USA – Page 8 – FASH455 Global Apparel & Textile Trade and Sourcing

Why does the US Textile Industry Want Yarn-forward Rule of Origin (RoO) in TPP?

My personal understanding: the US textile industry insists yarn-forward RoO in TPP is not because they expect a substantial increase of textile exports to Vietnam as the case of NAFTA and CAFTA which help capture the export markets in Mexico and Central America. But rather it is because:

1) Without yarn-forward, situation will get even worse. Particularly, a less restrictive RoO will make Vietnam’s apparel exports which contain textiles made in China, Taiwan or South Korea qualified for duty free access to the US market. Definitely this will be a more imminent and bigger threat to the US textile industry than simply facing competition from Vietnam’s apparel which contains Japanese made textiles. And still many US textile companies don’t treat the Japanese textile industry very seriously, although I think they should. Remember, Japan currently is the fourth largest textile supplier to Vietnam and the NO.1 textile supplier to China.

2) With yarn-forward RoO in place, at least US textile companies can invest in Vietnam (remember, globalization is about movement of capital as well. Many apparel companies in Mexico and Central America actually are invested by US companies). Without yarn-forward RoO however, Vietnam can simply rely on imported textiles as the case mentioned in (1) and there will be no incentive for US textile companies to move factories to Vietnam (meaning, capital holders will lose).

So overall yarn-forward RoO may win a few more years for the US textile industry. But in the long run, it is my view that the US textile production and its exports to the Western Hemisphere countries may still inevitably decline (especially those output to be used for apparel assembly purposes) after the implementation of TPP. In the 21st century, the nature of competition is supply chain v.s. supply chain.

The future of the US textile industry is those high-end markets, particularly technical & industrial textiles.

Sheng Lu

Additional Reading: The potential impact of TPP on the US textile industry

Textile and Apparel Sector in the TPP Negotiation: An Update

USTR objectives
Officially, USTR has announced the following objectives in the TPP for textile and apparel:

Elimination of tariffs on textile and apparel exports to TPP countries;
A “yarn forward” rule of origin, which requires that textile and apparel products be made using U.S. or other TPP country yarns and fabrics to qualify for the benefits of the agreement, so as to ensure that non-qualifying textiles and apparel from non-TPP countries do not enjoy the benefits reserved for TPP countries;
A carefully crafted “short supply” list, which would allow fabrics, yarns, and fibers that are not commercially available in the United States or other TPP countries to be sourced from non-TPP countries and used in the production of apparel in the TPP region without losing duty preference;
Strict enforcement provisions and customs cooperation commitments that will provide for verification of claims of origin or preferential treatment, and denial of preferential treatment or entry for suspect goods if claims cannot be verified; and
A textile specific safeguard mechanism that will allow the United States and other TPP countries to re-impose tariffs on certain goods if a surge in imports causes or threatens to cause serious damage to domestic producers.

X-basket
According to the National Council of Textile Organizations, with regard to the market access offer to Vietnam, textile and apparel products are categories into different groups based on their “sensitivity” to the domestic industry producing the like products. Among the three major categories, the so called “X-basket” will include textile and apparel items that are deemed most sensitive to the United States. Specific items to be included in the X-basket however are unclear and details of the phrase-out formula are still under discussion. It is said that items in the “X-basket” may be subject to an initial tariff cut ranging from 35 to 50 percent.

Vietnam’s top apparel exports to the United States are basic apparel items like shirts, sweaters and pants. Many of them are the same types of items that were subject to the U.S. safeguard measures against China back in 2005. The U.S. textile industry hopes that the longer phrase-out period for items in the “X-basket” would provide needed time for the industry to adjust. However, for the Vietnam side, if duties on most of its apparel exports to the United States stay in place after the implementation of the TPP, the value of participating in the agreement would substantially be compromised.

Short-supply list
The short-supply list is a roster of fabrics and other textile inputs that are determined to not be readily available in the TPP region in commercial quantities on a timely basis and can therefore be imported from third countries. Items on the short-supply list would be exempt from the general “yarn-forward” rule of origin that the U.S. has proposed in the textiles and apparel talks. USTR is pushing for a short-supply list that would have permanent items as well as temporary items that will be removed after three years. Previous U.S. free trade agreements, including CAFTA, have included a short supply process to add additional products to the list once the agreement enters into force. But the U.S. has rejected the notion that the short-supply list could be modified after the TPP enters into force.

Mexico has consistently sought to limit the scope of the short-supply list, arguing that it actually makes some of the products that the U.S. had originally proposed for inclusion in the short-supply list. Mexico was also pushing for roughly 70 items proposed for the short supply to be included only on a temporary basis, rather than a permanent one.

Other TPP members’ positions
According to the Inside US Trade, Malaysia’s textile and apparel industry is supporting U.S. calls for a “yarn-forward” rule of origin in TPP, but is also pushing for a range of exceptions such as cut-and-sew allowances and a short supply list that would be periodically reviewed. Among the items the Malaysian industry would like to see on the short supply list are shirting fabrics such as woven cotton fabric that weighs not more than 250 grams because this type of fabric is said not made in the U.S. nor Malaysia.

2014 USFIA Benchmarking Study Released

Key Findings

China will remain the dominant supplier, though Vietnam and Asia as a whole are seen as having more growth potential.
Companies aren’t leaving Bangladesh, and are committed to compliance.
Companies continue to look for opportunities closer to home, including the United States, as they diversify their sourcing.
Companies are diversifying their sourcing and expect to continue to do so. However, current FTAs and preference programs remain under-utilized or don’t represent a major component of respondents’ sourcing.
Respondents welcome the passage or renewal of all future trade agreements that intend to remove trade barriers and facilitate international trade in the industry.

About the Benchmarking Study
The 2014 USFIA benchmarking study is conducted based on a survey of 29 executives at 29 leading U.S. fashion companies from March to April 2014. The study incorporates a balanced mix of respondents representing various business types in the U.S. fashion industry, including retailers, importers, wholesalers, and manufacturers. The survey asked respondents about the business outlook, sourcing practices, utilization of Free Trade Agreements and preference programs, and views on trade policy.

The full study can be downloaded from HERE.

EU Commission Releases Negotiating Positions for Textile and Apparel in T-TIP

The EU Commission released its negotiating positions for the textile and apparel sector in the Trans-Atlantic Trade and Investment Partnership (T-TIP) on May 14, 2014. The position paper outlines a few areas that the EU Commission says it would include in the T-TIP negotiation with the United States:

Labeling requirements for textile & apparel and footwear products
convergence and/or harmonization of approaches to guarantee product safety and consumer protection
standards approximation

Earlier this year, USTR also released its negotiating objectives for the T-TIP. Specifically for the textile and apparel sector, USTR will “seek to obtain fully reciprocal access to the EU market for U.S. textile and apparel products, supported by effective and efficient customs cooperation and other rules to facilitate U.S.-EU trade in textiles and apparel.” USTR holds the positive view that “eliminating the remaining duties on our exports will create new opportunities for integration into European supply chains and to sell high-quality “made-in-USA” garments to European consumers. Enhanced U.S.-EU customs cooperation will also help ensure that non-qualifying textiles and apparel from third countries are not being imported into the United States under T-TIP.

However, T-TIP negotiation somehow is under the shadow of the Trans-Pacific Partnership (TPP), another free trade agreement currently under negotiation among the United States and other eleven countries in the Asia Pacific region. As reported by the Inside US Trade, the National Council of Textile Organizations (NCTO) holds the view that TTP and T-TIP negotiation should be dealt with “sequentially”. NCTO would like to avoid a situation where the US makes a concession on textiles and apparel to the EU in T-TIP that goes beyond the US offer to Vietnam in TPP, causing Vietnam to demand the same concession in the TPP talks.

One of the most difficult issues on textiles and apparel in T-TIP will be the rule of origin, given that the U.S. and EU have taken vastly different approaches on this issue in their existing preferential trade agreements. The EU rule of origin for apparel essentially consists of two different rules — one that applies generally and one that can be used as an exception. Under the general rule, an apparel item qualifies as originating if it has undergone at least two “substantial processes” in the EU. In general, weaving the yarn into fabric and finishing the fabric are considered substantial operations. Under this scheme, EU manufacturers can use non-originating yarn to make qualifying apparel as long as that yarn is woven into fabric in the EU and also finished there. As a result, this part of the EU rule is sometimes referred to in the United States as the equivalent of a “fabric-forward” rule, since it usually requires all components of the item, starting with the fabric, to be made in the region.

