvin Klein, Tommy Hilfiger, Van Heusen, Arrow, and Izod, is one of the largest US fashion companies with nearly $9.2 billion in sales revenues in 2022.
By leveraging PVH’s publically released factory lists, this article analyzes the company’s detailed sourcing strategies and changes from 2021 to 2022. Key findings:
Trend 1: PVH adopts a diverse apparel sourcing base and continues to work with more vendors. Specifically, in 2022, PVH sourced apparel from as many as 37 countries in Asia, Europe, America, the Middle East, and Africa, the same as in 2021. Despite not expanding the number of countries it sources from, PVH increased its total number of vendors from 503 in 2021 to 553 in 2022, highlighting the company’s ongoing commitment to diversifying its sourcing base.
Trend 2: Asia is PVH’s dominant sourcing base for finished garments and textile raw materials.
Specifically, about 56.2% of PVH’s apparel suppliers were Asia-based in 2022, followed by the EU (20.3%). Compared with a year ago, PVH even added twenty new Asia-based factories to its supplier list in 2022, suggesting no intention of reducing sourcing from the region. Moreover, From 2021 to 2022, as many as 83% of PVH’s raw material suppliers were Asia-based, far exceeding any other regions.
Trend 3: PVH’s China sourcing strategies are evolving and more complicated than simply “reducing China exposure.”
First, PVH continued to work with MORE Chinese factories. Specifically, between 2021 and 2022, PVH added 17 Chinese factories to its apparel supplier list, more than other countries. However, the expansion could be because of PVH’s growing sales in China.
Second, PVH’s garment factories in China are smaller than their peers in other Asian countries. For example, in 2022, most PVH’s contracted garment factories in top Asian supplying countries, such as Bangladesh (87.5%), Vietnam (63.3%), and Sri Lanka (65.3%), had more than 1,000 workers. In comparison, only 11.3% of PVH’s Chinese vendors had 1,000 workers, and more than 62.5% had fewer than 500 workers. The result suggests that PVH treats China as an apparel sourcing base for flexibility and agility, particularly those orders that may include a greater variety of products in relatively smaller quantities.
Further, PVH often priced apparel “Made in China” higher than those sourced from the rest of Asia.
Trend 4: PVH actively used “emerging” sourcing destinations outside Asia. Other than those top Asian suppliers, PVH’s apparel sourcing base includes several countries in America, the EU, and Africa that deserve more attention, including Portugal, Brazil, Tunisia, and Turkey. Overall, PVH sourced from these countries for various reasons, from serving local consumers, seeking sourcing flexibility, accessing raw materials, and lowering sourcing costs.
The program is split into two half-day sessions. Public sector trade-related careers will be examined on Friday, March 10, and private sector opportunities will be the focus on Monday, March 13. Both sessions will be held from 8:45 a.m. to 12:30 p.m. on Zoom.
Sarah Clarke, former Chief Supply Chain Officer, PVH Corp.
Hun Quach, Director of Policy and Advocacy, Levi Strauss & Co.
Stephanie Lester, Vice President, Head of Government Affairs, Gap Inc.; former Professional Staff, House Ways and Means Committee, Subcommittee on Trade
Patty Lopez, Sr. Director- Vendor Management, Gap Inc.; former Sr Director-Global Production, Gap Inc.
Julia Hughes, President, U.S. Fashion Industry Association
Natalie Hanson, Deputy Assistant USTR for Textiles, Office of the U.S. Trade Representative
Jon Gold, Vice President of Supply Chain and Customs Policy, National Retail Federation
Nate Herman, Senior Vice President, American Apparel and Footwear Association (AAFA)
Bill McRaith, former Chief Supply Chain Officer, PVH Corp.
Heidi Colby-Oizumi, Chief Chemicals and Textiles Division, US International Trade Commission
Linda Martinich, Senior International Trade Specialist, Office of Textiles and Apparel, US Department of Commerce
Thomas Newberg, International Trade Specialist, Office of Textiles and Apparel, US Department of Commerce
Blake Harden, Vice President, International Trade at Retail Industry Leaders Association (RILA); former Trade Counsel, U.S. House of Representatives, Committee on Ways and Means, Subcommittee on Trade
Eric Biel, Senior Advisor, Fair Labor Association; Adjunct Professor, Georgetown University Law Center; former Associate Deputy Undersecretary, U.S. Department of Labor, Bureau of International Labor Affairs
Nicole Bivens Collinson, President, International Trade and Government Relations, Sandler, Travis & Rosenberg, P.A.; former Assistant Textile Negotiator, Office of the United States Trade Representative
Amanda Blunt, Counsel, Legal Affairs & Trade, General Motors; former Associate General Counsel, Office of the U.S. Trade Representative
Lisa Schroeter, Global Director of Trade and Investment Policy, Dow; former Executive Director, TransAtlantic Business Dialogue
Maria Luisa Boyce, Vice President, UPS Global Public Affairs; former Executive Director Office of Trade Relations/Senior Advisor for Trade Engagement, U.S. Customs and Border Protectionformer President, Border Trade Alliance
Brenda Smith, Global Director of Government Outreach, Expeditors; former Executive Assistant Commissioner, U.S. Customs & Border Protection
Nikole Burroughs, Deputy Chief of Staff for Management and Resources, USAID; former Staff Director, Subcommittee on Asia, the Pacific the Nonproliferation, United States House Committee on Foreign Affairs
Catherine DeFilippo, Director of Operations, United States International Trade Commission; former Economist, US International Trade Commission
Paul H. DeLaney, III, Partner, Kyle House Group; former Vice President for Trade and International at Business Roundtable, former International Trade Counsel to Chairman Orrin G. Hatch for the U.S. Senate Committee on Finance
Erin Ennis, Senior Director, Global Public Policy, Dell Technologies; former Assistant to the Deputy US Trade Representative, Office of the US Trade Representative
Naomi Freeman, Consultant, Sandler, Travis & Rosenberg; former Director for the Generalized System of Preferences at the Office of the U.S. Trade Representative
Nasim Fussell, Partner, Holland & Knight LLP; former Chief International Trade Counsel, U.S. Senate Committee on Finance
Ed Gresser, Vice President and Director, Trade and Global Markets at PPI; former Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative
Jodi Herman, Assistant Administrator for Legislative and Public Affairs, USAID; former Vice President for Government Relations and Public Affairs, National Endowment for Democracy (NED)
Charlotte Mcclure, Logistics Supervisor, Cap America; former Overseas Specialist, Cap America; former Logistics Specialist, Cap America
Concerns about the used clothing exports to Kenya (viewpoints from the Changing Markets Foundation)
Data from the United Nations (UNComtrade) shows that Kenya’s used clothing imports surged by over 500% from 2005 ($27 million) to 2021 ($172 million).
An overwhelming volume of used clothing shipped to Kenya is waste synthetic clothing, a toxic influx creating devastating consequences for the environment and communities. It is estimated that over 300 million items of damaged or unsellable clothing made of synthetic or plastic fibers are exported to Kenya each year, where they end up dumped, landfilled, or burned, exacerbating the plastic pollution crisis.
Interviews with used clothing traders in Kenya show that 20–50% of the used clothing in bales they purchased was unsellable due to being damaged, too small, unfit for the climate or local styles, and sometimes even with clothing that is covered in vomit, stains or otherwise damaged beyond repair.
European sorting companies often skimmed off high-quality used clothing for resale in the local EU market. They exported the lower-quality and lower-graded ones to developing countries like Kenya.
It remains challenging to recycle synthetic clothing as it often contains harmful additives or other materials that make the recycling process difficult or impossible. Additionally, the quality of the recycled synthetic fibers is typically lower than that of the original fabric (i.e., using virgin fiber).
Defend the used clothing exports to Kenya (viewpoints from the Textile Recycling Association, TRA)
Sorting, trading and selling used clothing “directly employs two million peoplein Kenya alone , with tens of millions employed globally and supporting many more employment positions in ancillary sectors.”
“Used clothing and textiles collected in the UK, should go through a detailed sorting process and can be sorted typically into 130 plus re-use and recycling grades and sometimes this can be more than 200 grades. In the sorting process each garment is picked up and individually assessed by highly trained experts*. The good quality re-useable products are segregated from the recycling grades.” [*According to Changing Markets Foundation’s report, about 36 million pieces of used clothing were exported from the UK to Kenya in 2021; All EU countries exported about 112 million pieces to Kenya]
“It is the buyers in these countries (note: countries like Kenya) that dictate the flows of (used clothing) textiles and which import the goods into their countries.”
“TRA members are required to ensure that only good quality re-usable clothing products are sold onto countries in Africa and other non-OECD countries. Recycling grades and other non-textile/clothing items have to be removed… However, the majority of countries are not subject to the same tight restrictions on trading as the UK.. This is to the extent that some countries allow unsorted used textiles containing a complete mix of re-usable items, recycling grades, and waste to be sold into African countries as a product.” “The qualities of (used clothing) items originating from different countries is likely to vary significantly.”
“Kenyan’s buy more than 10 times as much used clothing from China than they do from the UK.”
Discussion questions for FASH455:
What is your stance on the used clothing trade? Should the government impose more export or import trade restrictions on used clothing?
After considering both sides of the debate, what is your decision regarding donating used clothing? What factors influenced your choice?
Any other thoughts or comments on the used clothing trade debate?
Argument: The U.S. textile manufacturing industry has been a winner of globalization
Comment #1: The video highlighted some of the few remaining textile plants and the cotton refinery’s in the U.S. and how they are taking risks daily to stay afloat with risks of inflation and climate change. However, for these American companies to stay afloat, they must participate in globalization themselves. The video mentioned how these factories were using Swiss and German dying machines to make production more efficient. For these onshore jobs to stay alive, they have to now utilize globalized information and technology to stay successful.
Comment #2: Deeper down, the US textile sector seems to be winning in the long run. The squeeze that globalization has placed on them has allowed for innovation within the industry as they fight to stay relevant and compete with overseas goods. Operational slack such as high turnover jobs have been eliminated with automation, and US manufacturers gained a new branding niche that overseas companies do not: a US “personal touch.” Consumers may now be more willing to pay more for a garment just because it says it is made in the USA. USA-made clothing may now be perceived as higher quality and more scarce. The sentiment towards US-made goods and their quality could enact change to reduce overseas reliance, which is a win for US manufacturing in the long run. Additionally, globalization expands the export market for the US textile manufacturing sector.
Argument: the U.S. textile manufacturing industry has been a loser of globalization
Comment #3: According to the video, the U.S. textile manufacturing sector is a loser in globalization and international trade. Robert Lighthizer, a former U.S. trade representative, believes the drive to globalization saw the United States effectively giving away its own prosperity and success. He explains the effects of trade deals on jobs, illustrating how the U.S. would place most of its focus on service sector jobs and outsource its industrial base. However, this resulted in the loss of roughly 6 million jobs and 60,000 factories, destroying many communities all across the country and causing a lack of diversity in the job economy.
Comment #4: I think the US is a loser of globalization and international trade because they rely on other countries for their cheap goods and services. When I look at clothing tags, I rarely see them made in the US nowadays. Again, this is because the US being dependent on other countries due to unbeatable costs. I also think since we rely so heavily on other countries, it has contributed to job displacement.
Comment #5: The US textile manufacturing sector is a loser of globalization and international trade. Cotton production in the US is beneficial to the communities it exists in. However, these companies must fight against a strong dollar, competitors in China who do not always abide by the same regulations as US companies, and use cheap labor. When China entered the WTO, the US suffered greatly. Many textile factories in the US have closed, disrupting the entire community.
Comment #6: Overall, I believe that the U.S. textile manufacturing industry is a loser of globalization and international trade, mostly due to the competition from overseas. This competition includes more manufacturers from other countries, but also the competition of pricing since other oversea manufacturers are able to sell their cotton/textile materials at a lower price. Since the U.S. struggles to compete with these lower prices, they are forced to look for another way to have a competitive advantage in the textile manufacturing sector, such as lean manufacturing and technology improvements. At Carolina Cotton Works, Bryan Ashby shares how they have increased efficiency and use high-quality machines (note: imported) for their products. Although this sounds great, this also means that there are fewer workers.
Comment #7: I think the US textile manufacturing sector was a loser of globalization and international trade because big companies were using other countries for their sourcing and manufacturing. This was because it was much cheaper compared to the United States. In doing this, it declined the need for textile manufacturing jobs in the United States.
Comment #8: Globalization creates a trade dependence on imports. It’s important we don’t depend on things for when things happen that we can’t predict like the pandemic where we can’t import anymore. Since there was a lack of local textile manufacturing and sourcing in the United States compared to what was being imported, there was less of a chance for technological advances and improvement in the United States textile manufacturing sector. Post Globalization however may be the chance for the United States to bring back the textile manufacturing sector momentum. I think this because the United States has seen the result of heavily relying on other countries for their cheap labor/sources and this could add extra motivation for companies to want to figure out better alternatives in manufacturing in their own country.
Comment #9: I think currently the US is a loser to globalization only because brands want to get the product for cheap. I think brands think that would create more profit that way. However, I do believe we could get to a future where more things would be created in the US and wouldn’t have to pay that much in tariffs and other external prices. I think it would help boost people to work more. I think people are worried about making things in our country because of the relations we have with other countries.
Comment #10: U.S. Businesses are now focusing on the cheapest way to do everything instead of thinking about creating good jobs for their working community with fair pay. The U.S. is losing jobs, factories, communities, etc. in efforts to help other countries build themselves up through globalization. It is time for the U.S. to make some changes and look out for our own country and people.
Do you agree or disagree with any particular argument above? Any follow-up comments on the impact of globalization on the US textile manufacturing sector? What should government do with trade given the debates? Please feel free to share any additional thoughts.
