FASH455 Global Apparel & Textile Trade and Sourcing
Copyright© 2012-2023 Dr. Sheng Lu, Associate Professor, Department of Fashion & Apparel Studies, University of Delaware
While shopping in SoHo (NYC), Nicole Farese, a student from FASH455, found the label of a Splendid sweater reads “Made of Italian Yarn” and “Made in China”. Splendid is a casual wear store which is known for their high-quality clothing sold at a premium price.
Exercise: Check your wardrobe and can you find any clothing that is also made through a “global supply chain?” Please feel free to submit your picture with a brief description of your item to shenglu@udel.edu.
Regional supply chain (or production-trade network, RPTN) or refers to a vertical industry collaboration system between countries that are geographically close to each other. Within a regional supply chain, each country specialized in certain portions of production or value-added activities based on their respective comparative advantages to maximize the efficiency of the whole supply chain.
There are three primary textile and apparel (T&A) regional supply chains in the world today:
Asia: within this regional T&A supply chain, more economically advanced Asian countries (such as Japan, South Korea, and China) supply textile raw material to the less economically developed countries in the region (such as Myanmar, Cambodia, and Vietnam). Based on relatively lower wages, the less developed countries typically undertake the most labor-intensive processes of apparel manufacturing and then export finished apparel to major consumption markets around the world.
Europe: within this regional T&A supply chain, developed countries in Southern and Western Europe such as Italy and Germany serve as the primary textile suppliers. Regarding apparel manufacturing in the European Union, products for the mass markets are typically produced by developing countries in Southern and Eastern Europe such as Poland and Romania, whereas high-end luxury products are mostly produced by Southern and Western European countries such as Italy and France. Furthermore, a high portion of finished apparel is shipped to developed EU members such as UK, Germany, France, and Italy for consumption.
America: within the region, the United States serves as the leading textile supplier, whereas developing countries in North, Central and South America (such as Mexico and countries in the Caribbean region) assemble imported textiles from the United States or elsewhere into apparel. The majority of clothing produced in the area is eventually exported to the United States for consumption.
Data from the World Trade Organization (WTO) shows that regional supply chain remains an essential feature of today’s global textile and apparel trade. Notably, three trade flows are worth watching:
First, Asian countries are increasingly importing more textiles from within the region. In 2016, around 91.2% of Asian countries’ textile imports came from other Asian countries, up from 86.8% in 2006. This change reflects the formation of a more integrated T&A supply-chain in Asia. The more efficient regional supply chain also helps improve the price competitiveness of apparel made by “factory Asia” in the world marketplace. Particularly in the past few years, T&A exports from Asia is posting substantial pressures on the operation of the T&A regional supply chains in the Western Hemisphere.
Second, the intra-region T&A trade in EU remains stable. In 2016, 64.1% of EU countries’ textile imports and 55.6% of EU countries’ apparel imports came from within the EU region. Over the same period, 73.3% of EU countries’ textile exports and 81.6 % of their apparel exports also went to other EU countries.
Third, the Western-Hemisphere T&A supply chain, which involves countries in North, South and Central America, is facing substantial challenges from the increasing competition from Asian T&A exporters. In 2016, only 29.0% of North, South and Central American countries’ textile imports and 18.6% of their apparel imports came from within the region, a record low in the past ten years. Meanwhile, in 2016 Asian countries supplied 60.1% of textiles and 73.7% of clothing imported by countries in the Western Hemisphere, a record high in history. Understandably, if regional free trade agreements, such as NAFTA and CAFTA-DR, no longer exist, it would be even more difficult for the Western-Hemisphere T&A supply chain to survive. The potential losers of the collapse of the Western-Hemisphere T&A supply chain will include not only US textile exporters but also apparel exporters in North, South and Central America. Notably, in 2016, 89.3% of apparel exported by countries in the Western Hemisphere were destined for the region.