The second part of the EU rule — which functions as an exception — essentially applies a more liberal rule for certain apparel and textile items. These items can qualify for tariff benefits even if only the printing or other downstream operations occur in the EU. Specifically, under this exception, a textile or apparel item that is made from non-originating fabric but for which the printing occurs in the EU can qualify for tariff benefits if the non-originating part of the item is no more than 47.5 percent of the value of the final product. EU manufacturers of printed bed sheets often take advantage of this printing exception (Inside US Trade).

Latest data from OTEXA shows that in 2013, U.S. textile and apparel imports from EU(28) totaled $4 billion, among which 52% were apparel products and 48% were textiles. Top product categories of U.S. textile and apparel imports from EU include non-woven fabrics, men&boys’ suits, dresses, floor coverings, other man-made fiber apparel, special purpose fabrics and women & girls’ coats. In comparison, U.S. textile and apparel exports to EU(28) reached $2.5 billion in 2013, among which only 29% were apparel products and 71% were textiles. Top product categories of U.S. textile and apparel exports to EU include specialty & industrial fabrics, felts & other non-woven fabrics, filament yarns, other made-up textile articles, waste & tow staples, women & girls slacks, shorts and pants as well as spun yarns & thread.

Vietnam Announces Ambitious Plan to Develop its Textile Industry

Reported by the Sourcing Journal, Vietnam’s Ministry of Industry and Trade recently approved its textile and garment sector development plan up to year 2030. Under the new plan, Vietnam sets an ambitious goal to achieve a 55% local content ratio for exported apparel by 2015 and will further increase the ratio to around 70% by 2030. As estimated, the plan will bring about an annual textile production growth rate of 12 to 13 percent between 2013 and 2030 in Vietnam.

Numerous studies have suggested that Vietnam could substantially expand its apparel exports to the world after the implementation of the Trans-Pacific Partnership (TPP), a free trade agreement under negotiation by twelve countries in the Asia-Pacific region, including the United States and Vietnam. However, restrained by its stage of development, about 70—80% of Vietnam’s demand for textile inputs currently is imported (Lopez-Acevedo & Robertson, 2012). Based on 23 interviews, Goto (2007) further finds that apparel suppliers in Vietnam on average produced 67% CMT and 33% FOB based on value and 95% CMT and 5% FOB based on quantity.

But with the help of foreign investment from South Korea, Taiwan and Japan, Vietnam is quickly building up its textile manufacturing capacity (note: this is very different from the case in Mexico). According to the General Statistics Office of Vietnam, the number of textile firms in Vietnam had quickly increased from 408 in 2000 to 1,577 in 2008. Lopez-Acevdeo & Robertson (2012) further suggest that Vietnam’s annual production of cotton fiber has reached 10,000 tons; 50,000 tons of man-made fiber; 260,000 tons of short-staple fiber and yarn; 15,000 tons of knitted fabric; and 680 million meters of woven fabric. Around 38% of Vietnam’s textile output came from foreign invested companies in 2009.

Vietnam’s ambition to expand its domestic textile manufacturing capacity will have huge implications for the US-based textile industry. Although Vietnam seldom uses US-made textile inputs, Vietnam’s apparel exports to the United States directly compete with those exported from Mexico and countries in the Caribbean Basin regions which is the largest export market for U.S. made textiles (Lu & Dickerson, 2012). An expanded local textile manufacturing capacity will not only reduce Vietnam’s demand for imported textile inputs, but also will help improve the price competitiveness of Vietnam’s apparel exports in the global marketplace. If China increasingly moves its textile factories to Vietnam (unless the conflict between Vietnam and China over the South China Sea complicates the situation), Vietnam may further becomes a net textile exporter in the long run.

Is Wal-Mart’s $250 billion “Made in the USA” Program Another “Crafted with Pride Campaign”? (I)

Earlier this year, Wal-Mart Store Inc. announced its commitment to buy $250 billion “Made in the USA” products (including textiles and apparel) over the next 10 years ($50 billion annually) with the hope to “help spark a revitalization of U.S.-based manufacturing” and “create jobs in America”. According to the Hoover’s, Wal-Mart’s cost of goods (i.e. sourcing cost for merchandise sold) totaled $358 billion in fiscal year 2013, suggesting $50 billion will account for around 10-14% of its total sourcing portfolio.

Wal-Mart’s campaign has received positive feedback from the US textile and apparel industry. As reported by the WWD, the U.S. textile industry sees Wal-Mart’s movement an encouraging and “sincere commitment”. Bill Jasper, the outgoing chairman of the National Council of Textile Organizations (NCTO) and CEO of Unifi Inc believed that “manufacturing in general across the United States is in a more favorable position than we’ve seen for some time” and “this is an environment for growth in U.S. textile manufacturing”. As an example, Unifi Inc has spent millions of dollars upgrading its equipment and expanding the company’s US-based cloth mill. However, Bill also realizes the market risks involved in the investment decision, which may not happen without Wal-Mart’s “assurance” through the $250 billion program.

However, to fully take advantage of Wal-Mart’s program is not without obstacle. On top of them, Walmart requires qualified apparel for the program has to be “100 percent made in the United States”. However, the reality is there is more apparel being made in the Western Hemisphere by countries such as Mexico and those in the Caribbean Basin Regions than there is in the United States. As put by Bill, “We’re seeing more of a resurgence of ‘made in the region’ as opposed to Made in USA…If you at look the growth we see in apparel, much of that is in Central America and to a lesser extent Mexico. It does drive growth in yarn and fabrics here in the U.S., which are feed for those garments.”

It is also interesting to compare Wal-Mart’s $250 billion “Made in USA” program with its role in the “Crafted with Pride Campaign” launched in the 1980s (our case study 3). During that campaign, Wal-Mart initially pledged that “our entire management and merchandising staff is committed to Buy American program” and it did cut imports by 20% and purchased $197.3 million of merchandise from domestic suppliers in 1985 (Minchin, 2012). However, for the commercial reasons, later on Wal-Mart more and more relied on imports to support its global expansion and “everyday low price” business model. The “betrayal” of Wal-Mart largely contributed to the eventual failure of the campaign.

What will be the destiny of the 21^st century version of the “Crafted with Pride Campaign”? Is Wal-Mart really committed to “Made in USA” or rather the more price competitive “Made in USA” today attracts the attention of Wal-Mart? If implementation of new free trade agreements such as TPP and TTIP switches the cost balance of domestic sourcing versus global sourcing again, will War-Mart repeat its record in history? Maybe only time will tell…

Sheng Lu

Why Textile and Apparel Majors Need to Know about Trade Policy

This past week, our class moved to the topic of trade policy, which as usual turned out to be one of the most challenging and “least exciting” chapters for our students. A common question in students’ mind is (and probably for some professors in the textile and apparel field as well): as a fashion major, why do I need to care about trade policy?

The answer is straightforward: textile market is shaped by rules—trade policy. Trade policy affects the availability of T&A products in the market in terms of quantity, price and speed. Trade policy also affects T&A companies’ access to the market, both domestic and foreign. Simply look at the clothing and shoes we wear daily: if they are imported, very likely the price we pay includes 10-30% additional tax (tariff). Even the clothing is “made in USA”, we should realize that the survival of US domestic apparel manufacturing could be the result of protection by the exact same trade policy which makes imported competing products 10—30% more expensive than otherwise in the US market.

Yet, trade policy does not happen naturally. Trade policies are deliberately made by policymakers and strongly influenced by industry players. Two things I hope our students can realize: first, the T&A industry cannot afford ignoring trade policy. Think about this case: if the US yarn manufacturers did not actively advocate “yarn-forward” rules of origin to be adopted in NAFTA and CAFTA, what will happen to their fate right now? Vice versa, how will the commercial interests of apparel retailers/importers be affected if they stop voicing themselves and simply leave the trade protectionism forces to influence trade policymakers? As the saying goes: if you are not at the table, you are on the menu. To certain extent, there is no good or bad trade policy, but winners and losers.

Second, understanding trade policy making is about understanding the real world. Trade policymaking is a painful balancing process like trying to “breathe and suck at the same time”.Not only different interests groups may have conflicting views on a specific trade policy, but also different policymakers may have their respective philosophies and priorities. As we mentioned in the class, agencies in the executive branch such as the US Trade Representative Office and the Commerce Department put national interests and international obligations of the United States at its heart whereas the Congress often times gives preferences to regional, sectoral and party interests. A full understanding of T&A trade policy thus requires familiarity with what’s going on in this unique industry sector, knowledge about its key players as well as having a big picture vision in mind. For example, without recognizing the value of becoming a WTO member for China, it will be difficult to appreciate why it was willing to allow US to restrict its apparel exports from 2003 to 2008 on a discriminatory basis (T-shirt book, part III).