For FASH455 students: Please share your reflections on the video regarding the free trade debate. You can focus on analyzing 1-2 specific debates raised in the video (e.g., comparing the arguments from both sides) and then share your thoughts. Please do not simply state your “opinion,” but use examples, statistics, or trade theories we learned to support your viewpoint.
Trend 1: US fashion companies continue to diversify their sourcing base in 2022
Numerous studies suggest that US fashion companies leverage sourcing diversification and sourcing from countries with large-scale production capacity in response to the shifting business environment. For example, according to the 2022 fashion industry benchmarking study from the US Fashion Industry Association (USFIA), more than half of surveyed US fashion brands and retailers (53%) reported sourcing apparel from over ten countries in 2022, compared with only 37% in 2021. Nearly 40% of respondents plan to source from even more countries and work with more suppliers over the next two years, up from only 17% in 2021.
Trade data confirms the trend. For example, the Herfindahl–Hirschman index (HHI), a commonly-used measurement of market concentration, went down from 0.110 in 2021 to 0.105 in 2022, suggesting that US apparel imports came from even more diverse sources.
Trend 2: Asia as a whole will remain the dominant source of imports
Measured in value, about 73.5% of US apparel imports came from Asia in 2022, up from 72.8% in 2021. Likewise, the CR5 index, measuring the total market shares of the top five suppliers—all Asia-based, i.e., China, Vietnam, Bangladesh, Indonesia, and India, went up from 60.6% in 2021 to 61.1% in 2022. Notably, the CR5 index without China (i.e., the total market shares of Vietnam, Bangladesh, Indonesia, India, and Cambodia) enjoyed even faster growth, from 40.7% in 2021 to 43.7% in 2022.
Additionally, facing growing market uncertainties and weakened consumer demand amid high inflation pressure, US fashion companies may continue to prioritize costs and flexibility in their vendor selection. Studies consistently show that Asia countries still enjoy notable advantages in both areas thanks to their highly integrated regional supply chain, production scale, and efficiency. Thus, US fashion companies are unlikely to reduce their exposure to Asia in the short to medium term despite some worries about the rising geopolitical risks.
Trend 3: US fashion companies’ China sourcing strategy continues to evolve
Several factors affected US apparel sourcing from China negatively in 2022:
One was China’s stringent zero-COVID policy, which led to severe supply chain disruptions, particularly during the fall. As a result, China’s market shares from September to November 2022 declined by 7-9 percentage points compared to the previous year over the same period.
The second factor was the implementation of the Uyghur Forced Labor Prevention Act (UFLPA) in June 2022, which discouraged US fashion companies from sourcing cotton products from China. For example, only about 10% of US cotton apparel came from China in the fourth quarter of 2022, down from 17% at the beginning of the year and much lower than nearly 27% back in 2018.
The third contributing factor was the US-China trade tensions, including the continuation of Section 301 punitive tariffs. Industry sources indicate that US fashion companies increasingly source from China for relatively higher-value-added items targeting the premium or luxury market segments to offset the additional sourcing costs.
Further, three trends are worth watching regarding China’s future as an apparel sourcing base for US fashion companies:
One is the emergence of the “Made in China for China” strategy, particularly for those companies that view China as a lucrative sales market. Recent studies show that many US fashion companies aim to tailor their product offerings further to meet Chinese consumers’ needs and preferences.
Second is Chinese textile and apparel companies’ growing efforts to invest and build factories overseas. As a result, more and more clothing labeled “Made in Bangladesh” and “Made in Vietnam” could be produced by factories owned by Chinese investors.
Third, China could accelerate its transition from exporting apparel to providing more textile raw materials to other apparel-exporting countries in Asia. Notably, over the past decade, most Asian apparel-exporting countries have become increasingly dependent on China’s textile raw material supply, from yarns and fabrics to various accessories. Moreover, recent regional trade agreements, particularly the Regional Comprehensive Economic Partnership (RCEP), provide new opportunities for supply chain integration in Asia.
Trend 4: US fashion companies demonstrate a new interest in expanding sourcing from the Western Hemisphere, but key bottlenecks need to be solved
Trade data suggests a mixed picture of near-shoring in 2022. For example, members of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) and US-Mexico-Canada Trade Agreement (USMCA) accounted for a declining share of US apparel imports in 2022, measured in quantity and value. While CAFTA-DR and USMCA members showed an increase in their market share of US apparel imports in the fourth quarter of 2022, reaching 10.7% and 3.1%, respectively, this growth was not accompanied by an increase in trade volume. Instead, US apparel imports from these countries decreased by 11% and 15%, respectively, compared to the previous year. CAFTA-DR and USMCA members’ gain in market share was mainly due to a sharper decline in US apparel imports from the rest of the world (i.e., decreased by over 25% in the fourth quarter of 2022).
Trade data also suggests two other bottlenecks preventing more US apparel sourcing from CAFTA-DR and USMCA members. One is the lack of product diversity. For example, the product diversification index consistently shows that US apparel imports from CAFTA-DR members and Mexico concentrated on only a limited category of products, and the problem worsened in 2022. The result explained why US fashion companies often couldn’t move souring orders from Asia to CAFTA-DR and USMCA members.
Another problem is the underutilization of the trade agreement. For example, CAFTA-DR’s utilization rate for US apparel imports consistently went down from its peak of 87% in 2011 to only 74% in 2021. The utilization rate fell to 66.6% in 2022, the lowest since CAFTA-DR fully came into force in 2007. This means that as much as one-third of US apparel imports from CAFTA-DR did NOT claim the agreement’s preferential duty benefits. Thus, regarding how to practically grow US fashion companies’ near-shoring, we could expect more public discussions and debates in the new year.
The session intends to facilitate constructive dialogue regarding the latest progress, challenges, and opportunities for achieving more sustainable and socially responsible apparel sourcing in the Post-COVID world. The session will offer a unique opportunity to hear directly from leading fashion brands and retailers regarding 1) fashion companies’ latest sourcing practices against the evolving business environment and their impacts on due diligence; 2) fashion companies’ new efforts and innovative projects to achieve more sustainable and socially responsible apparel sourcing; 3) opportunities and challenges to further improve sustainability and social responsibility in apparel sourcing in the post-COVID world. In addition, the session will be highly relevant and informative to all stakeholders in the fashion apparel business community, civil society, international organizations, academia, and policymakers.
Elizabeth Davelaar is a Co-Owner of Maker’s Way Fiber Mill in Brandon, SD, which opened in October 2021. The mill is a family-run business, with Elizabeth’s sister, Erin, and her mother, Kari, as other co-owners. Elizabeth began her career in the fashion industry at the University of Minnesota, where she graduated with a BS in Apparel Design from the College of Design. She then went to the University of Delaware, where she graduated with an MS in Fashion and Apparel Studies and a Graduate Certificate in Sustainable Apparel Business.
Elizabeth served as a project manager for a non-profit fashion brand in St. Louis and taught sewing to immigrant women in St. Louis and women in Ethiopia. She then moved to Vi Bella Jewelry in Sioux Center, IA, working her way from Shipping Manager to VP of Operations, Sustainability and Design. She then opened Maker’s Way Fiber Mill in 2021 with her family and has been working with local fiber producers to grow the yarn industry in South Dakota and surrounding areas.
Sheng: What inspired you to start your fiber mill business? What makes it special and exciting?
Elizabeth: The mill was born out of the need to solve a problem. I became interested in natural dye at the University of Delaware under Professor Cobb. Once I moved back to the area where I grew up, COVID hit, and I was able to dive deeper into the natural dye and use local plants as a dye source. This also led to being curious about local natural fibers. South Dakota isn’t a state that grows cotton, and the hemp industry is currently small, but it has an abundance of sheep. According to statistics from the US Department of Agriculture, South Dakota has 235,000 sheep and is home to one of the nation’s largest wool co-ops. However, there are only 2 working fiber mills in the area that provide custom processing, which makes yarn made from local fiber very hard to find.
This led to the opening of Maker’s Way Fiber Mill. We are a full-service, custom fiber mill and make yarn, felt, roving, and home goods products from primarily wool and alpaca fiber. Approximately 90% of our time is spent processing for clients who own the animals and use the yarn themselves or sell it, with the other 10% processing yarn that we sell online via our website and in-person at events. The vast majority of our customers are local (within 4-5 hrs) and sell locally to crafters. We take pride in knowing where the fiber we use comes from, sourcing from local farms or using fiber from vintage or second-hand sources.
Sheng: According to Maker’s Way Fiber Mill’s website, sustainability is a critical feature of your products. Why is that, and how do you make your products sustainable?
Elizabeth: We believe that we are stewards of the earth and should be conscious of how the products we make are grown, created, and then how they can be disposed of. The fashion industry, from creating the product to end life, is a huge polluter. The current market for wool is not great for producers, and there isn’t a good avenue for alpaca producers. We work very hard to ensure that our products are sourced from people that we know and trust or are from vintage or second-hand sources. We also work to ensure our products are made from natural fibers, thus they are biodegradable.
We also work to limit the waste in our mill. Although we try our absolute best to reduce loss in the process, each step produces some loss in fiber. This fiber is swept up and either rewashed and added to our Millie line or added to our bird nest starters. The Millie line is yarn spun up from the scraps, and we end up running about four batches of this a year. Each batch is unique because of the different blends of fiber we run. The bird nest starters use fiber that either falls out of our carder or is swept off the floor. These are then put outside in the spring for birds to use for nesting. The fibers are short enough that the baby birds don’t get tangled in them as they would with yarn and because they are natural animal fibers, the nests will biodegrade, unlike acrylic yarns that are sometimes used.
Sheng: Maker’s Way Fiber Mill’s products are 100% locally made in South Dakota. From your perspective, what are the opportunities and challenges for manufacturing textiles in the US today?
Elizabeth: I see two big challenges in the natural animal fiber side of the U.S. textile industry: Lack of consumer knowledge of where clothing comes from and lack of infrastructure. But both also present big opportunities!
First, we have found with our mill that people don’t have a good understanding of how many steps there are in creating yarn in general, let alone clothing. We have people who question our pricing because they don’t understand what it means to make yarn in the United States. From start to finish, it takes eight different steps to get raw fiber from producers to yarn ready to sell. Our consultations for new clients tend to be very educational because even fiber producers don’t necessarily know all the steps. As we open the mill for tours and talk to people at events, they start to understand and respect how much work is behind the yarn we create, and that is when we see buy-in – when people start to see the whole process, as well as the people.
The second challenge I see is the overall lack of infrastructure. We are one of approximately 200 small-scale / artisan-style mills in the country (this number is approximate – there is not a good database) and do not run near the quantity compared to the larger manufacturers. As of 2018, there aren’t any small-scale fiber mill equipment manufacturers in the US, so all of the equipment available to us is either used or has to be imported from Canada or Italy. Wait time for most small producers to get their fiber made into yarn is approximately 8-12 months at many mills, some run up to 18 months out. Our mill currently runs about 6 months out and we have been open for just over a year.
For producers who want to sell their wool to larger manufacturers and not have it custom processed, as far as our research has shown, there is one large-scale scouring (wool washing) facility in the states and most of the large-scale spinners use fiber from this facility to spin into yarn and then send the fiber off to other finishing companies for knitting. Otherwise, all of the wool is shipped overseas, and producers are earning approximately $1.66/lb of wool (in 2020). We have heard of many producers that have stockpiles of wool because they are waiting for higher wool prices. Coops also won’t accept wool that isn’t white, so all dark colors of wool get thrown away as there isn’t a market for it.
We also see this as an opportunity. We have noticed the “buying local” trend extending past food also to include yarn. People also see value in making their own clothing and being intentional through knitting/crocheting. There is a growing market for it. We have also seen some demand for the addition of another large-scale scouring facility that could meet the needs for wool insulation and other home applications.
Sheng: Like other fashion programs in the US, most of our FASH students take job opportunities from fashion brands and retailers, not necessarily textile mills. How to raise the young generation’s interest in pursuing a career in textile and apparel factories? Do you have any suggestions?
Elizabeth: I definitely never intended to start a fiber mill when I was in school. I only took one textile class and am pretty sure only one of my design projects used wool. UD was really what fed the sustainability bug in me and I started to realize that sustainability starts at the very beginning of the lifecycle of clothing. Whether or not something can be biodegradable, recyclable, or repurposed starts with what fiber makes up the clothing. UD also showed me how global apparel is and how much carbon footprint it makes.
Working in a fiber mill is not an easy job. It is dirty, we tend to put in long days, and we are constantly learning new things. I am a very hands-on person, and I love being able to create things from nothing, so this job is a great fit for me. The part I loved most about being in design school was being able to create things, and my current job is that all day, every day. We split the mill into “zones” and between myself, Erin and our mom, we all specialized in a specific part of the process. I am in charge of skirting and cleaning fleeces, which means cleaning off all of the hay and visibly dirty areas (aka manure) and then washing the fiber in 140-180 degree water to get the dirt and lanolin out of the fleece. I then pick and card the fiber, which opens up and organizes the fiber into a long tube that is then drafted, spun, plied, and put into skeins. While most days tend to include the same things, each day is never the same as the last. Each animal fleece we run acts differently, so we are always learning new and better ways to run the equipment we have. It is challenging but also a labor of love. Because we work directly with producers, we know the names of most of the animals and love knowing that their fleeces are being used instead of being discarded! We also love connecting with local people who love purchasing from local producers and makers.
One of the biggest things I believe fashion programs can do to help open up students to different options in the fashion industry is to expose them to different opportunities and allow them to follow whatever passion they have and emphasize that there isn’t a “right” path in the industry. My classes opened me up to labor issues around the world and that then led me to Delaware. And the opportunities I was given at UD to follow my passions are a huge reason I am doing what I am doing now. One of the things I think UD does right is having many different professors with varying backgrounds in the FASH department and I think other universities would do well to implement that too.
Sheng: Any other key issues or industry trends you will watch in 2023?