Data Source: World Trade Organization (2017)
by Sheng Lu
A timely, informative and intellectual discussion with Roberto Azevêdo, Director General of the World Trade Organization on the state of global trade and its governance. Some important key points during Roberto’s presentation/discussion:
Questions for thinking:
The World Textile and Apparel Trade in 2016 is now available
According to the newly released World Trade Statistical Review 2016 by the World Trade Organization (WTO), the current dollar value of world textiles (SITC 65) and apparel (SITC 84) exports totaled $291 billion and $445 billion respectively in 2015, but decreased by 7.2 percent and 8.0 percent from a year earlier. This is the first time since the 2009 financial crisis that the value of world textiles and apparel exports grew negatively.
However, textiles and apparel are not alone. The current dollar value of world merchandise exports also declined by 13 percent in 2015,to $16.0 trillion, as export prices fell by 15 percent. In comparison, the volume of world trade grew slowly at a rate of 2.7 percent, which was roughly in line with world GDP growth of 2.4 percent. WTO says that falling prices for oil and other primary commodities, economic slowdown in China, a severe recession in Brazil, strong fluctuations in exchange rates, and financial volatility driven by divergent monetary policies in developed countries are among the major factors that contributed to the weak performance in world trade.
Textile and apparel exports
China, the European Union and India remained the top three exporters of textiles in 2015. Altogether, they accounted for 66.4 percent of world exports. The United States remained the fourth top textile exporter in 2015. The top ten exporters all experienced a decline in the value of their exports in 2015, with the highest declines seen in the European Union (-14 percent) and Turkey (-13 percent). The smallest decline was recorded in China (-2 percent).
Top three exporters of apparel include China, the European Union and Bangladesh. Altogether, they accounted for 70.3 percent of world exports. Among the top ten exporters of apparel, increases in export values were recorded by Vietnam (+10 percent), Cambodia(+8 percent), Bangladesh (+6 percent) and India (+2 percent). The other major exporters saw stagnation in their export values (United States) or recorded a decline (all other top ten economies).
Additionally, despite reported rising production cost, China’s market shares in world textile and apparel exports continued to rise in 2015 (see the figure above).
Textile and apparel imports
The European Union, China and the United States were the top three importers of textiles in 2015. However, altogether they accounted for only 37 percent of world imports, down from 52.8 percent in 2000. Because a good proportion of textiles made by developed countries (such as the United States) are exported to developing countries for apparel manufacturing purposes, the pattern reflects the changing dynamics of world apparel manufacturing and exports in recent years.
Because of consumers’ purchasing power (often measured by GDP per capita) and size of the population, the European Union, the United States and Japan remained the top three importers of apparel in 2015. Altogether, they accounted for 59 percent of world imports, but down from 78 percent in 2000. This indicates that import demand from other economies, especially some emerging markets, have been growing faster over the past decade.
The 2018 U.S. Fashion Industry Benchmarking Study is now available.
The report can be downloaded from HERE
Key Findings of the study:
I. Business environment and outlook in the U.S. Fashion Industry
II. Sourcing practices in the U.S. fashion industry
III. Trade policy and the U.S. fashion industry
The benchmarking study was conducted between March 2016 and April 2016 based on a survey of 30 executives from leading U.S. fashion and apparel brands, retailers, importers, and wholesalers. In terms of business size, 92 percent of respondents report having more than 500 employees in their companies, while 84 percent of respondents report having more than 1,000 employees, suggesting that the findings well reflect the views of the most influential players in the U.S. fashion industry.
For the benchmarking studies in 2014 and 2015, please visit: https://www.usfashionindustry.com/resources/industry-benchmarking-study
The global apparel and footwear industry enjoys a 5 percent value growth in 2015. Asia Pacific remains the world’s largest apparel and footwear market, with market value increased by $30 billion USD in 2015. In particular, the United States, China and India contributed more than half the absolute increased value.
Market growth in Western Europe remains stagnant in 2015. However, some countries performed better than others. For example, apparel and footwear sales continued to experience significant losses in Greece and Italy with 7 percent and 2 percent declines in 2015, respectively. France didn’t do very well either and size of the French market is expected to contract by $1.5 billion USD by 2020. In comparison, UK, Western Europe’s largest market, posted modest 1 percent growth in 2015. Performance in Germany remained overall stable.