Our FASH students shall be encouraged to jump out of the narrowly-defined fashion world, because no industry operates as an island. Instead, the T&A industry is part of the world economy and shaped by the “rest” of the world economy.

Sheng Lu

The Ways and Means Hearing Shows Divided Views on US Trade Policy for Textiles and Apparel

ways&means

US Trade Representative Michael Froman testified on Obama’s 2014 trade policy agenda before the House Ways and Means Committee on April 3. Issues concerning the textile, apparel and the footwear industry were raised three times during the 3-hour hearing. However, it seems the Congress is much divided on how to deal with the T&A sector deemed as “sensitive” in the FTA talks.

(1h:42’)Mike Thompson (D-CA) asked Froman to reevaluate the value of including the “yarn-forward” rules of origin (RoO) in the TPP. Thompson suggested that this rule only affects a small proportion of the US apparel imports nowadays (Note: according to Froman, it was $13 billion annually or 17% of the total US apparel imports) and no longer meets the needs of the US outdoor apparel industry which demands more flexible RoO in supporting of their business model. In response, Forman said that “the USTR’s approach to T&A is always being to ensure to strike a balance that helps the domestic producers continue to produce while allowing importers to import products that serve customers…”

(2h:06’) Earl Blumenauer (D-OR) asked Froman to reduce the trade barriers (tariff and NTB) on footwear imports, arguing that less than 1% of the footwear consumed in the US nowadays is domestically produced. He said that the high tariff rates both retard the ability of the US footwear industry to concentrate on those parts of the value chain that it enjoys competitive advantages and hurt the interests of the US consumers. In response, Forman said that footwear has been a sensitive and key issue to the US and among other TPP members. According to Forman, USTR has been working both with the domestic producers and the importers to develop an approach hoping to achieve the right balance that the domestic producers can continue to compete and also the importers can bring in high quality products (from overseas) for the US consumers. Additionally, Forman referred to the footwear industry an “outstanding area” in the TPP negotiation and said that discussion among all partners will continue.

Last but not least, (2h:30’) Bill Pascrell(D-NJ), also the chair of the house textile caucus, reiterated the importance of the yarn-forward RoO to the US textile industry and asked Froman to ensure that the USTR will “seek the longest possible duty phrase out for the most sensitive textile items” in the TPP negotiation. In his reply to Pascrell, Forman said that his team will work with all stakeholders of the US T&A industry to fully understand what these “sensitive textile items” are and will use tools like the “phrase out period” and “short supply list” to strike a right balance. Pascrell also expressed the concerns of the US textile industry about Vietnam’s wanting of immediate access to the US apparel market after the implementation of the TPP. However, Forman declined to give any concrete promise, just saying the USTR commits to create the “maximum number of jobs in the US” through the trade talks[Note: textile industry jobs? Apparel retail jobs?].

In addition to the T&A, other issues mentioned in the hearing include TPA, GSP, TAA, IPR, SPS & TBT, TTIP, SOE, TiSA, ITA and WTO.

Full hearing can be viewed here

Sheng Lu

CAFTA-DR Fixes

In 2011, the US Trade Representative Office announced a number of changes to the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), or called “CAFTA-DR fixes”. The changes intend to expand export opportunities for the U.S. textile industry under the CAFTA-DR and encourage a vibrant textile and apparel supply chain in the Western Hemisphere. Among the changes of particular significance is the change clarifying that certain monofilament sewing thread is now required to originate or be produced in the United States or the CAFTA-DR region in order for goods to qualify for preferential tariff treatment. [You may think about within the territory of the CAFTA, which country actually has the capacity of making “thread”?] Before the fixes, some CAFTA-DR countries used cheaper threads from Asia which raised grave concerns by the textile manufacturers.

More technical details about the CAFTA-DR fixes can be found here.

PS–The Difference between Yarn and Thread:

A thread is a type of yarn
A thread is used for sewing while a yarn can be used for many purposes such as knitting, weaving, embroidering, and crocheting, and so on
A thread is lighter in weight than a yarn in general
While a thread is used to sew pieces of fabrics together, yarn is used to weave an altogether new fabric

Berry Amendment may Extend to Athletic Shoes, Benefiting New Balance and Other US-based Shoemakers

According to the Wall Street Journal (WSJ), under the pressure from the domestic shoe industry and lawmakers, the US Department of Defense (DOD) is evaluating the possibility of procuring athletic (running) shoes 100% made in the USA. Under a provision of 1941 legislation known as the “Berry Amendment” , DOD must buy clothing, fabrics, fibers, yarns, other made-up textiles, boots and certain other items that are 100% US-made. The exception can be made, however, if US manufacturers do not have the capacity to meet the procurement needs. This exception has been applied to athletic shoes for boot camp.

US-based shoemakers are excited about this opportunity and trying to convince DOD that they have enough capacity to make shoes in the USA. Shoemakers say the initiative will add jobs both at their plants and at suppliers.

Statistics from the American Apparel and Footwear Association (AAFA) show that in 2012 98.6% of shoes consumed in the US were imported. The WSJ report cited the Boston-based New Balance Athletic Shoe Inc as the only US maker of athletic shoes with large-scale production in the US, although New Balance also imported 75% of its branded shoes from overseas.

On the other hand, the Berry Amendment itself is not without controversy and future challenges. Cited in a recent CRS report, some policymakers believe that the Berry Amendment contradicts free trade policies and produces negative effects such as reducing the business incentive to modernize, causing inefficiency due to a lack of competition and causing higher costs to DOD. Negotiations of new trade agreements also create uncertainties for the future of the Berry Amendment. For example, under the Trans-Atlantic Trade and Investment Partnership (TTIP) negation, the European Union is seeking removal of “buy America” requirements such as the Berry Amendment to get more access to the US government procurement market.

Updates:

The DOD announced on April 25, 2014 that it will require new recruits to use their footwear allowance to purchase athletic footwear that is compliant with the Berry Amendment, which requires the use of domestically sourced apparel and textile products.

Wolverine, which for the past several years has urged the Pentagon to procure athletic footwear manufactured in the US rather than purchasing foreign-made products, believes the move will significantly help support the country’s supply chain for US-made shoes.

The policy change comes after campaigns last year to require the Department of Defense (DOD) to treat athletic footwear like every other uniform item, including boots, and ensure that such items are bought from American manufacturers.

Estimates suggest the DOD has spent around $180m to date on the athletic footwear cash allowance programme. Until now it has issued cash allowances to new recruits for training shoes which are not required to be Berry-compliant.

Additional reading: Berry Amendment and the U.S. Textile Industry

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Exclusive Interview with Nate Herman, Vice President of the American Apparel and Footwear Association

(Photo: Courtesy of the AAFA)

Nate Herman is the Vice President of the American Apparel and Footwear Association (AAFA). Mr. Herman manages AAFA’s regulatory and legislative affairs activities, advocating on behalf of, and providing information to, the industry on international trade and corporate social responsibility issues. Mr. Herman also handles product safety, customs, transportation and other technical (slip resistance, safety toe, etc.) issues as well as labeling matters for AAFA’s footwear members as co-leader of AAFA’s Footwear Team. In addition, Mr. Herman develops all apparel and footwear industry data and statistics as AAFA’s resident economist. Prior to joining AAFA, Mr. Herman worked for six years at the U.S. Department of Commerce’s International Trade Administration (ITA) assisting U.S. firms in entering the global market. Mr. Herman spent the last two years as the Department’s industry analyst for the footwear and travel goods industries.

Interview Part

Sheng Lu: First of all, would you please make a brief introduction of AAFA to our students, including your history, your current members, your key missions and main functions?

Nate Herman: Representing more than 1,000 world famous name brands, the American Apparel & Footwear Association (AAFA) is the trusted public policy and political voice of the apparel and footwear industry, its management and shareholders, its four million U.S. workers, and its contribution of $350 billion in annual U.S. retail sales. AAFA was formed in 2001 following a merger of the American Apparel Manufacturers Association and Footwear Industries of America.

AAFA stands at the forefront as a leader of positive change for the apparel and footwear industry. With integrity and purpose, AAFA delivers a unified voice on key legislative and regulatory issues. AAFA enables a collaborative forum to promote best practices and innovation. AAFA’s comprehensive work ensures the continued success and growth of the apparel and footwear industry, its suppliers, and its customers.