Elizabeth: One of the key trends we are watching is the local craft movements and knowing where your clothing comes from. We saw a crafting resurgence happen during COVID and people are still pickup up their knitting needles and crochet hooks to create items to wear and love. We also see some carryover of the local food scene into the local fiber scene. We believe that this will continue to grow!
Mango is a fashion company based in Barcelona, Spain that was founded in 1984 by brothers Isak Andic and Nahman Andic. The company has grown significantly since its inception and now has over 2,700 stores in 109 countries worldwide. Mango is known for its trendy and high-quality clothing, which is targeted toward young women.
One of the critical factors in Mango’s success has been its ability to stay current and relevant in the fast-paced fashion world. The company regularly collaborates with top designers and influencers to create unique and fashionable collections that appeal to its target audience. Mango also closely monitors emerging trends and adapts its collections accordingly.
Besides clothing, Mango also offers accessories, such as bags, shoes, jewelry, and a home collection. The company has a solid online presence, with an e-commerce website that allows customers to shop from anywhere in the world.
In December 2022, Mango announced the Sustainable 2030 strategy, which “aims to move towards the full traceability and transparency of its value chain, in order to continue with the process of auditing its suppliers and ensuring that appropriate working conditions are being fulfilled for the workers in the factories the company works with around the world.” As part of the strategy, Mango will “focus its efforts on moving towards a more sustainable collection, prioritizing materials with a lower environmental impact and incorporating circular design criteria, so that by 2030 these will predominate in the design of its products and all its fibers will be of sustainable origin or recycled.”
Mango’s Apparel Sourcing Strategies (as of December 2022)
First, Mango adopted a sophisticated global sourcing network for its apparel products. Specifically, Mango’s apparel supply chain involves 1,878 Tier 1, Tier 2, and Tier 3 factories in 29 countries worldwide. About 31% of these factories produce garments (Tier 1), 19% supply fabrics (Tier 2), and 49% provide textile raw materials like yarns and accessories (Tier 3). Further, about 407 factories (or 21%) have vertical production capability (e.g., making both finished garments and textile inputs).
Second, like many EU fashion companies, near-shoring from the EU and Turkey is a critical feature of Mango’s apparel sourcing strategy. For example, about 44.8% of Mango’s Tier 1 garment suppliers were EU based (including Turkey), whereas Asia suppliers only accounted for 54%. Likewise, about 34% of Mango’s Tier 2 fabric suppliers and nearly half of its Tier 3 yarn and accessories suppliers were also EU based. The result reflects the EU’s intra-region textile and apparel trade patterns, supported by the region’s relatively complete textile and apparel supply chain. In comparison, US fashion companies typically source more than 80% of finished garments from Asia, and most of these garments also use Asia-based textile raw materials.
Third, measured by the number of suppliers, Mango’s top Tier 1 apparel production bases include Turkey (187 factories), China (176 factories), India (135 factories), and Italy (107 factories). Industry sources further indicated that between 2021 and 2022, Mango primarily sourced from Turkey and India for Tops (69% and 78%, respectively). Mango’s imports from China and Italy were more diverse in product categories (e.g., dresses, outwear, bottoms, and swimwear). On the other hand, Mango’s apparel imports from Italy were much higher priced ($107 retail price on average) than those from the other three countries ($38-41 retail price on average).
Fourth, the factory size and vertical production capabilities of Mango’s suppliers seem to vary by region. Notably, Mango’s Asia-based suppliers are more likely to be large-sized (with 1,000+ employees) and offer vertical production (e.g., making both finished garments and textile input). Mango’s Africa and America-based suppliers were relatively small-sized or lacked vertical integration.
This study explored the survival strategies of apparel manufacturing in a high-wage developed economy using “Made in Ireland” as a case study. Based on a statistical analysis of 4,000 apparel items for sale in the retail market from January 2018 to December 2021, the study found that:
First, unlike the conventional views like the factor proportion trade theory and the global value chain theory, the study’s results showed that garment manufacturing did NOT disappear in Ireland as a high-wage developed country. Notably, garments “Made in Ireland” demonstrated many unique attributes, such as:
statistically more likely to target luxury and high-end markets than foreign-made apparel imported into Ireland;
statistically more likely to highlight their Irish cultural heritage and mention keywords such as “traditional,” “centuries-old,” “craftsmanship,” and “historical” in the product description;
statistically more likely to focus on manufacturing specific product categories with a world reputation, including jumpers and kilts;
statistically less likely to be seen in categories with an abundant supply from lower-cost imports, such as bottoms;
In other words, economic theories need to incorporate non-price competition factors and better explain the development patterns of a country’s garment sector, particularly in developed economies.
Second, the findings called for a rethink of the strategies supporting the garment-manufacturing sector in a high-wage developed country. Current industry practices and government policies aiming to promote garment manufacturing in a developed country primarily focus on implementing protectionist trade measures (i.e., restricting imports) or investing in modern technologies like automation. However, the study’s findings suggested new approaches. For example, using disaggregated product data at the Stock Keeping Unit (SKU) level, the study indicated that a substantial portion of garments “Made in Ireland” was sold overseas. Thus, promoting exports instead of curbing imports could be a more effective way of expanding garment production in a high-wage developed country.
On the other hand, the popularity of “Made in Ireland” jumpers and kilts in the world marketplace suggested that garment manufacturers in a high-wage developed country could survive their business by leveraging cultural heritage, history, and traditional craftsmanship instead of fancy new technologies. Likewise, to a certain extent, the value of maintaining garment manufacturing in a high-wage developed country in the 21st Century may not necessarily be about replacing imports, improving “speed to market,” or creating jobs but preserving a country’s unique cultural heritage and history.
Third, the study’s findings revealed the challenges facing garment manufacturers in a high-wage developed country like Ireland. For example, garments “Made in Ireland” were more likely to be sold with a discount, implying their price competition with foreign-made imports might not be entirely avoidable despite all the efforts from targeting the niche markets to differentiating product assortments.
On the other hand, garments “Made in Ireland” often targeted the high-end market, requiring the workforce to obtain demanding skills such as advanced sewing, craftsmanship, and a deep understanding of the Irish culture. However, the aging workforce and the shortage of skilled labor, a common problem facing developed countries, could also prevent the expansion of apparel manufacturing in Ireland in the long run. Thus, prompting the traditional Irish culture and apparel production craftsmanship, especially to attract the young generation to garment factories and be willing to pursue a career there, would be critical for sustaining the garment manufacturing sector in Ireland and other high-wage developed countries.
Ireland has a long history of making garments, and specific categories of apparel “Made in Ireland” are famous worldwide, such as jumpers and kilts. As of 2020 (i.e., the latest data available), about 340 garment factories still operate in Ireland, a notable increase from 293 in 2010 (Eurostat, 2022). Meanwhile, the output of Ireland’s apparel manufacturing sector totaled $68 million in 2020 (measured in value-added), a substantial drop from $142 million ten years ago (Eurostat, 2022).
Meanwhile, export was critical in supporting apparel “Made in Ireland” today. Statistics show that Ireland’s apparel exports totaled $270 million in 2019 before the pandemic, down about 19% from 2005 (UNComtrade). However, over that period, Ireland’s apparel exports to most developed countries enjoyed positive growth, such as Spain (up 151%), the Netherlands (up 4.5%), Germany (up 14.5%), France (up 61.6%), and Japan (up 20.2%). Further, Ireland’s top four largest apparel export markets were all developed Western EU countries (UNComtrade, 2022). Geographic proximity and the specific product structure of Ireland’s apparel exports could be important factors behind these distinct export patterns.
by Miriam Keegan (FASH MS student, Fulbright-EPA scholar) and Sheng Lu
Full paper: Keegan, M. & Lu, S. (2023). Can garment production survive in a developed economy in the 21st century? A study of “Made in Ireland”. Research Journal of Textile and Apparel. (ahead of print) https://doi.org/10.1108/RJTA-09-2022-0113
This study was based on a statistical analysis of 3,307 randomly selected clothing items made from recycled textile materials for sale in the U.S. retail market between January 2019 and August 2022 (see the sample picture above). The results show that:
First, U.S. retailers sourced clothing made from recycled textile materials from diverse countries.
Specifically, the sampled clothing items came from as many as 36 countries, including developed and developing economies in Asia, America, the EU, and Africa.
However, reflecting the unique supply chain composition of clothing made from recycled textile materials, U.S. retailers’ sourcing patterns for such products turned out to be quite different from regular new clothing. For example, whereas the vast majority (i.e., over 90%) of U.S. regular new clothing came from developing countries as of 2022 (UNComtrade, 2022), as many as 43% of the sampled clothing items made from recycled textile materials (n=1,408) were sourced from developed countries. Likewise, U.S. retailers seemed to be less dependent on Asia when sourcing clothing made from recycled materials (41.9%, n=1,387) and instead used near-sourcing from America (30.1%, n=994) more often, particularly domestic sourcing from the United States (14.8%, n=490).
Second, U.S. retailers appeared to set differentiated assortments for products imported from developed and developing countries when sourcing clothing made from recycled textile materials.
Among the sampled clothing items made from recycled textile materials, those imported from developing countries, on average, included a broader assortment than developed economies. Likewise, imports from developing countries also concentrated on products relatively more complex to make as opposed to developed countries. Developing countries’ more extensive clothing production capability, including the available production facilities and skilled labor force, than developed economies could have contributed to the pattern.
On the other hand, likely caused by developed countries’ overall higher production costs, the average retail price of sampled clothing items sourced from developed countries was notably higher than those from developing ones. However, NO clear evidence shows that U.S. retailers used developed countries primarily as the sourcing bases for luxury or premium items and used developing countries only for items targeting the mass or value market.
Third, an exporting country’s geographic location was another statistically significant factor affecting U.S. retailers’ sourcing pattern for clothing made from recycled textile materials. Specifically,
Imports from Asia had the most diverse product assortment (e.g., sizing options) and focused on complex product categories (e.g., outwear) that targeted mass and value markets.
Imports from America (North, South, and Central America) concentrated on simple product categories (e.g., T-shirts and hosiery) with moderate assortment diversity and mainly targeted the mass and value market.
Imports from the EU were mainly higher-priced luxury items in medium-sophisticated or sophisticated product categories with diverse assortment.
Imports from Africa concentrated on relatively higher-priced premium or luxury items in simple product categories (i.e., swim shorts) with a limited assortment diversity.
The study’s findings demystified the country of origin of clothing made from recycled textile materials hidden behind macro trade statistics. The findings also created critical new knowledge that contributed to our understanding of the supply chain of clothing made from recycled textile materials and U.S. retailers’ distinct sourcing patterns and affecting factors for such products. The findings have several other important implications:
First, the study’s findings revealed the broad supply base for clothing made from recycled textile materials and suggested promising sourcing opportunities for such products. Whereas existing studies illustrated consumers’ increasing interest in shopping for clothing made from recycled textile materials, the study’s results indicated that the “enthusiasm” also applied to the supply side, with many countries already engaged in making and exporting such products. Meanwhile, the results showed that U.S. retailers sourced clothing made from recycled textile materials in different product categories with a broad price range targeting various market segments to meet consumers’ varying demands. Moreover, as textile recycling techniques continue to advance, potentially enriching the product offer of clothing made from recycled textile materials, U.S. retailers’ sourcing needs and supply base for such products could expand further.
Second, the study’s findings suggest that sourcing clothing made from recycled textile materials may help U.S. retailers achieve business benefits beyond the positive environmental impacts. For example, given the unique supply chain composition and production requirements, China appeared to play a less dominant role as a supplier of clothing made from recycled textile materials for U.S. retailers. Instead, a substantial portion of such products was “Made in the USA” or came from emerging sourcing destinations in America (e.g., El Salvador, Nicaragua) and Africa (e.g., Tunisia and Morocco). In other words, sourcing clothing made from recycled textile materials could help U.S. retailers with several goals they have been trying to achieve, such as reducing dependence on sourcing from China, expanding near sourcing, and diversifying their sourcing base.
Additionally, the study’s findings call for strengthening U.S. domestic apparel manufacturing capability to better serve retailers’ sourcing needs for clothing made from recycled textile materials. On the one hand, the results demonstrated U.S. retailers’ strong interest in sourcing clothing made from recycled textile materials that were “Made in the USA.” Also, the United States may enjoy certain competitive advantages in making such products, ranging from the abundant supply of recycled textile waste and the affordability of expensive modern recycling machinery to the advanced research and product development capability. On the other hand, the results showed that U.S. retailers primarily sourced simple product categories (e.g., T-shirts and hosiery), targeting the value and mass markets from the U.S. and other American countries. This pattern somewhat mirrored the production and sourcing pattern for regular new clothing, for which apparel “Made in the USA” also lacked product variety and focused on basic fashion items compared with Asian and EU suppliers. Thus, strengthening the U.S. domestic apparel production capacity, especially for those complex product categories (e.g., outwear and suits), could encourage more sourcing of “Made in the USA” apparel using recycled textile materials and support production and job creation in the U.S. apparel manufacturing sector.
In December 2022, Just-Style consulted a panel of industry experts and scholars in its Outlook 2023–what’s next for apparel sourcing briefing. Below is my contribution to the report. All comments and suggestions are more than welcome!
2023 is likely another year full of challenges and opportunities for the global apparel industry.
First, the apparel industry may face a slowed world economy and weakened consumer demand in 2023. Apparel is a buyer-driven industry, meaning the sector’s volume of trade and production is highly sensitive to the macroeconomic environment. Amid hiking inflation, high energy costs, and retrenchment of global supply chains, leading international economic agencies, from the World Bank to the International Monetary Fund (IMF), unanimously predict a slowing economy worldwide in the new year. Likewise, the World Trade Organization (WTO) forecasts that the world merchandise trade will grow at around 1% in 2023, much lower than 3.5% in 2022. As estimated, the world apparel trade may marginally increase between 0.8% and 1.5% in the new year, the lowest since 2021. On the other hand, the falling demand may somewhat help reduce the rising sourcing cost pressure facing fashion companies in the new year.