We achieve these goals through aggressive advocacy on Capitol Hill and before the Administration on the issues most important to the U.S. apparel and footwear industry. AAFA also hosts more than 50 conferences, seminars, workshops, and webinars both in the United States and around the world to ensure the industry is able to comply with growing state, federal, and international regulations.

Sheng Lu: AAFA recently released a video clip “What do we wear”, which is very encouraging and eye-opening to our students. What makes AAFA create this video and what specific information you would like to deliver to the audiences?

Nate Herman: A few years ago, we were asked a question during a meeting with a top-ranking senator. “What is the economic impact of your industry?” We didn’t have an answer, which didn’t help policy makers see the important jobs within our industry and our significant contribution to the U.S. economy. That led to the launch of our “We Wear” brand.

You see, when we get dressed each day, we wear more than clothes and shoes. We wear four million U.S. jobs. We wear intellectual property. We wear social responsibility. Our new video is a visual reminder of our important mission and economic impact. We use it to educate policy makers, administration officials, the industry, and consumers about our industry and how vital we are to the overall health of the U.S. economy.

Sheng Lu: One phrase often used by AAFA is your member companies “produce globally and sell globally”. How should our students understand the global nature of today’s apparel industry?

Nate Herman: The apparel and footwear industry is on the frontlines of globalization. In fact, our industry’s supply chain is the most global supply chain in the history of commerce.

Simply put: We are a nation of 330 million importers. In 2012, 97.5 percent of the apparel and 98 percent of the footwear sold in the United States was produced internationally. This model allows families to spend less of their family budgets on clothing and shoes while still getting more bang for their buck.

Sourcing is made possible through strong and positive trade relationships with a variety of countries, including China, Mexico, Vietnam, Indonesia, Bangladesh, Colombia, Honduras, the Dominican Republic, Nicaragua, and more. Companies even source product from the United States. Sourcing decisions are often made through serious processes that evaluate a country’s trade programs, environmental record, social responsibility standards, intellectual property protections, material and labor costs, shipping time, and reliability of sourcing partners.

At the same time, don’t ignore the rest of the world. The United States only represents just five percent of the world’s population. So when a company sources from China or Vietnam, they are sending products all over the world through a complex supply chain. One of our goals at AAFA is to help ensure the entire world has access to world famous U.S. name brands.

Sheng Lu: The Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP) are two buzzwords nowadays. From the perspective of AAFA, why should the US apparel industry care about these two agreements?

Nate Herman: Trade agreements like the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP) offer U.S. name brands direct market access to new sourcing and retail markets. For example, the United States and the European Union, under TTIP, accounts for more than 40 percent of global clothes and shoes retail sales.

Trade agreements also provide opportunities to harmonize regulations to make it easier to do business in the global market. For instance, the United States maintains strict product safety standards. Through trade agreements, we can make regulations consistent to ensure if a shirt is safe in one country it’s safe in another. This prevents redundant testing costs, which ultimately makes clothes and shoes cheaper for consumers.

Sheng Lu: Last year, several tragedies happened in the Bangladesh garment factories raised the public awareness of the corporate social responsibility issues in the apparel sector. How has the tragedy changed the business practices in the apparel sector from your observation?

Nate Herman: Over the past year, the U.S. apparel and footwear industry has rallied together to address significant social responsibility challenges, including worker safety. In fact, we’ve never seen the industry come together so fully in a spirit of collaboration. Safety inspections, training, and fire safety prevention have been or are now part of many companies’ compliance programs. AAFA supported the creation of the Alliance for Bangladesh Worker Safety, an industry-led effort to prevent future tragedies in Bangladesh. While all these positive steps encourage us, we know our social responsibility and environmental work will never be finished. We can always do better.

Sheng Lu: Look ahead in 2014, what top issues in the apparel industry you would suggest our students to watch?

Nate Herman: 2014 is already shaping up to be a busy year for the U.S. apparel and footwear industry. One major trend we are watching is the continued growth of e-commerce and Omni-channel retail. You see, the point of sale is just the starting point of a long – and global – supply chain. We will see sourcing patterns and business models change as retail shifts away from brick-and-mortar shopping to online e-commerce. We are now beginning to focus on new ideas like online privacy and data security, terms the industry didn’t have to focus on 10 years ago.

Outlook for the US Textile Industry in 2014

In its latest industry analysis report, the Textile World (TW) presents a fairly optimistic outlook for the US textile industry in year 2014. According to the report:

Output of the US textile mills may increase 2 percent for basic products like fibers, yarns and fabrics; more highly fabricated items like industrial textiles could achieve an even higher growth rate.
US Imports of textiles may continue the pattern of flatness (i.e. limited growth) over the next 12 months whereas exports of US-made textiles will remain modest growth. As results, the US textile industry may see some fractional decline in trade deficit in the year ahead.
US textile mills may avoid meaningful upward fiber cost pressure, which includes cotton, rayon staple, acrylic staple, textured nylon and polyester. High cotton stock level worldwide and the weak demand for natural gas and petroleum are cited as the two major reasons for the minimum price change.
As another encouraging sign, the operating rate (production as a percentage of capacity) in the US textile industry has rebounded to above 70% which is accompanied with a robust growth of capital investment. As quoted in the report “US textile mills spent more than $1 billion each year to replace obsolete facilities and to take advantage of new, state of the art technology aimed at turning out new products and increasing overall efficiency”.
In terms of the job market, the picture seems to be mixed. Productivity growth as results of capitalization both reduces the real production cost as well as the overall demand for labor. According to the report, labor had only accounted for 19% of textile mills revenue dollars in 2013, implying the highly capital-intensive nature of the industry.
Additionally, the rising demand for product innovation and improvement create brightening growth opportunities for the US textile industry. According to the TW report, US consumers seem willing to pay a premium for “pluses functions” of the fabrics. Some 50 percent said they’d pay extra for wrinkle resistance, 51 percent for stain protection, 50 percent for easy care, 46 percent for fade resistance, and 45 percent for stretch. A number of US firms are further weaving sophisticated electronic extras into the fabric of garment sensors that can monitor a variety of personal vital signs.

Other highlighted issues to watch in 2014 include: made-in-USA factor, improved supply chain management, energy cost advantage and government policy support.

Exclusive Interview with Kim Glas, Deputy Assistant Secretary for Textiles and Apparel, US Department of Commerce

(source of photo: WWD)

Kim Glas is the Deputy Assistant Secretary for Textiles, Consumer Goods, and Materials at the U.S. Department of Commerce. She oversees programs and strategies to improve the domestic and international competitiveness of the broad product range of U.S. textiles, apparel, consumer goods, metals and mining forest products, and chemicals and plastics manufacturing sectors and industries. Ms. Glas also serves as Chairman of the Committee for the Implementation of Textile Agreements (CITA), which supervises the negotiation and implementation of textile and apparel agreements.

Prior to joining the Department of Commerce, Kim Glas served more than 10 years as a professional staff member in the U.S. House of Representatives. As Deputy Chief of Staff and Legislative Director for Representative Michael Michaud of Maine for over seven years, Ms. Glas managed the Congressman’s legislative agenda and was the key advisor on international trade and labor issues. In addition, Ms. Glas worked for Representative John LaFalce of New York during her tenure on Capitol Hill, advising on trade and labor issues.

Interview Part

Sheng Lu: Because almost all clothing consumed in the United States nowadays is imported, some people wonder if there is still a textile and apparel industry in this country. What is the reality? What does the general public should know about the US textile and apparel industry today?

Kim Glas: While imports still dominate U.S. consumption of textiles and apparel, we can expect to see a new trend going forward. Currently, the textiles and apparel industry in the country is experiencing a different manufacturing paradigm than 10 years ago. In 2012, textiles and apparel exports were $22.7 billion, up 37% from just 3 years earlier. This is indicative of a reassessment by American companies about manufacturing in the United States. Cost, time benefits, and international economic challenges have closed the international manufacturing gap making it more attractive to source at home. More and more U.S. companies are considering and many have moved production or part of their production back to the U.S. This return of manufacturing to the U.S. is expected to continue into the future. This means consumers can expect to find more quality and more affordable Made in USA textiles and apparel in the market in the years to come.

The United States has a strong and diverse textile industry, manufacturing a range of high quality products including fibers, yarn, fabric, and apparel. It is the fourth largest single country exporter of yarns and fabrics, with $13.6 billion in exports in 2012. The United States is also home to one of the largest providers of spun yarn in the world, Parkdale, Inc., with 29 manufacturing plants in the United States, Central America, Mexico, and South America.

Sheng Lu: From your view, what role does the OTEXA play in enhancing the competitiveness of the US textile and apparel industry in the 21st century global competition?

Kim Glas: OTEXA administers and enforces agreements and preference programs concerning the textile, apparel, footwear and travel goods industries and works to ensure fair trade and a level playing field for these industries to enhance their competitiveness in international markets. The office has an active Export Promotion Program that assists small- and medium-sized U.S. textile and apparel firms to develop and expand their export markets helping job retention and creation in this and related sectors.

Sheng Lu: There have been many discussions recently about manufacturing coming back to the United States given the rising labor cost in China. Yet, statistics from the US Bureau of Labor statistics show a continuous decline of employment in the manufacturing aspect of the US textile and apparel sector (i.e. NAICS 313, NAICS 314 and NAICS 315). What is your view on the future of textile and apparel “made in USA” as well as related job opportunities?

Kim Glas: The U.S. textiles and apparel industry employs over 380,000 people nationwide. Declining employment in this sector has been an ongoing trend for the past four decades, a development related mainly to productivity improvements and international competition. The adoption of new technologies has boosted productivity in this sector.

Advances in technology and manufacturing capabilities by capital-intensive U.S. textile and apparel firms have contributed towards competitiveness and productivity, increasing output and lowering labor costs.

The apparel industry has retained more skilled and higher-paying jobs in such areas as computer-aided design and manufacturing, marketing, and product development. Lower-skilled apparel production jobs have moved offshore, in support of our production-sharing operations in Mexico, Central America, and the Caribbean Basin, as well as to other countries with lower labor costs.

The continued upswing of re-shoring sentiments and companies moving textiles and apparel production back to the U.S., combined with increasing consumer demands for Made in USA products will help foster more U.S. production hence increasing high-skilled job opportunities in these sectors for the foreseeable future.

Sheng Lu: This year marks the 20th anniversary of the North American Free Trade Agreement (NAFTA), which has been both lauded and attacked in the United States. In your view, does the US textile and apparel industry a beneficiary of the agreement? What critical changes has the NAFTA brought to the US textile and apparel industry over the past 20 years, if any?

Kim Glas:The United States exported a total of $22.7 billion in textiles and apparel in 2012, including $5.3 billion to Mexico and $5.2 billion to Canada. Together, our NAFTA partners account for 46% of total U.S. exports of textiles and apparel.

The United States imported more than $113 billion in textile and apparel products in 2012, including $2.2 billion from Canada and $5.7 billion from Mexico. U.S. imports from our NAFTA partners have a high U.S. content and therefore help to preserve U.S. jobs and increase sales opportunities for U.S. producers.

U.S. textile and apparel firms have benefited from NAFTA provisions including the “yarn forward” rule of origin and Mexican production-sharing arrangements. This has allowed them to optimize production and manufacturing. U.S. investment in Canada and Mexico has increased by 57% since NAFTA was implemented, reaching $592 million in 2012. The United States remains the largest single-country supplier of textiles and apparel to Mexico.

Sheng Lu: Both the ongoing Trans-Pacific Partnership (TPP) and the Trans-Atlantic Partnership (TTIP) negotiations include a chapter specifically dealing with textile and apparel. What makes textile and apparel always a unique and sensitive sector in the free trade agreement negotiation? And what does the US textile and apparel industry can expect from the TPP and TTIP?

Kim Glas: The U.S. approach to free trade agreements (FTAs) has been to provide for specific rules that apply only to the textile and apparel sectors in several areas, including rules of origin and related matters, safeguards and anti-circumvention Customs cooperation commitments. Treating textiles and apparel in a separate chapter of an FTA provides more clarity and transparency, and therefore makes it easier for industries and traders in our FTA partner countries to make maximum use of the opportunities of the agreement while improving compliance.

As the largest market for imported textiles and apparel, and as one of the world’s largest markets for imported textiles and apparel, trade negotiations for this sector require experts with specialized knowledge. Textile issues have been addressed in a textile negotiating group in all of our major FTAs, past and pending, with full coordination with other relevant negotiating groups.

Sheng Lu: looking ahead in 2014, what are the key industry development trends and trade policy issues we shall watch?

Kim Glas: The turnaround in U.S. manufacturing of textiles and apparel is expected to continue to reshape the manufacturing landscape of this industry with improved industry strategies and planning. U.S. companies will be increasingly active in their efforts to innovate and improve to keep and stay viable in today’s highly competitive global market place. In addition to keeping up with innovations, we can expect to see improvements in companies’ sourcing, supply chain management, and development of niche product and improved quality. Moving forward, we can expect to see U.S. companies to be to be more lean, efficient and flexible with consumer and market demands.

The Apparel Industry on Both Sides of the Atlantic Push for Regulatory Coherence in the TTIP negotiation

The European Apparel and Textile Confederation (EURATEX) and the American Apparel and Footwear Association (AAFA), the two leading trade associations representing the apparel industry in the EU and US respectively, released their joint comment on the Trans-Atlantic Trade and Investment Partnership (TTIP) on December 13, pushing negotiators of the agreement to address the regulatory challenges that affect the apparel business across the Atlantic. Specifically, the diverse labeling and product safety requirements between EU and US are identified as the two leading regulatory hurdles for the apparel business. Other issues of concern to the EURATEX and AAFA include conflict minerals reporting requirements, customs procedures and chemical management regimes.

TTIP, launched in June 2013, is one of the most important and economically influential free trade agreements currently under negotiation. If implemented, the agreement is expected to create additional $65 billion and $86 billion GDP to the US and the EU respectively.

It is argued that because the implementing tariff rate in the EU and US on average is already quite low, harmonizing regulatory differences rather than eliminating tariffs will be the key to the TTIP negotiation.* However, the very different and rigid legislative procedures in the EU and US may complicate the negotiation on regulatory coherence. Particularly, both the EU and US may want to convince the other side that their current regulations/standards are the better ones. And the political implication will be bad if trade negotiators of either side leave the impression domestically that the TTIP would lower down their current standards for sensitive topics such as “product safety” and “environmental protection” .

Note*: as one of the few exceptions, the tariff rates for T&A are still relatively high: 6.6% for textiles and 11.5% for apparel in the EU as well as 7.9% for textiles and 11.6% for apparel in the US according to the World Trade Organization.

by Sheng Lu

Despite growth of production, no sign of jobs recovery in the US textile and apparel manufacturing sector

According to the latest World Manufacturing Production Quarterly Report released by the United Nations Industrial Development Organization (UNIDO), for the first time over the past few years, production of wearing apparel enjoyed a positive growth of 3.9% in the third quarter of 2013 compared to the same period of 2012 in the United States. This statistics seem to support the argument that “made in USA” is making a coming back when “made in Asia” is losing cost advantages. A Just-style report quotes that “A growing number of US apparel manufacturers, government officials and industry leaders have been working on initiatives to increase domestic production. As an example, Wal-Mart has recently made a commitment to buy an additional $50 billion in U.S.-made products over the next ten years.”

However, statistics from the US Bureau of Labor Statistics show that the employment level in the US textile and apparel manufacturing sector continues declining in 2013 despite the positive growth of industry output. Specifically, total employment in the US textile mills (NAICS 313), US textile product mills (NAICS 314) and US apparel manufacturing (NAICS 315) sectors were 2.7%, 3.1% and 5.4% less in November 2013 respectively compared to the average level in 2012 after seasonal adjustment.

The mixed pattern imply the changing nature of textile and apparel manufacturing in the United States. Particularly, it is important to realize that the industry is NOT going back to the old days, but rather the resurgence of “made in USA” may be the result of a new round of capitalization in the industry, which is manifested by a growing number of modern-looking plants with “floors empty of people”.

by Sheng Lu

Exclusive Interview with Julia K. Hughes, President of the United States Fashion Industry Association

(Photo above: Julia Hughes presented at the 25th Annual Textile and Apparel Importer Conference. Courtesy of the United States Fashion Industry Association)

Julia K. Hughes is the President of the United States Fashion Industry Association (USFIA). USFIA represents all segments of the fashion industry, from apparel brands to retailers to service companies. Ms. Hughes represents the interests of textile and apparel importers on trade policy issues to government officials, both in the United States and overseas. She has testified before Congress and the Executive Branch on textile trade issues. Ms. Hughes is also recognized as an expert in textile and apparel issues and is a frequent speaker at international conferences including the Apparel Sourcing Show, MAGIC, Foreign Service Institute, National Association of Manufacturers, Cotton Sourcing Summit, USIA’s Worldnet, the International Textiles and Clothing Bureau, Young Presidents’ Organization, World Trade Organization Beijing International Forum and others.