Second, fashion brands and retailers will likely continue leveraging sourcing diversification and strengthening relationships with key vendors in response to the turbulent market environment. According to the 2022 fashion industry benchmarking study I conducted in collaboration with the US Fashion Industry Association (USFIA), nearly 40 percent of surveyed US fashion companies plan to “source from more countries and work with more suppliers” through 2024. Notably, “improving flexibility and reducing resourcing risks,” “reducing sourcing from China,” and “exploring near-sourcing opportunities” were among the top driving forces of fashion companies’ sourcing diversification strategies. Meanwhile, it is not common to see fashion companies optimize their supplier base and work with “fewer vendors.” For example, fashion companies increasingly prefer working with the so-called “super-vendors,” i.e., those suppliers with multiple-country manufacturing capability or can make textiles and apparel vertically, to achieve sourcing flexibility and agility. Hopefully, we could also see a more balanced supplier-importer relationship in the new year as more fashion companies recognize the value of “putting suppliers at the core.”
Third, improving sourcing sustainability and sourcing apparel products using sustainable textile materials will gain momentum in the new year. On the one hand, with growing expectations from stakeholders and pushed by new regulations, fashion companies will make additional efforts to develop a more sustainable, socially responsible, and transparent apparel supply chain. For example, more and more fashion brands and retailers have voluntarily begun releasing their supplier information to the public, such as factory names, locations, production functions, and compliance records. Also, new traceability technologies and closer collaboration with vendors enable fashion companies to understand their raw material suppliers much better than in the past. Notably, the rich supplier data will be new opportunities for fashion companies to optimize their existing supply chains and improve operational efficiency.
On the other hand, with consumers’ increasing interest in fashion sustainability and reducing the environmental impact of textile waste, fashion companies increasingly carry clothing made from recycled textile materials. My latest studies show that sourcing clothing made from recycled textile materials may help fashion companies achieve business benefits beyond the positive environmental impacts. For example, given the unique supply chain composition and production requirements, China appeared to play a less dominant role as a supplier of clothing made from recycled textile materials. Instead, in the US retail market, a substantial portion of such products was “Made in the USA” or came from emerging sourcing destinations in America (e.g., El Salvador, Nicaragua) and Africa (e.g., Tunisia and Morocco). In other words, sourcing clothing made from recycled textile materials could help fashion companies with several goals they have been trying to achieve, such as reducing dependence on sourcing from China, expanding near sourcing, and diversifying their sourcing base. Related, we are likely to see more public dialogue regarding how trade policy tools, such as preferential tariffs, may support fashion companies’ efforts to source more clothing using recycled or other eco-friendly textile materials.
Additionally, the debates on fashion companies’ China sourcing strategy and how to meaningfully expand near-sourcing could intensify in 2023. Regarding China, fashion companies’ top concerns and related public policy debates next year may include:
What contingency plan will be should the geopolitical tensions in the Asia-Pacific region directly affect shipping from the region?
Meanwhile, driven by various economic and non-economic factors, fashion companies will likely further explore ways to “bring the supply chain closer to home” in 2023. However, the near-shoring discussion will become ever more technical and detailed. For example, to expand near-shoring from the Western Hemisphere, more attention will be given to the impact of existing free trade agreements and their specific mechanisms (e.g., short supply in CAFTA-DR) on fashion companies’ sourcing practices. Even though we may not see many conventional free trade agreements newly launched, 2023 will be another busy year for textile and apparel trade policy deliberation, especially behind the scene and on exciting new topics.
By Sheng Lu
Discussion question: As we approach the middle of the year, why do you agree or disagree with any predictions in the outlook? Please share your thoughts.
#1. What makes globalization and trade controversial and debatable? Please use 1-2 examples from the video to illustrate your point.
#2. Are classic trade theories (e.g., comparative advantage) still relevant or outdated in the 21st century? Why? Please share your thoughts based on the video and the figures.
#3. Based on the video and the figures above, is the US textile manufacturing sector a winner or loser of globalization and international trade? Why?
#4. Related to question #3, does the future prosperity of the US textile manufacturing sector need globalization or de-globalization? What’s your vision?
#5. Take the following poll (anonymous) and share your reflections.
#6. Should the government’s trade policy consider non-economic factors such as national security and geopolitics? What should be the line between promoting “fair trade” and “trade protectionism”? What’s your view?
#7. Is there anything else you find interesting/intriguing/thought-provoking in the video? Why?
(Welcome to our online discussion. For students in FASH455, please address at least two questions and mention the question number (#) in your reply)
On September 2, 2022, the Office of the US Trade Representative (USTR) announced it would continue the billions of dollars of Section 301 punitive tariffs against Chinese products. USTR said it made the decision based on requests from domestic businesses benefiting from the tariff action. As a legal requirement, USTR will launch a full review of Section 301 tariff action in the coming months.
In her remarks at the Carnegie Endowment for International Peace on Sep 7, 2022, US Trade Representative Katharine Tai further said that the Section 301 punitive tariffs on Chinese imports “will not come down until Beijing adopts more market-oriented trade and economic principles.” In other words, the US-China tariff war, which broke out four years ago, is not ending anytime soon.
A Brief History of the US Section 301 tariff action against China
The US-China tariff war broke out as both unexpected and not too surprising. For decades, the US government had been criticizing China for its unfair trade practices, such as providing controversial subsidies to state-owned enterprises (SMEs), insufficient protection of intellectual property rights, and forcing foreign companies to transfer critical technologies to their Chinese competitors. The US side had also tried various ways to address the problems, from holding bilateral trade negotiations with China and imposing import restrictions on specific Chinese goods to suing China at the World Trade Organization (WTO). However, despite these efforts, most US concerns about China’s “unfair” trade practices remain unsolved.
When former US President Donald Trump took office, he was particularly upset about the massive and growing US trade deficits with China, which hit a record high of $383 billion in 2017. In alignment with the mercantilism view on trade, President Trump believed that the vast trade deficit with China hurt the US economy and undermined his political base, particularly with the working class.
President Trump lost his patience with China in the summer of 2018. In the following months, citing the USTR Section 301 investigation findings, the Trump administration announced imposing a series of punitive tariffs on nearly half of US imports from China, or approximately $250 billion in total. As a result, for more than 1,000 types of products, US companies importing them from China would have to pay the regular import duties plus a 10%-25% additional import tax. However, the Trump administration’s trade team purposefully excluded consumer products such as clothing and shoes from the tariff actions. The last thing President Trump wanted was US consumers, especially his political base, complaining about the rising price tag when shopping for necessities. The timing was also a sensitive factor—the 2018 congressional mid-term election was only a few months away.
President Trump hoped his unprecedented large-scale punitive tariffs would change China’s behaviors on trade. It partially worked. As the trade frictions threatened economic growth, the Chinese government returned to the negotiation table. Specifically, the US side wanted China to purchase more US goods, reduce the bilateral trade imbalances and alter its “unfair” trade practices. In contrast, the Chinese asked the US to hold the Section 301 tariff action immediately.
However, the trade talks didn’t progress as fast as Trump had hoped. Even worse, having to please domestic forces that demanded a more assertive stance toward the US, the Chinese government decided to impose retaliatory tariffs against approximately $250 billion US products. President Trump felt he had to do something in response to China’s new action. In August 2019, he suddenly announced imposing Section 301 tariffs on a new batch of Chinese products, totaling nearly $300 billion. As almost everything from China was targeted, apparel products were no longer immune to the tariff war.With the new tariff announcement coming at short notice, US fashion brands and retailers were unprepared for the abrupt escalation since they typically placed their sourcing orders 3-6 months before the selling season.
Nevertheless, Trump’s new Section 301 actions somehow accelerated the trade negotiation. The two sides finally reached a so-called“phase one” trade agreementin about two months. As part of the deal, China agreed to increase its purchase of US goods and services by at least $200 billion over two years, or almost double the 2017 baseline levels. Also, China promised to address US concerns about intellectual property rights protection, illegal subsidies, and forced technology transfers. Meanwhile, the US side somewhat agreed to trim the Section 301 tariff action but rejected removing them. For example, the punitive Section 301 tariffs on apparel products were cut from 15% to 7.5% since implementing the “phase one” trade deal.
Trump lost the 2020 presidential election, and Joe Biden was sworn in as the new US president on January 20, 2021. However, the Section 301 tariff actions and the US-China “phase one” trade deal stayed in force.
Debate on the impact of the US-China tariff war
Like many other trade policies, the US Section 301 tariff actions against China raised heated debate among stakeholders with competing interests. This was the case even among different US textile and apparel industry segments.
On the one hand, US fashion brands and retailers strongly oppose the punitive tariffs against Chinese products for several reasons:
First, despite the Section 301 tariff action, China remained a critical apparel sourcing base for many US fashion companies with no practical alternative. Trade statistics show that four years into the tariff war, China still accounted for nearly 40 percent of US apparel imports in quantity and about one-third in value as of 2021. According to the latest data, in the first ten months of 2022, China remained the top apparel supplier, accounting for 35% of US apparel imports in quantity and 22.2% in value. Studies also consistently find that US fashion companies rely on China to fulfill orders requiring a small minimum order quantity, flexibility, and a great variety of product assortment.
Second, having to import from China, fashion companies argued that the Section 301 punitive tariffs increased their sourcing costs and cut profit margins. For example, for a clothing item with an original wholesale price of around $7, imposing a 7.5% Section 301 punitive tariff would increase the sourcing cost by about 5.8%. Should fashion companies not pass the cost increase to consumers, their retail gross margin would be cut by 1.5 percentage points. Notably, according to the US Fashion Industry Association’s 2021 benchmarking survey, nearly 90 percent of respondents explicitly say the tariff war directly increased their company’s sourcing costs. Another 74 percent say the tariff war hurt their company’s financials.
Third, as companies began to move their sourcing orders from China to other Asian countries like Vietnam, Bangladesh, and Cambodia to avoid paying punitive tariffs, these countries’ production costs all went up because of the limited production capacity. In other words, sourcing from everywhere became more expensive because of the Section 301 action against China.
Further, it is important to recognize that fashion companies supported the US government’s efforts to address China’s “unfair” trade practices, such as subsidies, intellectual property rights violations, and forced technology transfers. Many US fashion companies were the victims of such practices. However, fashion companies did not think the punitive tariff was the right tool to address these problems effectively. Instead, fashion brands and retailers were concerned that the tariff war unnecessarily created an uncertain and volatile market environment harmful to their business operations.
“While NCTO members support the inclusion of finished products in Section 301, we are seriously concerned that…adding tariffs on imports of manufacturing inputs that are not made in the US such as certain chemicals, dyes, machinery, and rayon staple fiber in effect raises the cost for American companies and makes them less competitive with China.”
Mitigate the impact of the tariff war: Fashion Companies’ Strategies
The first approach was to switch to China’s alternatives. Trade statistics suggest that Asian countries such as Vietnam and Bangladesh picked up most of China’s lost market shares in the US apparel import market. For example, in 2022 (Jan-Nov), Asian countries excluding China accounted for 51.2% of US apparel imports, a substantial increase from 41.2% in 2018 before the tariff war. In comparison, about 16.4% of U.S. apparel imports came from the Western Hemisphere in 2021 (Jan-Nov), lower than 17.0% in 2018. In other words, no evidence shows that Section 301 tariffs have expanded U.S. apparel sourcing from the Western Hemisphere.
The second approach was to adjust what to source from China by leveraging the country’s production capacity and flexibility. For example, market data from industry sources showed that since the Section 301 tariff action, US fashion companies had imported more “Made in China” apparel in the luxury and premium segments and less for the value and mass markets. Such a practice made sense as consumers shopping for premium-priced apparel items typically were less price-sensitive, allowing fashion companies to raise the selling price more easily to mitigate the increasing sourcing costs. Studies also found that US companies sourced fewer lower value-added basic fashion items (such as tops and underwear), but more sophisticated and higher value-added apparel categories (such as dresses and outerwear) from China since the tariff war.
Related, US fashion companies such as Columbia Sportswear leveraged the so-called “tariff engineering” in response to the tariff war. Tariff engineering refers to designing clothing to be classified at a lower tariff rate. For example, “women’s or girls’ blouses, shirts, and shirt-blouses of man-made fibers” imported from China can tax as high as 26.9%. However, the same blouse added a pocket or two below the waist would instead be classified as a different product and subject to only a 16.0% tariff rate. Nevertheless, using tariff engineering requires substantial financial and human resources, which often were beyond the affordability of small and medium-sized fashion companies.
Third, recognizing the negative impacts of Section 301 on US businesses and consumers, the Office of the US Trade Representative (USTR) created a so-called “Section 301 exclusion process.” Under this mechanism, companies could request that a particular product be excluded from the Section 301 tariffs, subject to specific criteria determined at the discretion of USTR. The petition for the product exclusion required substantial paperwork, however. Even companies with an in-house legal team typically hire a DC-based law firm experienced with international trade litigation to assist the petition, given the professional knowledge and a strong government relation needed. Also of concern to fashion companies was the low success rate of the petition. The record showed that nearly 90 percent of petitions were denied for failure to demonstrate “severe economic harm.” Eventually, since the launch of the exclusion process, fewer than 1% of apparel items subject to the Section 301 punitive tariff were exempted. Understandably, the extra financial burden and the long shot discouraged fashion companies, especially small and medium-sized, from taking advantage of the exclusion process.
In conclusion, with USTR’s latest announcement, the debate on Section 301 and the outlook of China as a textile and apparel sourcing base will continue. Notably, while economic factors matter, we shall not ignore the impact of non-economic factors on the fate of the Section 301 tariff action against China. For example, with the implementation of the Uyghur Forced Labor Prevention Act (UFLPA), only about 10% of US cotton apparel imports came from China in the first ten months of 2022 (latest data available), the lowest in a decade. As the overall US-China bilateral trade relationship significantly deteriorated in recent years and the friction between the two countries expanded into highly politically sensitive areas, the Biden administration could “willfully” choose to keep the Section 301 tariff as negotiation leverage. Domestically, President Biden also didn’t want to look “weak” on his China policy, given the bipartisan support for taking on China’s rise.
This article provided a comprehensive review of the world textiles and clothing trade patterns in 2021 based on the newly released data from the World Trade Statistical Review 2022 and the United Nations (UNComtrade). Affected by the ongoing pandemic and companies’ evolving production and sourcing strategies in response to the shifting business environment, the world textiles and clothing trade patterns in 2021 included both continuities and new trends. Specifically:
Pattern #1: As the world economy recovered from COVID, the world clothing export boomed in 2021, while the world textile exports grew much slower due to a high trade volume the year before. Specifically, thanks to consumers’ strong demand, world clothing exports in 2021 fully bounced back to the pre-COVID level and exceeded $548.8bn, a substantial increase of 21.9% from 2020. The apparel sector is not alone. With economic activities mostly resumed, the world merchandise trade in 2021 also jumped 26.5% from a year ago, the fastest growth in decades.
In comparison, the value of world textiles exports grew slower at 7.8% in 2021 (i.e., reached $354.2bn), lagging behind most sectors. However, such a pattern was understandable as the textile trade maintained a high level in 2020, driven by high demand for personal protective equipment (PPE) during the pandemic.
Nevertheless, the world textiles and clothing trade could face strong headwinds down the road due to a slowing world economy and consumers’ weakened demand. Notably, amid hiking inflation, high energy costs, and retrenchment of global supply chains, leading international economic agencies, from the World Bank to the International Monetary Fund (IMF), unanimously predict a slowing economy worldwide. Likewise, the World Trade Organization (WTO) forecasts that the growth of world merchandise trade will be cut to 3.5% in 2022 and down further to only 1% in 2023. As a result, the world textiles and clothing trade will likely struggle with stagnant growth or a modest decline over the next two years.
Pattern #2: COVID did NOT fundamentally shift the competitive landscape of textile exports but affected the export product structure. Meanwhile, some long-term structural changes in world textile exports continued in 2021.
Specifically, China, the European Union (EU), and India remained the world’s three largest textile exporters in 2021, a pattern that has stayed stable for over a decade. Together, these top three accounted for 68% of the world’s textile exports in 2021, similar to 66.9% before the pandemic (2018-2019). Other textile exporters that made it to the top ten list in 2021 were also the same as a year ago and before the pandemic (2018-2019).
Meanwhile, the growth rate of the top ten textile exporters varied significantly in 2021, ranging from -5.5% (China) to 47.8% (India). The demand shift from PPE to apparel-related yarns and fabrics was a critical contributing factor behind the phenomenon. For example, China’s PPE-related textile exports decreased by more than $33bn (or down 43%) in 2021. In contrast, the world knit fabric exports (SITC code 655) surged by more than 30% in 2021, led by India (up 74%) and Pakistan (up 72%). Nevertheless, as consumers’ lifestyles almost reached a “new normal,” we could expect the textile export product structure to stabilize soon.
On the other hand, as a trend already emerged before the pandemic, middle-income developing countries continued to play a more significant role in textile exports, whereas developed countries lost market shares. For example, the United States, Germany, and Italy led the world’s textile exports in the 2000s, accounting for more than 20% of the market shares. However, these three countries’ shares fell to 12.8% in 2019 and hit a new low of 11.3% in 2021. In comparison, middle-income developing countries like China, Vietnam, Turkey, and India have entered the development stage of expanding textile manufacturing. As a result, their market share in the world’s textile exports rose steadily. These countries also achieved a more balanced textiles/clothing export ratio over the years, meaning more textile raw materials like yarns and fabrics can be locally produced instead of relying on imports. For example, Vietnam, known for its competitive clothing products, achieved a new high of $11.5bn in textile exports in 2021 and ranked sixth globally. Vietnam’s textiles/clothing ratio also doubled from 0.15 in 2005 to 0.37 in 2021. It is not unlikely that Vietnam’s textile exports may surpass the United States over the next few years.
Pattern #3: Countries with large-scale production capacity stood out in world clothing exports in 2021. Meanwhile, clothing exporters compete to become China’s alternatives, but there seems to be no clear winner yet.
Consumers’ surging demand and COVID-related supply chain disruptions significantly impacted the world’s clothing export patterns in 2021. As fashion brands and retailers were eager to find sourcing capacity, countries with large-scale production capacity and relatively stable supply enjoyed the fastest growth in clothing exports. For example, except for Vietnam, which suffered several months of COVID lockdowns, all other top five clothing exporters enjoyed a more than 20% growth of their exports in 2021, such as China (up 24%), Bangladesh (up 30%), Turkey (up 22%), and India (up 24%).
As another critical trend, many international fashion brands and retailers have been trying to reduce their apparel sourcing from China, driven by various economic and non-economic factors, from cost considerations and trade tensions to geopolitics. Notably, despite its strong performance in 2021, China accounted for only 23.1% of US apparel imports in 2022 (January to September), much lower than 36.2% in 2015. Likewise, China’s market shares in the EU, Japanese, and Canadian clothing import markets also fell over the same period, suggesting this was a worldwide phenomenon.
With reduced apparel sourcing from China, fashion companies have actively sought alternative sourcing destinations, but the latest trade data suggests no clear winner yet. For example, Vietnam and Bangladesh, the two most popular candidates for “Next China,” accounted for 6.5% and 5.7% shares in the world’s clothing export in 2021, still far behind China (32.1%). Interestingly, from 2015 to 2021, the world’s top four largest clothing exporters next to China (i.e., Bangladesh, Vietnam, Turkey, and India) did not substantially gain new market shares. Instead, China’s lost market was filled by “the rest of the world.”
Additionally, recent studies show that many fashion companies have switched back to the sourcing diversification strategy in 2022 as managing risks and improving sourcing flexibility become more urgent priorities. In other words, the world’s clothing export market could turn more “crowded” and competitive in the coming years.
Pattern #4: Regional supply chains remain critical features of the world textiles and clothing trade. Several factors support and shape the regional textiles and clothing trade patterns. First, as clothing production often needs to be close to where textile materials are available, many developing clothing-producing countries rely heavily on imported textile materials, primarily from more advanced economies in the same region. Second, through lowered trade barriers, regional free trade agreements also financially encouraged garment producers, particularly in Asia, the EU, and Western Hemisphere (WH), to use locally or regionally made textile materials. Further, fashion companies’ interest in “near-shoring” supported the regional supply chain, and related textiles and clothing trade flows between neighboring countries.
The latest trade data indicated that Asia’s regional textiles and clothing trade patterns strengthened further despite supply chain chaos during the pandemic. Specifically, in 2021, as many as 82% of Asian countries’ textile imports came from within Asia, up from 80% in 2015. China, in particular, has played a more prominent role as a leading textile supplier for other Asian clothing-exporting countries. For example, more than 60% of Vietnam’s textile imports came from China in 2021, a substantial increase from 23% in 2005. The same pattern applied to Pakistan, Cambodia, Bangladesh, and the Association of Southeast Asian Nations (ASEAN) members.
In January 2022, the Regional Comprehensive Economic Partnership (RCEP), a mega free trade agreement involving all major economies in Asia, entered into force. The tariff cut and very liberal rules of origin of the agreement will hopefully drive Asia’s booming regional textiles and clothing trade and further deepen its regional economic integration.
Besides Asia, the regional textiles and clothing trade pattern in the EU (or the so-called Intra-EU trade) was also in good shape. In 2021, 50.8% of EU countries’ textile imports and 37% of clothing imports came from other EU members. This pattern has changed little over the past decade, thanks to many EU countries’ commitment to maintaining local textiles and clothing production rather than outsourcing.
In comparison, the Western Hemisphere (WH) textile and apparel supply chain (e.g., clothing made in Mexico or Central America using US or regionally made textiles) seemed to struggle in recent years. As of 2021, only 20% of WH countries’ textile imports came from within WH, down from 26% in 2015. Likewise, WH countries (mainly the US and Canada) just imported 14.6% of clothing from WH in 2021, down from 15.3% in 2015 and much lower than their EU counterparts (37% in 2021). It will be interesting to see whether US and Canadian fashion companies’ expressed interest in expanding near-shoring may reverse the course.
Furthermore, the regional textiles and clothing trade patterns in Sub-Saharan Africa (SSA) are also worth watching. Compared with Asia and the EU, SSA clothing producers used much fewer locally-made textiles (i.e., stagnant at around 11% only from 2011 to 2021), reflecting the region’s lack of textile manufacturing capability. Most trade programs with SSA countries, such as the US-led African Growth and Opportunity Act (AGOA) and EU’s Everything But Arms (EBA) program, adopt liberal rules of origin for clothing products, allowing third-party textile input to be used. It can be studied whether such liberal rules of origin somehow disincentivize building SSA’s own textile manufacturing sector or are still essential given the reality of SSA’s limited textile production capacity.
The EU region as a whole remains one of the world’s leading producers of textile and apparel (T&A). The EU’s T&A production value totaled EUR135.6 bn in 2019, down around 6% from a year ago (Note: Statistical Classification of Economic Activities or NACE, sectors C13, and C14). The EU’s T&A output value was divided almost equally between textile manufacturing (EUR69.4bn) and apparel manufacturing (EUR66.2bn).
Regarding textile production, Southern and Western EU, where most developed EU members are located, such as Germany, France, and Italy, accounted for nearly 60% of EU’s textile manufacturing in 2020. Further, of EU countries’ total textile output, the share of non-woven and other technical textile products (NACE sectors C1395 and C1396) has increased from 20.2% in 2011 to 23.2% in 2019, which reflects the ongoing structural change of the sector.
Apparel manufacturing in the EU includes two primary segments: one is the medium-priced products for consumption in the mass market, which are produced primarily by developing countries in Eastern and Southern Europe, such as Poland, Hungary, and Romania, where cheap labor is relatively abundant. The other category is the high-end luxury apparel produced by developed Western EU countries, such as Italy, UK, France, and Germany.
It is also interesting to note that in Western EU countries, labor only accounted for 20.3% of the total apparel production cost in 2019, which was substantially lower than 30.1% back in 2006. This change suggests that apparel manufacturing is becoming capital and technology-intensive in some developed Western EU countries—as companies are actively adopting automation technology in garment production.
Because of their relatively high GDP per capita and the size of the population, Germany, Italy, the UK, France, and Spain accounted for nearly 60% of total apparel retail sales in the EU in 2021. Such a market structure has stayed stable over the past decade. Also, reflecting local consumers’ preference, EU apparel brands overall outperform non-EU brands in the EU retail market.
Intra-region trade is an essential feature of the EU’s textile and apparel industry. Despite the increasing pressure from cost-competitive Asian suppliers, statistics from UNComtrade show that of the EU region’s total textile imports in 2019, as much as 53.8% were in the category of intra-region trade. However, it could result from increased PPE imports from Asia, EU countries’ Intra-region trade% for textiles dropped to 40% in 2020.
Meanwhile, about one-third of EU countries’ apparel imports came from other EU members during 2019-2020. In comparison, close to 98% of apparel consumed in the United States was imported over the same period, of which more than 75% came from Asia (Eurostat, 2022; UNComtrade, 2022).
Regarding EU countries’ textile and apparel trade with non-EU members (i.e., extra-region trade), the United States remained one of the EU’s top export markets and a vital textile supplier (mainly for technical and industrial textiles). Meanwhile, Asian countries, led by China, and Bangladesh, served as the dominant apparel sourcing base outside the EU region for EU fashion brands and retailers. Turkey was another important apparel sourcing base for EU fashion companies. There is no sign that COVID-19 has shifted the trade pattern.
Additionally, Vietnam was EU’s sixth-largest extra-region apparel supplier in 2020 (after China, Bangladesh, Turkey, India, and Cambodia), accounting for 4% in value. The EU-Vietnam Free Trade Agreement which took effect in August 2020, could encourage more EU apparel sourcing from the country in the long run.
According to the European Apparel and Textile Federation (Euratex), the EU textile and apparel industry continued to recover from COVID-19. For example, the value of textile and apparel output has already reached its pre-pandemic level by the end of September 2022. However, Euratex warns that the EU textile and apparel industry still faces significant challenges from a slowed economy, hiking energy costs as a result of the Russia-Ukraine war and high inflation.
Video 3: Vietnam’s textile and apparel industry amid the pandemic
Video 4: How H&M’s Recycling Machines Make New Clothes From Used Apparel in Hong Kong
How are textiles and apparel “Made in Asia” changing their face? What are the driving forces of these changes?
Based on the video, why or why not do you think the “flying geese model” is still valid today?
How to understand COVID-19’s impact on Asia’s textile and apparel industry? What strategies have been adopted by garment factories in Asia to survive the pandemic? What challenges do they still face?
What is your evaluation of Asia’s competitiveness as a textile and apparel production and sourcing hub over the next five years? Why? What factors could be relevant?
Anything else you find interesting/intriguing/thought-provoking/debatable in the video? Why?
Note: Everyone is welcome to join our online discussion. For students in FASH455, please address at least two questions. Please mention the question number # (no need to repeat the question) in your comment.
Question: What does a typical day look like during your AAFA internship?
Ally: I would arrive at American Apparel and Footwear Association (AAFA)’s beautiful DC office, take the elevator up to the third floor, greet the two other interns, and make my way over to my desk. For the policy interns, our typical day consisted of working on individual projects and attending committee meetings, such as the weekly Social Responsibility Committee call with member companies, environmental and product safety meetings, trade policy meetings, and others. We also took notes on hearings and events and paid particular attention to topics related to the apparel sector. For example, I listened in and took notes on Hill hearings, workshops hosted by the World Trade Organization (WTO), and International Labour Organization (ILO) meetings. Some additional internship projects included updating country sourcing profiles for AAFA member companies to use in their factory selection process and analyzing trade data.