Julia Hughes is also well known to students enrolled in TMD433. She is featured in the book Travels of a T-shirt in the Global Economy, which highlights the global nature of the textile and apparel industry in the 21st century and those complicated economic, social and political factors associated with this important sector.

Interview Part

Sheng Lu: Would you please briefly introduce the current status of the U.S. fashion industry which your organization represents? For example, how large is the industry, how important is it to the US and the global economy, and what types of companies are involved as well as their business functions?

Julia Hughes: The phrase “the fashion industry” may call to mind images of Fashion Week and photo shoots. In this era of global trade, however, the high-fashion runways are just one part of the broader textile and apparel industry that ranges from high-end luxury brands to fast-fashion retailers—and the thousands of companies in between that produce and sell clothing, shoes, and other textile products.

United States Fashion Industry Association members and affiliates include companies across the value chain, which support our mission to remove barriers to textile and apparel trade. These companies include:

Brands, retailers, importers, and wholesalers of textiles and apparel.
Service providers, including consultants, customs brokers, freight forwarders, law firms, logistics providers, steamship lines, and testing and certification companies that help those brands, retailers, importers, and wholesalers.
Manufacturers and suppliers of finished products and inputs for finished products, as well as supplier associations, business councils, and promotional groups.
Agencies that promote the industry from a specific region, country, city, or other geographic entity.
Academic institutions.

This industry includes companies and professionals across the value chain, working in roles ranging from design and development, to sourcing and logistics, to trade policy and compliance, to retail and marketing. USFIA members include all of these types of companies and individuals…

Sheng Lu: The United States Association of Importers of Textiles & Apparel (USA-ITA) has been a big name in the industry for 25 years. What leads your organization to change the name and rebrand yourself? Particularly, how will the USFIA distinguish itself with the American Apparel and Footwear Association (AAFA), whose members also include many US-based apparel companies and retailers?

Julia Hughes: The United States Association of Importers of Textiles & Apparel (USA-ITA), founded in January 1989 by nine U.S. importers, was instrumental in eliminating the global apparel quota system. At that time, it seemed like an almost insurmountable task to change the political dynamic enough so that the special protection for textiles and apparel would finally end.

On January 1, 2005, the quotas were officially eliminated, and since then, the industry has increasingly globalized. As a result, new challenges arise every day for apparel brands, retailers, and importers, ranging from challenges with compliance at the factories to challenges with transportation at the ports of entry. Over the years, the association has evolved with our members to address these new challenges—but our brand, including our name, logo, and official mission statement, had not changed in over two decades.

Accordingly, our major project in 2013 was rebranding the association to more clearly communicate our purpose and our direction for the future. It’s important to note that this project was not about changing our purpose or direction, but about ensuring that our brand accurately reflects the reality of the industry and the work we had already been doing for our members. The new brand—the United States Fashion Industry Association—was developed over 10 months with input from members and our trusted network across the value chain who participated in comprehensive overviews.

Why did we choose this name? First, our members are no longer just “importers.” While importing will be a critical aspect of our members’ sourcing plans for the foreseeable future, many of our members are truly global brands—for instance, designing product in the United States, producing that product in Asia, and then selling that product in Europe or Australia. Additionally, many of our members are also making product in the United States from U.S. and/or imported inputs. As we told WWD, “We are very supportive of Made in USA, and we sponsored some of the very first programs about Made in USA at MAGIC. It is a very important element, but it is one part of sourcing decision making.” Considering these realities, the phrase “Importers of Textiles and Apparel” no longer accurately described the industry or our members, so we needed to update it. (It was also a mouthful!) We settled on this exact name because “the fashion industry” is the phrase that companies, government, and the media uses most commonly to describe the wide variety of companies and professionals across the value chain—it best describes our association in 2013 and moving forward.

We spoke to our members and some trusted partners in our network about who we are and what sets us apart. From those conversations, we developed five values that we keep in mind with every decision we make. They are:

1. Integrity: Our members tell us that we listen to them, support them, and defend them—while our government partners tell us that we work with them to find creative solutions.

2. Substance: We maintain and articulate a deep understanding of the industry and challenges most important to our members—the sourcing and compliance executives who make tough decisions every day on how to address these challenges.

3. Focus: We keep a laser focus on our mission, which allows us to be agile and quickly seize upon opportunities to move the needle.

4. Collaboration: Our members collaborate to share best practices and amplify the industry’s voice on the critical issues, putting aside marketplace competition to work together toward common goals.

5. Foresight: We keep our members informed not only about the regulatory challenges today, but also the regulatory challenges of tomorrow—and as our industry globalizes, we likewise expand our reach.

Sheng Lu: As mentioned in your mission statement, the USFIA is dedicated to the removal of barriers that impede the free movement of textile and apparel products to the United States and international markets. What are the top trade policy and market access concerns for the USFIA right now?

Julia Hughes: For 25 years, the United States Fashion Industry Association (USFIA)–formerly the United States Association of Importers of Textiles & Apparel (USA-ITA)–worked to eliminate barriers that impede the free movement of textile and apparel products to the United States and international markets. We participate in advocacy activities on a number of issues related to our mission in order to eliminate the tariff and non-tariff barriers that impede the industry’s ability to trade freely and create economic opportunities in the United States and abroad. Our top issues include:

Negotiation of a successful Trans-Pacific Partnership (TPP) agreement
Negotiation of a successful Transatlantic Trade & Investment Partnership (TTIP) agreement
Expansion of the “trusted trader” programs with U .S. Customs & Border Protection
Extension and expansion of the African Growth & Opportunity Act (AGOA)
Ethical sourcing and the industry’s commitment to address the challenges in Bangladesh
Working with the International Labour Organization (ILO) and NGOs to help eliminate forced and child labor in the cotton industry in Uzbekistan

Sheng Lu: You are featured in the well-known book Travels of T-shirt in the Global Economy. Interestingly enough, your counterpart in the book—Mr. Auggie Tantillo, now taps to lead the National Council of Textile Organizations (NCTO) which represents the US textile industry. In the T-shirt book, you two held very different views on whether the U.S. should restrict apparel imports from China. Now almost 8 years later, do you (and the USFIA) still debate often with Auggie (and the NCTO) on textile and apparel trade policy issues? If so, what are you mainly debating about?

Julia Hughes: Today, Auggie and I still disagree on some of the basic trade policy issues–especially the negotiations for new free trade agreements. NCTO is trying to hold onto the same textile rules of origin that were negotiated in the 1990s, the yarn-forward rule of origin. USFIA and our members continue to encourage the U.S. textile industry to take a fresh look at the global industry. But, so far, we remain far apart.

Nonetheless, we also have some areas where we can work together. Both our organizations support efforts to promote Made in the USA activities, as well as manufacturing in the Western Hemisphere. And, just this week I asked Auggie to help us with information about U.S.-based fabric mills. We also have collaborated on some proposals with Customs and Border Protection that build on the “trusted trader” concept and would focus enforcement measures on the companies who are not already proven to be compliant. And if I had to make a prediction, I would predict that in the next few years, we will find other areas where we can worth together productively.

Sheng Lu: Most of our students in the Textiles, Fashion Merchandising and Design (TMD) department will become professionals working for the US fashion industry after graduation. Does the USFIA have any resources available to our college students or have any future plans to expand the collaboration with the textile and apparel educational programs/academic institutions?

Julia Hughes: Yes! We welcome participation from universities, educators, and students in the fashion industry.

First, our website is a wonderful resource for information about the industry and our key issues. In addition to our issue pages, you’ll also find resources including recaps of past seminars, recordings of past webinars, our member publications, and more. (Some of this information is locked to USFIA members, but in the spirit of helping to grow our industry and future members, we’re always happy to help you access specific information you need! Just ask us!) We continue to build on the website, and in 2014, we will be launching a Value Chain Directory, which will provide comprehensive information on service providers and sourcing opportunities around the world.

Additionally, we host a number of events throughout the year, including our annual conference. We’re happy to work with educators and students to make attendance affordable, and we even have opportunities for universities to exhibit and students to volunteer.