A very exciting and beneficial component of the AAFA internship experience was being able to attend special industry events such as the Washington International Trade Association (WITA) dinner and AAFA’s Annual Traceability and Sustainability Conference in Pittsburgh, PA. The WITA dinner is often referred to as “Trade Prom” and is packed with a ‘Who’s Who of trade policy professionals–over 500 attendees each year. Volunteering at this event with the other AAFA and WITA interns was incredible. The AAFA 2022 Traceability and Sustainability Conference in Pittsburgh, PA was another highlight of my internship experience. The conference took place at the American Eagle corporate headquarters, which was very exciting to tour. I spent three days in Pittsburgh with the AAFA team and heard presentations from top leaders in the fashion sustainability space, which was a dream! Member retailers spoke about what their companies are working on, what key challenges the industry faces, and how brands can collectively make a difference. It was a truly inspiring event and a phenomenal networking opportunity. This was an experience I will never forget!
Question: Any major projects did you work on during your internship? What did you learn from the experiences?
Ally:One of the main projects I worked on during my internship was updating AAFA’s Sourcing Profiles for their member companies. These country-specific sourcing profiles include essential information relevant to apparel companies’ sourcing decisions, such as a country’s political situation, minimum wage, membership in trade agreements, and economic outlook. Updating these sourcing profiles allowed me to understand why fashion brands and apparel retailers choose to source from particular countries over others. Having this solid background knowledge of leading apparel-sourcing destinations helps me tremendously, especially given that I am very interested in pursuing a career in sourcing. Some other projects I worked on include analyzing the latest US import patterns for travel goods and creating a “Corporate Social Responsibility Checklist” for AAFA members.
Question: What insights did you learn about the fashion apparel industry from the internship? For example, the key issues the industry cares about or the challenges it faces.
Ally: Through this highly valuable internship with AAFA, I saw the fashion industry through a unique policy and “DC” perspective. A key issue the industry cares about is sustainability. For example, fashion companies are increasingly implementing more and more environmentally and socially responsible business practices. Many leading US apparel brands shared their perspectives on building a more sustainable and transparent fashion supply chain at AAFA’s Traceability and Sustainability Conference. Fashion companies are also investing in innovative new technologies to work toward a closed-loop, circular economy.
Another challenge the fashion industry faces today is improving the supply chain’s transparency. For example, the alleged forced labor in China’s Xinjiang region is a huge concern to US apparel companies. With the recent implementation of the Uyghur Forced Labor Prevention Act (UFLPA) in June 2022, many US fashion brands and retailers are seeking advice on how to comply with this new law and minimize potential sourcing disruptions. Now, more than ever, apparel companies need to ensure they can map their supply chains all the way back to the very beginning, such as where they source their raw cotton.
There is also much interest among fashion companies in finding new sourcing destinations outside of China. For example, Sri Lanka sees this as an opportunity, as well as other developing countries such as Vietnam and Cambodia. We could see some notable shifts in US fashion companies’ sourcing patterns in the coming years.
Further, this Fall, I have been interning virtually at Worldwide Responsible Accredited Production (WRAP). WRAP is a non-profit organization headquartered in Arlington VA, with staff worldwide. WRAP certifies factories in the apparel, footwear, and sewn-products sector regarding their social responsibility performance. WRAP helps factories achieve this certification by conducting audits and working with factories directly to improve working conditions. AAFA and WRAP work closely with one another on numerous projects and industry events, and it has been wonderful to connect these two internship experiences. For example, I read and studied factory audit reports at WRAP. This allowed me to see fashion companies’ and auditors’ respective perspectives when examining a factory’s social compliance. Something that I took away from both internships is that garment factories could use auditing as an opportunity rather than a burden. By investing time and energy into improving factory working conditions and getting certified by a third-party organization, such as WRAP, a factory can attract more retailers, gain more business, and provide a better working environment for its workers.
Question: How do your learning experiences at FASH help with your internship? Any specific knowledge or skillsets do you find most critical?
Ally:My learning experiences in the UD’s FASH department were what influenced and inspired me to pursue the internship with AAFA and now with WRAP. FASH455 (Global apparel trade and sourcing), specifically, is what sparked my interest in apparel sourcing, supply chain, and trade. Before taking this class, I certainly had not thought about how free trade agreements affect the fashion industry. I found all the sourcing rules of origin such as “yarn-forward” and “fabric-forward” to be interesting and intriguing and I was eager to learn more. That is part of what led me to seek out these fashion opportunities in DC.
What I’ve learned through my time in the FASH department is that there are so many career directions a fashion merchandising degree can take you. Fashion is not all about runway shows and magazines- although those elements are very exciting. Many people often do not think about so many other aspects of the industry, like sourcing and trade. The fashion department at UD does a great job in providing students with a well-rounded education and improving students’ critical thinking skills, writing skills, data analytic skills, as well as other skills useful in preparing us for our future careers.
Being selected as a UD Summer Scholar during the Summer of 2021 was another fascinating and unique learning experience, which allowed me to begin researching an area of the fashion industry that I am most interested in–sustainability. Specifically, working with Dr. Lu, I researched US fashion retailers’ merchandising and marketing strategies for clothing made from recycled materials. I expanded the Summer Scholar’s research project into my master’s thesis which was recently published in the Journal of Fashion Design, Technology and Education. This is super exciting!
Choosing the University of Delaware and its fashion department for my education was the best choice I could have made. I have such positive memories such as my first business of fashion class with Professor Ciotti, my assortment planning and buying class with Professor Shaeffer, where we simulated working for a department store, and Dr. Cao’s sustainability and textile courses. Being Co-President of the Sustainable Fashion Club was also a highlight of my time in the FASH department. All of my coursework and experiences in the FASH department gave me the confidence needed to succeed in my internship and work experiences.
Question: What’s your plan after graduation?
Ally: I am currently nearing graduation from my Master’s program. I am on track to receive my Master’s degree in Spring 2023 (or earlier!). I am looking for full-time job opportunities in the realm of fashion sourcing, sustainability, and supply chain. I am hoping to live in either New York or DC after graduation, depending on what job opportunities become available. I am also keeping an open mind to other locations/job prospects. I am eager and excited to start my career in an industry that I am so passionate about, and I look forward to seeing where the future takes me!
The full interview, conducted by Modaes’ Editor-in-Chief, Iria P. Gestal, is available HERE (in Spanish). Below is an abridged translation.
Question: Fashion brands have reduced their exposure to China markedly in recent years. What has been the turning point?
Sheng: We could interpret fashion companies’ decisions in the context of their overall sourcing diversification strategy. Many companies want to diversify their sourcing base because of the ever-uncertain business environment, ranging from the continuation of the supply chain disruptions, and the Russia-Ukraine war, to the rising geopolitical tensions. As China is one of the largest sourcing bases for many fashion companies, reducing “China exposure” is unavoidable.
Question: Isn’t there a specific concern about sourcing from China?
Sheng: Definitely! The Uyghur Forced Labor Prevention Act (UFLPA), officially implemented in the summer of 2022, is a big deal. For example, back in 2017, around 30% of US cotton apparel came from China. However, because of the new law and concerns about the risk of forced labor, China’s market shares fell to only 10% as of August 2022. One well-known US brand selling jean products cut their sourcing from China to just 1% of the total.
Question: Is it possible that the apparel sector as a whole reaches that point?
Sheng: Whether we like it or not, it is still unlikely to get rid of China from the supply chain entirely in the short to medium terms. Notably, China continues to play a significant role as a supplier of raw textile materials, particularly for leading apparel-exporting countries in Asia like Vietnam, Bangladesh, and Cambodia. Diversifying textile raw materials sourcing will be a longer and more complicated process.
Question: Is the “China Plus One” strategy no longer enough?
Sheng: The “China Plus One” strategy does not necessarily mean companies only source from “two” countries. Instead, the phrase refers to companies’ sourcing diversification strategy, trying to avoid “putting all eggs in one basket.” However, neither is the case that fashion companies blindly source from more countries today. Notably, many companies attempt to leverage a stronger relationship with key vendors to mitigate sourcing risks and achieve more sourcing flexibility and agility. For example, fashion companies increasingly tend to work with the so-called “super vendors,” i.e., those with multiple country presence and vertical manufacturing capabilities.
Question: Some politicians have said that the war in Russia has been the “geopolitical awakening” of Europe. Has the same thing happened in fashion?
Sheng: Indeed! We say fashion is a “global sector” because companies “produce anywhere in the world and SELL anywhere in the world.” However, many fashion brands and retailers have had to leave Russia due to the war and geopolitics. The same could apply to China—for example, China’s zero-COVID policy has posed a dilemma for western fashion companies operating there—whether to stay or leave the country, which used to be regarded as one of the fastest-growing emerging consumer markets. Likewise, more and more fashion companies have chosen to develop “dual supply chains” in response to the geopolitical tensions between China and the West—“made in China for China” and “made elsewhere for the rest of the world/Western market.” However, we must admit that this is not an ideal way to optimize the global supply chain.
Question: Has the apparel sector been “naïve” until now, ignoring these risks?
Sheng: I do not think so. In fact, most fashion companies and their leaders closely watch world affairs. As I recall, some visionary companies started evaluating geopolitics’ supply chain implications last year. Indeed, a peaceful world with few trade barriers is an ideal business environment for fashion companies. Unfortunately, there are too many “black swans” to worry about these days. As another example, “friend-shoring,” meaning only trading with allies or “like-minded” countries, becomes increasingly popular today. This phenomenon is also the result of geopolitics. With the looming of a new cold war (or the winter is already here), fashion companies may need to use imagination and prepare for the “worst scenarios” to come.
Question: Is a textile and apparel supply without China a more expensive one?
Sheng: It depends on how to look at it. The most challenging part of “reducing China exposure” is the textile raw materials. But we could think outside the box. For example, my recent studies show that China is NOT the top supplier of clothing made from recycled textile materials. Instead, fashion companies are more likely to source such products locally from the US or EU, or Africa—like Jordan, Tunisia, and Morocco, because of the unique supply chain composition. In other words, sourcing more clothing made from recycled textile materials may help fashion companies achieve several long-awaited goals, such as diversifying sourcing base, expanding nearshoring, and reducing sourcing costs.
This study offers valuable input and practical policy recommendations from U.S. apparel companies’ perspectives regarding expanding U.S. apparel sourcing from CAFTA-DR members. For the study, we consulted executives at 27 leading U.S.-based apparel companies (note: 85% report having annual revenues exceeding $500 million; over 95% have been sourcing apparel from the CAFTA-DR region for more than ten years).
The results confirm that expanding U.S. apparel sourcing from CAFTA-DR could be the best chance to effectively create more jobs in Central America and solve the root causes of migration there. To achieve this goal, we need to focus on four areas:
First, improve CAFTA-DR’s apparel production capacity and diversify its product offers.
As many as 92 percent of respondents report currently sourcing apparel from CAFTA-DR members.
Highly consistent with the macro trade statistics, the vast majority of respondents (i.e., 60 percent) place less than 10 percent of their company’s total sourcing orders with CAFTA-DR members.
Whereas respondents rate CAFTA-DR members overall competitive in terms of “speed to market,” they express concerns about CAFTA-DR countries’ limited production capacity in making various products. As a result, U.S. companies primarily source basic fashion items like T-shirts and sweaters from the region. These products also face growing price competition with many alternative sourcing destinations.
Improving CAFTA-DR’s production capacity and diversifying product offers would encourage U.S. apparel companies to move more sourcing orders from Asia to the region permanently.
Second, practically solve the bottleneck of limited textile raw material supply within CAFTA-DR and do NOT worsen the problem.
The limited textile raw material supply within CAFTA-DR is a primary contributing factor behind the region’s stagnated apparel export volume and a lack of product diversification.
Notably, respondents say for their apparel imports from CAFTA-DR members, only 42.9% of fabrics, 40.0% of sewing threads, and 23.8% of accessories (such as trims and labels) can be sourced from within the CAFTA-DR area (including the United States). CAFTA-DR’s textile raw material supply problem could worsen as the U.S. textile industry switches to making more technical textiles and less so for apparel-related fabrics and textile accessories.
Maintaining the status quo or simply calling for making the CAFTA-DR apparel supply chain more “vertical” will NOT automatically increase the sourcing volume. Instead, allowing CAFTA-DR garment producers to access needed textile raw materials at a competitive price will be essential to encourage more U.S. apparel sourcing from the region.
Third, encourage more utilization of CAFTA-DR for apparel sourcing.
CAFTA-DR plays a critical role in promoting U.S. apparel sourcing from the region. Nearly 90 percent of respondents say the duty-free benefits provided by CAFTA-DR encourage their apparel sourcing from the region.
The limited textile supply within CAFTA-DR, especially fabrics and textile accessories, often makes it impossible for U.S. companies to source apparel from the region while fully complying with the strict “yarn-forward” rules of origin. As a result, consistent with the official trade statistics, around 31 percent of respondents say they sometimes have to forgo the CAFTA-DR duty-free benefits when sourcing from the region.
Respondents say the exceptions to the “yarn-forward” rules of origin, including “short supply,” “cumulation,” and “cut and assemble” rules, provide necessary flexibilities supporting respondents’ apparel sourcing from CAFTA-DR members. Around one-third of respondents utilize at least one of these three exceptions when sourcing from CAFTA-DR members when the products are short of meeting the strict “yarn-forward” rules of origin. It is misleading to call these exceptions “loopholes.”
Fourth, leverage expanded apparel sourcing to incentivize more investments in the CAFTA-DR region’s production and infrastructure.