We also encourage current and former students to visit our Career Center, which contains job opportunities at USFIA member companies. Even if you’re not looking for a job at the moment, it may be helpful to see what types of candidates these companies are seeking.

We’re always happy to work with universities, educators, and students to ensure that we educate the next generation of fashion industry leaders and professionals—future USFIA members!

Why the General Public Needs to Care About Textiles and Apparel

International Trade Administration Reorganized

From Just Style:

As part of its first major reorganization in more than 30 years, the US Department of Commerce’s International Trade Administration (ITA) has consolidated its four business divisions into three units.

The new units are Global Markets, Industry and Analysis, and Enforcement and Compliance.

Global Markets combines ITA’s country and regional experts, overseas and domestic field staff, and specific trade promotion programmes.

The Industry and Analysis (I&A) unit brings together ITA’s industry, trade, and economic experts to help US industries develop and execute international trade and investment policies to increase exports.

And the Enforcement and Compliance unit helps enforce US trade laws and ensure compliance with trade agreements.

The Office of Textiles & Apparel (OTEXA), which oversees apparel and textile trade, supervises the implementation of all textile trade agreements, formulates trade policy, performs research and analysis, compiles industry data, and promotes US trade events, is now part of the new Industry & Analysis division. Key staffs at the OTEXA and their responsibilities can be found HERE.

“Just as companies must change and adapt to ensure they provide cost-effective, high-quality products and services that meet the demands of their clients, so too must government agencies adapt to continuously improve their performance and make the best use of scarce public funds,” explained Francisco Sánchez, undersecretary for international trade.”

U.S. Textile Plants Return, With Floors Largely Empty of People

This is a strongly recommended New York Times article which focuses on the current status of the U.S. textile industry.The article reflects many things we’ve discussed in the class.

First, we still live in a world of “specialization”, in which each country produces something but not everything based on their respective comparative advantage. It is important to realize that the reason why textile manufacturing is coming back to the United States is because the manufacturing process has become more “capital and technology intensive” in nature. Therefore, it makes senses for the United States as a capital and technology abundant country to focus on producing “capital and technology” intensive products. At the same time, with the fast rising labor cost in recent years, some developing countries are gradually losing “comparative advantage” in making labor intensive apparel products. This factor further affects T&A companies’ decision making on where to produce.

Second, textile and apparel industry is NOT disappearing in the U.S., but it evolves constantly in response to globalization and technology advancement. “Made in America” is starting to mean something again, but not the same as what it used to mean. As the business function of the textile and apparel industry in the US becomes more capital, knowledge and technology intensive, it provides even more promising career options and opportunities for our TMD/TM graduates than in the past. That’s also why in the classroom, we emphasize creativity, critical thinking, analysis skills, playing with technology, leadership skills and having a big landscape of the industry in mind.

Third, as we discussed in the class, the “made in ___” label can no longer reflect the whole supply chain of finished textile/apparel products in the 21st century. Instead, we live in a “made in the world” era in which different countries share responsibilities in T&A product development, manufacturing and distribution. Neither is it the case that the U.S. textile and apparel industry is all about “manufacturing” today. Those non-manufacturing functions such as retailing, merchandising, branding and marketing actually contribute much higher added values and result in a U-shape global apparel value chain called “smiling curve”.

Travels of a T-shirt with Pietra Rivoli (2013)

Bureau of Labor Statistics: Manufacturing-related Fashion Jobs Continue to Drop in the U.S.

A recent study released by the U.S. Bureau of Labor Statistics (BLS) showed that manufacturing-related fashion jobs in the United States will continue to drop through 2020. Although the occupation of sewing machine operator is projected to face the most significant shrinkage in employment, the job decline is suggested to be an industry-wide phenomenon. According to the BLS, from 2003 to 2012, the U.S. apparel manufacturing industry (NAICS 315) had lost 57.7% of its jobs.

The question open for discussion, yet critical for textile& apparel major college graduates, is that how might the decline in manufacturing affect the destiny of other aspects of the U.S. fashion industry in the long run, such as the design and product development functions. No industry sector can survive as an island. As argued by the world’s leading scholar on the subject Michael Porter in his numerous studies addressing the industry competitiveness, the availability and strength of the local supporting industries have a key role to play in shaping the competitiveness of an industry in a nation. For example, the reason why the United States remains the world leading man-made fiber producer today is largely because the U.S. chemistry industry is able to provide needed inputs (such as raw material, technology and knowhow). By the same token, if fabrics are no longer locally made, compared with their overseas competitors such as Italy and China, the U.S. fashion designers might also be put at a big disadvantage in sourcing the needed material and developing the sample products in a timely manner, with flexible choices and at a reasonable cost.

Technology is another critical factor contributing to job decline in the U.S. fashion industry. As the 2008 study Forecasting the US fashion industry with industry professionals—Part I material and design concluded that “design and production processes would rely heavily on computer and digital technology…the apparel package in the U.S., including creative design, will possibly migrate offshore with the exceptions of heavily technology-involved design and product development tasks.”

In the meanwhile, the retail sector remains a robust job creator for textile & apparel major college graduates. From 2003 to 2012, total employment in the U.S. apparel retail industry (NAICS 4482) increased 5.7%. By 2012, almost 80% of the occupations in the U.S. textile and apparel industry were offered by retailers.

by Sheng Lu

A Global View in Mind Means More Job and Career Oppertunities in the Fashion Apparel Industry

(Note: the functions & jobs below the U.S. flag mean they are based in the United States; Remember, apparel are “made in the world”–just like iphone and ipad. Even imports contain U.S. added value.)

Source: Moongate Association (2012). Analyzing the Value Chain for Apparel Designed in the United States and Manufactured Overseas

Impact of the Trans-Pacific Partnership on Textile and Apparel Trade in the Pacific Rim

Citation: Lu, S. (2013). Impact of the Trans-Pacific Partnership on textile and apparel trade in the Pacific Rim. World Trade Organization Focus, 20(5), 67-77.

For questions, please contact the author: shenglu@mail.uri.edu

Three U.S. Textile Organizations Merge

If you’ve finished the third part of the T-shirt book, you should remember Auggie Tantillo and the American Manufacturing Trade Action Coalition (AMTAC) under his leadership. On March 28, 2013, AMTAC together with the National Textile Association (NTA) joined the National Council of Textile Organization (NCTO), which will become the flagship organization representing the interests of the U.S. textile industry (textile mills and texile product mills which produce fibers, yarns, fabrics, home textiles and industrial textiles). This new movement could strengthen the voice of the U.S. textile industry in Washington DC, but at the same time can also be read as a sign of the declining industry base of AMTAC and NCTO.

The press release of the merger can be downloaded from here

Trans-Atlantic Trade and Investment Partnership

From Just Style, March 2013

Textile and clothing industry groups on both sides of the Atlantic have welcomed the news that the EU and the US are to commence talks on the biggest bilateral trade deal ever negotiated.

European Union (EU) clothing and textile industry association Euratex has hailed the launch of talks between the United States and the EU to forge what the European Commission calls the “biggest bilateral trade deal ever,” saying EU exporters will benefit.

A deal, once sealed, could eliminate American duties as high as 19%, says Euratex.

The EU’s textile and clothing industry already has a positive trade balance with the US. “Tariffs are still high in the US” for textile and clothing, Euratex president Alberto Paccanelli has stressed.

And it is worse when it comes to exporting products containing wool where the “duties are generally higher, sometimes above 19%,” Luisa Santos, head of international trade at Euratex, told just-style.

So “we expect to have duty-free access from the entry into force of the agreement and we are willing to give the same benefit to the US,” Ms Santos noted. With exports being highly price-sensitive, an elimination of the duties could “help substantially our competitiveness in the market.”

The EU’s textile and clothing exports to the US have been steadily increasing and are already substantial. In 2009, these exports stood at EUR2.8bn (US$3.7bn) and in 2010, they rose to EUR3.3bn, while they reached EUR3.7bn in 2011.

In negotiations, the EU would have a “forward looking approach” in terms of tariff and duty-free access from day one, according to Santos.

US sees opportunity

There was also optimism from American importers and retailers. Julie Hughes, president of the United States Association of Importers of Textiles & Apparel (USA-ITA), said a free trade agreement “presents a terrific opportunity” to remove duties and resolve regulatory issues that hold back trade between the US and the EU.

“We are especially enthusiastic about the launch of the US-EU trade negotiations,” Hughes told just-style adding: “Many people don’t realise that the EU is actually one of the top destinations for US exports of yarns, fabrics, and apparel” or that US brands import yarns and fabrics from the EU to manufacture ‘Made in the USA’ garments.