U.S. apparel companies are interested in investing in CAFTA-DR to strengthen the region’s sourcing and production capacity. Nearly half of respondents explicitly say they will make investments, including “building factories or expanding sourcing or manufacturing capacities” in the CAFTA-DR region through 2026.
CAFTA-DR will be better positioned to attract long-term investments in its textile and apparel industry with a sound and expanded apparel sourcing volume.
U.S. fashion companies report significant challenges coming from the macro-economy in 2022, particularly inflation and rising cost pressures. However, most respondents still feel optimistic about the next five years.
Respondents rated “increasing production or sourcing costs” and “inflation and outlook of the U.S. economy” as their 1st and 3rd top business challenges in 2022.
As a new record, 100 percent of respondents expect their sourcing costs to increase in 2022, including nearly 40 percent expecting a substantial cost increase from a year ago. Further, almost everything has become more expensive this year, from textile raw materials, shipping, and labor to the costs associated with compliance with trade regulations.
Over 90 percent of respondents expect their sourcing value or volume to grow in 2022, but more modest than last year.
Despite the short-term challenges, most respondents (77 percent) feel optimistic or somewhat optimistic about the next five years. Reflecting companies’ confidence in their businesses, nearly ALL respondents (97 percent) plan to increase hiring over the next five years.
U.S. fashion companies adopt a more diverse sourcing base in response to supply chain disruptions and the need to mitigate growing sourcing risks.
Asia remains the dominant sourcing base for U.S. fashion companies—eight of the top ten most utilized sourcing destinations are Asia-based, led by China, Vietnam, Bangladesh, and India.
More than half of respondents (53 percent) report sourcing apparel from over ten countries in 2022, compared with only 37 percent in 2021.
Reducing “China exposure” is one crucial driver of U.S. fashion companies’ sourcing diversification strategy. One-third of respondents report sourcing less than 10% of their apparel products from China this year. In addition, a new record of 50 percent of respondents sources MORE from Vietnam than China in 2022.
Nearly 40 percent of respondents plan to “source from more countries and work with more suppliers” over the next two years, up from only 17 percent last year.
Managing the risk of forced labor in the supply chain is a top priority for U.S. fashion companies in 2022, especially with the new implementation of the Uyghur Forced Labor Prevention Act (UFLPA).
Over 95 percent of respondents expect UFLPA’s implementation to affect their company’s sourcing. Notably, more than 85 percent of respondents plan to cut their cotton-apparel imports from China, and another 45 percent to further reduce non-cotton apparel imports from the country.
Most respondents (over 92 percent) do NOT plan to reduce apparel sourcing from Asian countries other than China. However, nearly 60 percent of respondents also would “explore new sourcing destinations outside Asia” in response to UFLPA.
Mapping and understanding the supply chain is a critical strategy adopted by U.S. fashion companies to address the forced labor risks in the supply chain. Almost all respondents currently track Tier 1 and 2 suppliers. With the help of new traceability technologies, 53 percent of respondents have started tracking Tier 3 suppliers this year (i.e., those manufacturing yarn, threads, and trimmings), a substantial increase from 25-36 percent in the past.
There is considerable new excitement about increasing apparel sourcing from members of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). Respondents also call for more textile raw sourcing flexibility to encourage apparel sourcing from the CAFTA-DR region.
CAFTA-DR plays a more significant role as a sourcing base. About 20 percent of respondents place more than 10% of their sourcing orders from the region, doubling from 2021.
Over the next two years, more than 60 percent of respondents plan to increase apparel sourcing from CAFTA-DR members as part of their sourcing diversification strategy.
CAFTA-DR is critical in promoting U.S. apparel sourcing from the region. Around 80 percent of respondents took advantage of the agreement’s duty-free benefits when sourcing apparel from the region this year, up from 50—60 percent in the past.
Respondents say the exceptions to the “yarn-forward” rules of origin, such as the “short supply” and “cumulation” mechanisms, provide essential flexibility that encourages more apparel sourcing from CAFTA-DR members.
Respondents say improving textile raw material supply is critical to encouraging more U.S. apparel sourcing from CAFTA-DR members. Particularly, “allowing more flexibility in souring fabrics from outside CAFTA-DR” and “improving yarn production capacity and variety within CAFTA-DR” are the top two priorities.
U.S. fashion companies strongly support another ten-year renewal of the African Growth and Opportunity Act (AGOA). Meanwhile, Ethiopia’s loss of AGOA eligibility discourages U.S. apparel sourcing from the ENTIRE AGOA region.
As much as 75 percent of respondents say another ten-year AGOA renewal will encourage more apparel sourcing from the region and making investment commitments.
However, despite the tariff benefits and the liberal rules of origin, respondents express explicit concerns about the region’s lack of competitiveness in speed to market, political instability, and having an integrated regional supply chain.
Ethiopia’s loss of AGOA benefits had a notable negative impact on sourcing from the country AND the entire AGOA region. Notably, no respondent plans to move sourcing orders from Ethiopia to other AGOA beneficiaries.
The latest trade data shows that in the first four months of 2022, US apparel imports increased by 40.6% in value and 25.9% in quantity from a year ago. However, the seemingly robust import expansion is shadowed by the rising market uncertainties.
Uncertainty 1: US economy. As the US economic growth slows down, consumers have turned more cautious about discretionary spending on clothing to prioritize other necessities. Notably, in the first quarter of 2022, clothing accounted for only 3.9% of US consumers’ total expenditure, down from 4.3% in 2019 before the pandemic. Likewise, according to the Conference Board, US consumers’ confidence index (CCI) dropped to 106.4 (1985=100) in May 2022 from 113.8 in January 2022, confirming consumers’ increasing anxiety about their household’s financial outlook.
Removing the seasonal factor, US apparel imports in April 2022 went up 2.8% in quantity and 3.0% in value from March 2022, much lower than 9.3% and 11.9% a month ago (i.e., March 2022 vs. February 2022). The notable slowed import growth reflects the negative impact of inflation on US consumers’ clothing spending. According to the Census, the value of US clothing store sales marginally went up by 0.8% in April 2022 from a month ago, also the lowest so far in 2022.
Uncertainty 2: Worldwide inflation. Data from the Bureau of Economic Analysis shows that the price index of US apparel imports reached 103.1 in May 2022 (May 2020=100), up from 100.3 one year ago (i.e., a 2.8% price increase). At the product level (i.e., 6-digit HS Code, HS Chapters 61-62), over 60% of US apparel imports from leading sources such as China, Vietnam, Bangladesh, and CAFTA-DR experienced a price increase in the first quarter of 2022 compared with a year ago. The price surge of nearly 40% of products exceeded 10 percent. As almost everything, from shipping, textile raw materials, and labor to energy, continues to soar, the rising sourcing costs facing US fashion companies are not likely to ease anytime soon.
The deteriorating inflation also heats up the debate on whether to continue the US Section 301 tariff action against imports from China. Since implementing the punitive tariffs, US fashion companies have to pay around $1 billion in extra import duties every year, resulting in the average applied import tariff rate for dutiable apparel items reaching almost 19%. Although some e-commerce businesses took advantage of the so-called “de minimis” rule (i.e., imports valued at $800 or less by one person on a day are not required to pay tariffs), over 99.8% of dutiable US apparel imports still pay duties.
Uncertainty 3: “Made in China.” US apparel imports from China in April 2022 significantly dropped by 26.7% in quantity and 24.6% in value from March 2022 (seasonally adjusted). China’s market shares also fell to a new record low of 26.3% in quantity and 16.8% in value in April 2022. The zero-COVID policy and new lockdown undoubtedly was a critical factor contributing to the decline. Fashion companies’ concerns about the trajectory of the US-China relations and the upcoming implementation of the new Uyghur Forced Labor Prevention Act (UFLPA) are also relevant factors. For example, only 10.5% of US cotton apparel imports came from China in April 2022, a further decline from about 15% at the beginning of the year. Given the expected challenges of meeting the rebuttable presumption requirements in UFLPA and the high compliance costs, it is not unlikely that US fashion companies may continue to reduce their China exposure.
As US fashion companies source less from China, they primarily move their sourcing orders to China’s competitors in Asia. Measured in value, about 74.8% of US apparel imports came from Asia so far in 2022 (January-April), up from 72.8% a year ago. In comparison, there is no clear sign that more sourcing orders have been permanently moved to the Western Hemisphere. For example, in April 2022, CAFTA-DR members accounted for 9.3% of US apparel imports in quantity (was 10.8% in April 2021) and 10.2% in value (was 11.4% in April 2021).
Uncertainty 4: Shipping delays. Data suggests we are not out of the woods yet for shipping delays and supply chain disruptions. For example, as Table 2 shows, the seasonable pattern of US apparel imports in March 2022 is similar to January before the pandemic (2017-2020). In other words, many US fashion companies still face about 1.5-2 months of shipping delays. Additionally, several of China’s major ports were under strict COVID lockdowns starting in late March, including Shanghai, the world’s largest. Thus, the worsened supply chain disruptions could negatively affect the US apparel import volumes in the coming months.
Kekeli Ahiableis a private sector development Advisor with the Tony Blair Institute’s Industrialisation Practice. Working with industry leaders over the past 10 years, she has facilitated business and job creation opportunities in the trade infrastructure, supply chain, and manufacturing sectors across four continents.
In her current technical support role at TBI, she manages the Institute’s regional textile and apparel (T&A) project which aims to support the development of a best in class, sustainable, and circular cotton-to-apparel manufacturing hub across five West African countries.
She holds a Master of Public Policy (MPP) from the University of Oxford, with a focus on trade policy and economic development.
Sheng: Thank you so much for speaking with us, Kekeli. First of all, would you please tell us a little about the Tony Blair Institute for Global Change (TBI) and your involvement with the textile and apparel (T&A) industry in West Africa?
Kekeli: Sure! The Tony Blair Institute for Global Change (TBI) is a not-for-profit organization that offers strategic advice and practical support to political leaders and governments so they can deliver reforms that raise standards and transform lives. Our work includes advising on a range of sectors including industrialization, energy, and technology. We currently work in 17 African countries.
Since 2019, we have been working with several governments in West Africa – specifically Cote d’Ivoire, Ghana, and Togo – to support the development of a best-in-class and sustainable textile and apparel sector that meets the needs of British, European, and North American retailers and consumers.
Our role has centered around supporting our partner governments to:
prepare for doing business; work with them to develop relevant sector strategy & review policy, etc.
design attractive investment incentives
attract interest in the region from relevant fashion trade actors
For instance, we facilitated a week-long investor roadshow to the three countries in 2019, with participation from three of the largest global apparel brands together with their mills and manufacturers (with a combined turnover of over US$ 70 billion). This was co-sponsored under the banner of Amcham Hongkong.
Covid-19 naturally impacted our physical scoping events and so we moved the conversations to virtual roundtable forums. Last December, eight of the UK’s biggest retailers, plus several European retailers, attended a session we organized, led by Rt Hon. Tony Blair. Representatives from the three main governments and other non-governmental groups involved in developing textiles and apparel in the region were also present to engage in discussion with the investors. We have also worked with the American Apparel and Footwear Association (AAFA) and the United States Fashion Industry Association (USFIA) to update US brands and retailers on West Africa’s potential as a nearshore sourcing destination for the North American market.
In summary, TBI is very much to help create top-of-mind awareness about West Africa’s suitability to grow a viable T&A sourcing hub and ultimately facilitate investment into the priority countries.
Sheng: What is the current state of the textile and apparel (T&A) industry in West Africa? What are the key development trends? How about the impact of COVID?
Kekeli: West Africa’s T&A market is rapidly expanding. Although considered nascent when compared to Asia’s more developed markets, its many greenfield opportunities also mean there are fewer legacy challenges to contend with. This offers a ripe opportunity for investors and manufacturers to start from an almost clean slate, which is crucial as the apparel industry makes strides toward a more environmentally sustainable footprint.
The region also has numerous natural and competitive advantages for textiles and apparel manufacturing and has seen increased interest from global actors, brands, manufacturers, infrastructure developers, development finance institutions, etc., over the last few years.
Key development trends
Recognizing shifting patterns in global T&A trade and the immense value in domestic processing of abundantly available raw materials, West African governments are demonstrating an ambition to harness their competitive advantages and expand their T&A sectors.
The governments of Cote d’Ivoire, Ghana, and Togo especially, are walking the talk. Togo’s agile government closed a ground-breaking €200 million investment deal with Arise IIP, in August 2020. The deal included building a 400-hectare eco-industrial park dedicated to textiles and apparel manufacturing. Apart from the park, the Arise group is investing into vertically integrated (fiber to fashion) knit apparel units which will start commercial operations in mid-2023.
Ghana has the most advanced industrial base of the three highlighted countries and hosts DTRT Apparel, which has been running its operation in Ghana for the past 7 years and is currently the largest apparel exporter from West Africa. As a further boost towards vertical integration, in March, they partnered on a co-creation deal with the International Finance Corporation (IFC) to jointly develop setting up a synthetic fabric mill in the region. Meanwhile, Northshore Apparel, another garment actor, recently began constructing a 10,000-worker garment factory in Ghana. To attract more foreign direct investment (FDI), the government is drafting a new T&A sector policy and incentive framework under the UK’s Foreign, Commonwealth & Development Office (FCDO) funded £16 million-pound JET Programme.
In a similar vein, Cote d’Ivoire, Africa’s second-largest cotton seed grower, is carrying out sector reforms and strategy development aimed at facilitating the domestic transformation of at least 50% of their annual cotton output.
Altogether, it is an exciting time to be developing the T&A sector in West Africa. We are excited to contribute towards this vision to create a best in class, vertical and sustainable manufacturing hub in the region, and help to create 500k direct and indirect jobs.
Impact of COVID
Most existing garment manufacturers pivoted to producing PPE for both domestic and international markets. For instance, DTRT is making this a permanent feature of their production, although orders have resumed from their traditional apparel buyers.