However some US groups are concerned because of different tax and regulatory regimes between the two regions.

“We are eagerly watching how the US government is going to engage with the EU,” said David Trumbull, vice president of the USA’s National Textile Association.

He is concerned about the fact that the US does not have the comprehensive sales tax systems in place in Europe, which do not apply for exports. Meanwhile, American producers can pay more through income tax or corporate tax: so US exporters could be placed at a comparative tax disadvantage, also having to pay VAT in Europe.

He said: “We do not want to get subjected to double taxation when exporting to the EU while EU producers get away with paying import duties to the US.”

Other issues to discuss

Meanwhile, back in Europe, the European Commission is compiling an impact study on “which sector benefits how”, said Helene Banner, EU trade spokesperson. The study will be released in two months.

An earlier report from the EU-US High-Level Working Group on Jobs and Growth (HLWG) had, noted Banner, recommended “eliminating all duties on bilateral trade, with a substantial elimination of tariffs upon entry into force, and a phasing out of all but the most sensitive tariffs in a short time frame.”

But there are host of other issues to discuss, notably, labelling, safety and consumer protection, during clothing and textile talks.

One issue is that “the information that has to be included on the label is more extensive in the US than in the EU,” Ms Santos stressed. For instance, the US has mandatory origin labelling – which is currently only a (recent) proposal in the EU.

And when it comes to safety and consumer protection, the US has its own legislation that varies from the EU. – for example requirements in terms of testing.

Santos said it is important to focus on “harmonisation to reduce costs for companies, especially small-and-medium enterprises in both sides of the Atlantic”.

Brussels and Washington aim to conclude the talks “ideally in about two years from now,” said EU trade Commissioner Karel De Gucht: “But more paramount than speed is achieving an ambitious deal.”

The European Commission will present draft negotiating directives to the EU Council of Ministers for approval in March and similar proposals are being sent to the US Congress. “Both sides aim to advance fast once negotiations are started,” added Banner.

Outlook of the U.S. Textile Industry in 2013

The latest industry outlook proposed by the Textile World argues that in 2013 the U.S. textile industry will improve industry strategy and planning in the following areas:

increased management emphasis in such areas as sourcing, inventory control
use of more flexible and efficient machinery and equipment
new and upgraded consumer products,
more ecologically friendly offerings
more Made-in-USA labels

Don’t misunderstand/misinterpret these terms. The proposed strategies actually tell us:

1. the U.S. textile industry will become even more capitalized in production (as the result of “using more flexible and efficient machinery and equipment”).

2. the success of the U.S. textile industry relies on import (that’s why “management of sourcing” is suggested to be emphasized), despite the intension to promote “made in USA” label which has more to do with the current “rules of origin” defining the nationality of the products.

3. the softgoods industry (textile, apparel and related retailing) is a highly buyer-driven industry. Even textile mills have realized the importance of understanding and directly reaching the consumers.

4. sustainability is a major factor driving technical reform and upgrading in the textile industry. Other than the environmental concerns, there is another strategy behind the efforts: when the U.S. textile industry is fully ready to “be able to produce in a sustainable way”, it will ask for legislation support to require “everybody”(including imported products) to meet the same environmental standards(professionally, we call it “technical barriers of trade”). Developing countries can compete on price, but definitely cannot compete on technology and capital which are the basis of achieving “sustainability”. Bu then, you will see sustainability becomes a real game changer.

Another relevant forecast made by the article “But holding these costs down through efficiency gains can also have a negative impact —namely, a smaller industry workforce. In the textile sector, for instance, squeezed by productivity gains, overall employment should drop from 232,000 in 2012 to near 209,000 by 2015.” As we menioned in the class, technology kills jobs too, although new types of jobs will be created at the same time–but with totally different skill requirements.

Is Textile and Apparel Manufacturing Coming back to the U.S.?

Preliminary Findings:

1. As suggested by numerous studies, the U.S. manufacturing sector as a whole demonstrated a robust V-shaped recovery from the 2008 financial crisis in terms of industry output. Growth rate of the industry output from 2010-2011 was also among the highest in the past 10 years.

2. There is no sign yet that textile and apparel (T&A) manufacturing is coming back to the U.S, despite suggested popularity of “insourcing” as result of rising labor cost in China. However, the decline rate of apparel manufacturing in the U.S. seemed to be slowing down.

3. Jobless recovery happened both in the U.S. manufacturing sector as a whole and in the T&A manufacturing sectors. Particularly, the U.S. T&A industry respectively lost 21.0% and 25.6% of its manufacturing jobs from 2008-2012 compared with only 10.8% decline of employment in the manufacturing sector over the same period. Based on the current data, it can be concluded that a sizable return of manufacturing jobs in the U.S. T&A industry would hardly occur at least in the near future.

Sheng Lu

How many U.S. consumers are willing to spend $1,300 for a blazer, $170 for a dress shirt, $80 for a tie and $390 for a pair of jeans?

Recently, WSJ wrote a story about apparel “made in USA”. Although apparel manufacturing will never disappear in the U.S. (as the case elsewhere in the world), neither is it likely that those lost labor-intensive manufacturing jobs in the apparel sector will come back in the future. Why? Just ask yourself: Am I willing to spend $1,300 for a blazer, $170 for a dress shirt, $80 for a tie and $390 for a pair of jeans? These are the price tags associated with “Made in USA” for apparel.

Apparel is not a single case. If you’d like to enjoy your iPhone “Made in USA”, please add two “00” to the current price tag. Like it or not?

Similar questions can also be raised to the Europeans, Chinese, Koreans and everyone else in the world. For example, what will happen if China does not import U.S. cotton but totally relies on its domestic supply? What will happen if each country tries to produce their own air plane instead of using Boeing’s aircraft? How about European retailers only accept credit card issued by an European financial service provider and reject Visa or America Express? And how long will it take to deliver a package to Asia if FedEx and UPS are not allowed to operate in these regions? Will these “changes” improve or worsen people’s daily life? The answer is obvious.

Globalization does not mean “Made in China”nor “Made in USA”. Rather, it means “Made in the World” based on each country’s comparative advantage, it means getting access to the world resources and using them more wisely and more efficiently. Why not everyone engages in doing something they are good at doing and then exchange? This is why we go grocery instead of growing vegetables nor raising cows by ourselves today.

Globalization also means a product now can reach the world market beyond the limited domestic market. But a country can only successfully export when another country is willing to import. This is why we need to support trade liberalization so that every country can export more of those products they are competitive in making. And definitely more jobs will be created domestically. I mean every country that engages in such global “exchange”.

We no longer live in the 15th century when the Mercantilism was born. In the 21st century, export is good and import is equally good for the economy. Embrace globalization and enjoy better life~

Sheng Lu

Data source: American Apparel and Footwear Association (2012)

Data source: U.S.-China Business Council

TPP and the U.S. Textile Manufacturing Industry

The Congressional Research Service just released its most recent study on the U.S. textile manufacturing industry and the Trans-Pacific Partnership (TPP) Negotiation. This is also one of the limited reference available so far that specifically addresses the sectoral impacts of TPP.

Overall, this report did a good job of compiling latest statistics showing the operation of the regional trade & production network between the United States and those developing countries in central and south America. It also discusses why the U.S. textile industry appears to be very nervous about Vietnam.

However, the study wasn’t able to quantify the impact of TPP, which leaves potential for future studies. On the other hand, although debates over TPP centers upon the rules of origin, we shall not forget about foreign investment–especially when geographically Vietnam is very close to China, Japan and South Korea. Even yarn-forward is adopted, why cannot Chinese factories move their factories to Vietnam? It shall be noted that China’s economy is undergoing structural change and it’s the time for some Chinese factories to “go offshore”.

Full text of the report can be found here.

OTEXA identifies top export markets for U.S. textile and apparel

The Office of Textiles and Apparel (OTEXA) recently released its 2012 Going Global Report, which identifies 15 top export markets for U.S. made textiles and apparel. The report also includes statistical profile of these 15 countries, including their GDP per capita, GDP growth and bilateral trade with the United States in recent years.

It is interesting to note that the top export markets for textile and for apparel are very different. Wonder why? Please think about the “stages of development theory” we discussed in class.

HS code refers to the “Harmonized tariff schedule” (HS), a classification system for commodities. Textile and apparel are covered by HS code chapter 50-63. Detailed list can be found at http://www.usitc.gov/tata/hts/bychapter/index.htm

The report can be downloaded from here

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