We have also witnessed a stronger resolve from governments to support their domestic T&A manufacturing sectors’ growth. The Togo deal, for instance, happened at the height of covid lockdowns. Some countries also offered waivers on value-add tax for their textile and apparel manufacturers and used the time to restructure their labor codes to meet international standards.
Sheng: How to understand West African countries’ competitiveness as an apparel-sourcing base for western fashion companies?
Kekeli: First, there is an immense opportunity to vertically integrate the T&A manufacturing value chain. The region produces around 1.5 million metric tons of cotton annually, which represents about 60% of Africa’s total output and 15% of global exports. The vast majority of this is exported unprocessed. Farming methods feature rain-fed irrigation with harvest done by handpicking, leading to 80% being labeled as preferred, sustainable cotton under Better Cotton Initiative (BCI) and Cotton made in Africa (CmiA) standards.
Secondly, its geographical location means it offers a natural nearshore market to Europe and US markets – literally less than two weeks away from Europe by sea.
Other benefits include an abundant trainable labor force, cost savings to manufacturers under favorable trade instruments like African Growth and Opportunity Act (AGOA), EU’s Economic Partnership Agreement (EPA)/Everything But Arms (EBA) program, etc., as well as consolidated political stability in all three countries. Moreover, there is strong potential for developing a circular textile economy facilitated by green manufacturing and initiatives like our West Africa Regeneration Zone (WARZ) initiative, on which TBI is collaborating with key brands and figures from the industry.
Apart from the main retail regions, there is a growing online retail market in Africa – estimated to increase to $75 billion by 2025 with projected $3.4 trillion aggregate GDP under African Continental Free Trade Area (AfCFTA). As we have seen with recent moves to the continent by Twitter, Google, and others, there is large scope for fashion retailers to use manufacturing in West Africa as a launchpad into this growing continental market, with free movement of goods and services under AfCFTA.
These are attractive propositions for buyers and manufacturers looking to diversify their supply chains and leave a greener carbon footprint in the process.
Sheng: It is of concern that used clothing exports from developed countries to Africa hurt the local textile and apparel industry. What is your assessment?
Kekeli: That is correct. The reality is that there is strong consumer demand for second-hand clothing, due to the cheap prices and readily available clothing for re-use. This is the main reason why the supply chains are routing the bales to other markets, including Africa. Most consumers in Africa rely heavily on the second-hand clothing markets. In this configuration, it is difficult for local players to compete and attract the same consumers’ appetites.
Moreover, this is quite complex, especially in an era of global value chains and [free] trade pacts that enjoin countries to offer some levels of reciprocity in their trade relations. Governments wishing to partake in international trade cannot simply ban imports of goods to protect their local industries. It is, therefore, crucial to explore practical win-win solutions.
For instance, there is a fast-growing global market for fabrics made from recycled materials as brands and manufacturers are taking steps to make their footprint greener. Receiver countries of second clothes could develop other business opportunities from the materials that arrive, with funding from relevant partners. Take Ghana as an example – its Kantamanto market, arguably the world’s largest reuse, repair, and upcycle market, process hundreds of tons of clothing each week. A large percentage of what comes to the market however ends up as landfilled waste due to various reasons.
One remedy is recycling, which ploughs back the many unsold and non-reusable clothes into the textile manufacturing economy. This not only reduces the need for virgin fibers but with the scale envisioned for the West Africa T&A manufacturing project, it increases the fabric feedstock available for domestic Cut, Make, Trim (CMT) manufacturers thus supporting to differentiate the region as a destination for circular apparel sourcing. Managed properly, we envision this would have positive spillover effects on the domestic market. At TBI, we published a piece on tackling Ghana’s textile waste which can be read here for a deeper dive into the subject.
Sheng: How does the textile and apparel industry in West Africa embrace sustainability?
Kekeli: The strongest aspect is from an environmental perspective. With rain-fed irrigation, around 80% of the region’s cotton is labeled as preferred cotton. Vertically integrating the cotton value chain by processing within one geographical area supports a lower carbon footprint of each final product.
West Africa’s geographical proximity to main buyer markets also increases its environmental sustainability credentials as a nearshore market.
Moreover, circularity is part of the culture in this part of the world – people reuse and pass on clothes to other family relations after use, with very little going to waste. We see an opportunity to scale this with the West Africa regeneration (WARZ) initiative. The WARZ initiative aims to support the development of a sustainable and circular textile and apparel supply base in West Africa where post-consumer textile waste is recycled at scale and becomes feedstock for making new apparel. This would be underpinned by disruptive recycling and traceability technology.
In our role as non-vested convenors and facilitators, we have convened a consortium of international and domestic stakeholders to develop a pilot project in Ghana, which is the world’s number two importer of second-hand clothing. Preliminary scoping puts the entire project size at over US$500 million with the potential to generate over 60K jobs along the value chain over the next 5-10 years. The following image depicts the initial concept for the regeneration zone project:
Sheng: How important are trade preference programs like the African Growth and Opportunity Act (AGOA) to the development of the textile and apparel industry in West Africa? Do you think AGOA should be extended after 2025? Should the agreement keep the liberal “third-country fabric” rules of origin? Why or why not?
Kekeli: Trade preference programs are extremely important to facilitate the growth of Africa’s manufacturing and export capacity. As fundamentals like infrastructure tend to be less developed on the continent, preferential regimes like AGOA serve as a key enabler for manufacturing FDI. The T&A industries in countries like Kenya, Lesotho, and Madagascar have grown tremendously in the past few years thanks to AGOA’s tariff-free concessions. West Africa’s T&A industry is now in the beginning stages of development and needs an extension of AGOA to grow.
I believe in the short-medium term, maintaining third-country fabric rules is also crucial (note: Third-country fabric rules allow for apparel made with fabrics sourced from outside the AfCFTA/Sub-Saharan Africa region to qualify for duty-free access). The simple reason is that West Africa’s cotton value chain needs support to develop. While countries have ambitions for vertical integration by processing cotton within the region, these backward linkages will take time to develop.
A phase-out period may be negotiated to further incentivize accelerating the move towards domestic production of fibers that qualify to be used by CMT manufacturers in the [sub]-region.
Sheng: What does the African Continental Free Trade Area (AfCFTA) mean for the textile and apparel industry in West Africa?
Kekeli: The AfCFTA pact aims to form the world’s largest free trade area by connecting almost 1.3bn people across 54 African countries. The goal is to create a single market for goods and services to deepen the economic integration of Africa, with a combined GDP of around $3.4 trillion.
Historically, the most developed world regions have been those that have figured out and developed strong regional value chains. The EU, which is the world’s largest regional trade agreement (RTA) by value has over 64% of trade taking place within the regional block. Similar cases pertain in the US-Mexico-Canada (USMCA) and the Association of Southeast Asian Nations (ASEAN) free trade areas.
Intra-Africa trade on the contrary is currently under 20%, with strong potential for growth. Trade figures show that when African countries trade with each other, it is mostly intermediate or finished goods, which naturally have more value. The goal is to encourage more of this.
Textiles and apparel development in West Africa has strong potential to become a flagship example of what AfCFTA implementation could practically look like. In the next couple of years, I envision fabrics from Cote d’Ivoire, Benin, being exported to Ghana duty-free to feed apparel factories, designers from Cote d’Ivoire offering their expertise across the sub-region with no restrictions on their movement, textiles from Ghana being traded in Nigeria, etc. The possibilities are truly endless.
Textile and apparel manufacturing in the U.S. has significantly shrunk in size over the past decades due to multiple factors ranging from automation, import competition to the shifting U.S. comparative advantages for related products. However, U.S. textile manufacturing is gradually coming back. The output of U.S. textile manufacturing (measured by value added) totaled $16.59 billion in 2021, up 23.8% from 2009. In comparison, U.S. apparel manufacturing dropped to $9.5 billion in 2019, 4.4% lower than ten years ago (Bureau of Economic Analysis, 2021).
Meanwhile, like many other sectors, U.S. textile and apparel production was hit hard by COVID-19 in the first half of 2020 but started to recover in the 3rd quarter. Notably, as of December 2021, U.S. textile production had returned to its pre-COVID level.
On the other hand, as the U.S. economy is turning more mature and sophisticated, the share of U.S. textile and apparel manufacturing in the U.S. Gross Domestic Product (GDP) dropped to only 0.12% in 2020 from 0.57% in 1998 (Bureau of Economic Analysis, 2021).
The U.S. textile and apparel manufacturing is changing in nature. For example, textile products had accounted for over 66% of the total output of the U.S. textile and apparel industry as of 2019, up from only 58% in 1998 (Bureau of Economic Analysis, 2020). Textiles and apparel “Made in the USA” are growing particularly fast in some product categories that are high-tech driven, such as medical textiles, protective clothing, specialty and industrial fabrics, and non-woven. These products are also becoming the new growth engine of U.S. textile exports. Notably, “special fabrics and yarns” had accounted for more than 34% of U.S. textile exports in 2019, up from only 20% in 2010 (Data source: UNComtrade, 2021).
Compatible with the production patterns, employment in the U.S. textile industry (NAICS 313 and 314) and apparel industry (NAICS 315) fell to the bottom in April-May 2020 due to COVID-19 but started to recover steadily since June 2020. From January 2021 to December 2021, the total employment in the two sectors increased by 4.5% and 4.2%, respectively (Seasonally adjusted). However, the employment level remains much lower than the pre-COVID level (benchmark: December 2019).
To be noted, as production turns more automated and thanks to improved productivity (i.e., the value of output per worker), U.S. textile and apparel factories have been hiring fewer workers even before the pandemic. The downward trend in employment is not changing for the U.S. textile and apparel manufacturing sector. Related, how to attract the new generation of workforce to the factory floor remains a crucial challenge facing the future of textile and apparel “Made in the USA.”
It is not rare to find clothing labeled “made in the USA with imported fabric” or “made in the USA with imported material” in the stores. Statistical analysis shows a strong correlation between the value of U.S. apparel output and U.S. yarn and fabric imports from 1998 to 2019.
Like many other developed economies whose textile and apparel industries had reached the stage of post-maturity, the United States today is a net textile exporter and net apparel importer. COVID-19 has affected U.S. textile and apparel trade in several ways:
Trade volume fell and yet fully recovered: Both affected by the shrinkage of import demand and supply chain disruptions, the value of U.S. textile and apparel imports dropped by as much as 19.3% in 2020 from a year ago, particularly apparel items (down 23.5%). Likewise, the value of U.S. textile and apparel exports in 2020 decreased by 15.6%, including an unprecedented 26% decrease in yarn exports. Further, thanks to consumers’ robust demand, the value of US apparel imports enjoyed a remarkable 27.4% growth in 2021 from a year ago and but was still 2.5% short of the level in 2019.
Trade balance shifted: Before the pandemic, U.S. was a net exporter of fabrics. However, as the import demand for non-woven fabrics (for making PPE purposes) surged during the pandemic, U.S. ran a trade deficit of $502 million for fabrics in 2020; the trade deficit expanded to $975 million in 2021. Meanwhile, as retail sales slowed and imports dropped during the pandemic, the U.S. trade deficit in apparel shrank by 19% in 2020 compared with 2019. However, the shrinkage of the trade deficit did not necessarily boost clothing “Made in the USA” in 2020, reminding us that the trade balance often is not an adequate indicator to measure the economic impact of trade.
No change in export market: More than 70% of U.S. textile and apparel export went to the Western Hemisphere in 2021, a pattern that has stayed stable over the past decades (OTEXA, 2022). More can be done to strengthen the Western Hemisphere supply chain and textile and apparel production in the region by leveraging regional trade agreements like CAFTA-DR and USMCA.
Event summary by Mariel Abano (FASH455 student, Spring 2022)
COVID-19 and other external shocks such as the Ukraine-Russia war shifted the fashion supply chain from its conventional low-cost model. In response to the changes, brands and companies focus on flexibility, strengthening their relationships with suppliers, and sustainability.
Regarding the pandemic’s impacts on the apparel supply chain, fashion brands need to be more future-oriented to better prepare for unexpected market shocks that may come up in the fluctuating world. Flexibility within their merchandising teams allowed Neiman Marcus to pivot during the pandemic and market differently within the context of the pandemic. The company explored new ways to connect with its consumers via digital platforms as many physical stores closed. However, fashion companies need to be flexible enough to respond to the increasing demand from its growing e-commerce platform. This is not always easy to happen.
Likewise, Reformation tries its best to predict demand, build supply chain capacity, and manage lead time during COVID-19. Their manufacturing chains within the U.S. and vertical integration helped them respond quickly to supply chain disruptions. As a result, the company pivoted quickly to athleisure even though its brand is typically known for its event-wear dresses.
Meanwhile, when evaluating their supply chain, Amanda Martin explains that Neiman Marcusprioritizes labor, speed, and cost. With this, there is a balance between investment of capital and resources and mitigating costs like surging fuel prices.
The relationship with vendors also matters during the pandemic. For example, Neiman Marcus’s relationships with its vendors built over the years allowed the company to move more quickly from ocean to air shipping during the pandemic. In the discussion, Amanda Martin explained why the relationship between retailers/brands and manufacturers needs to help both sides grow and benefit. Likewise, Reformation also focuses on people and their relationships with their suppliers during the pandemic. Kathleen Talbot emphasizes that brand-supplier relationships are evolving. Fostering two-way conversations is key to moving away from the previous model that prioritized the needs and wants of the brand over the manufacturer.
Sustainability is NOT ignored during the pandemic. For example, fashion companies increasingly use technology and process management to take accountability for supply chains and improve traceability. In terms of environmental impact, there are more applications within sourcing emphasizing recycled and renewable materials. For example, Reformation recently launched a new circularity initiative that focuses on extending a product’s lifetime and then recycling that back into the system. When creating new styles, the company started from sustainable fibers. Further, they hope to shift transportation from air to other means to minimize their carbon footprint.