The US market continues to perform well with healthy value growth of 4 percent in 2015. However, the performance of key players such as J Crew and Gap, both of which plan to close a significant number of physical stores and lay off employees, highlight the increasingly competitive trading environment. US consumers overall remain cautious and adopt a value- driven approach to buying clothes resulting in a continuous discounting cycle, negatively impacting profit margins and slowing growth for the industry as a whole. From 2013 to 2014, volume growth of apparel sales in the United States exceeded value, primarily due to discounting, the proliferation of fast fashion brands and greater availability of low prices online. However, value growth returned to a more robust position in 2015, as a strengthening economy, improvements in the labor market and rising wages support future growth.
Sportswear is maintaining its momentum, increased by 8 percent in market value from 2014 to 2015, faster than any other apparel product categories. Consumers no longer consider sport a task that needs to be checked off on a day-to-day basis but instead it has become a lifestyle. Athleisure remains a heavily prominent trend as more consumers adopt an active and healthy lifestyle, increasing the demand for athletic products that are technically advanced and fashionable. In response to the evolving athleisure trend, major sportswear brands have turned their attention to women’s sports apparel and footwear. With Skechers, Lululemon, Under Armour and Nike reporting growth of 33 percent, 20 percent, 19 percent and 12 percent, respectively, in 2015.
Currency weakness, political unrest and tough economic environments continue to result in slowing growth among the emerging markets. However, internet retailing & e-commerce is a spotlight. Apparel and footwear sales through internet retailing grew by 23 percent in 2015 globally and are expected to continue providing impressive growth for apparel brands to 2020. Global mobile internet retailing has grown at a rapid of 92 percent over 2011-2015, highlighting the increasingly vital role mobile is playing within the buying process. Notably, emerging markets are accounting for a significant proportion of growth and are expected to boast a higher market size than developed markets by 2018.
Data source: Euromonitor Passport
(photo courtesy: Amcham Vietnam)
Herb Cochran is the Executive Director at the American Chambers of Commerce (AmCham) Vietnam. He has helped transform AmCham Vietnam into an influential organization that promotes trade and investment between Vietnam and the United States, with a focus on developing networking, information-sharing, and advocacy activities to improve the business environment.
Herb mobilized AmCham Vietnam members’ substantial efforts to conclude negotiations on the Vietnam-U.S. Bilateral Trade Agreement and Vietnam’s WTO Accession, and to have these two agreements approved by the U.S. Congress. As a result, trade between Vietnam and the U.S. increased from $1.2 billion in 2000 to about $36 billion in 2014. And Herb expects that total Vietnam-U.S. trade will reach $ 72 billion in 2020.
With Herb’s leadership and support, AmCham Vietnam’s committees and industry sector experts have helped improve mutual understanding on key issues in U.S.-Vietnam trade and investment, including implementation of trade agreements, preserving Vietnam-U.S. apparel trade, strengthening governance and anti-corruption efforts, improved industrial relations, Project 30 (simplification of Vietnam’s administrative procedures), work force development for modern manufacturing, promoting trade and investment between the U.S. and Vietnam’s Southern Key Economic Region, and the Asia Development Bank’s strategy for the economic and social development of Vietnam and the Greater Mekong Subregion.
Prior to joining AmCham, Herb was Commercial Attaché at the U.S. Embassy in Hanoi and Principal Commercial Officer at the U.S. Consulate General in Ho Chi Minh City. He helped establish the commercial office of the U.S. Embassy in Hanoi, hiring staff and establishing trade and finance programs, including the U.S. Export-Import Bank, Overseas Private Investment Corporation (OPIC), and U.S. Trade and Development Agency (USTDA). In 1998-99 he established the commercial office of the U.S. Consulate General in Ho Chi Minh City.
Herb also served as Regional Director, East Asia and Pacific, U.S. Commercial Service, based in Washington DC. His responsibilities included program, personnel, and budget support for the commercial departments of 15 United States Embassies in the Asia/Pacific region, from Tokyo, Seoul, and Beijing in Northeast Asia, to all the countries of Southeast Asia, and down to Australia and New Zealand. Other international working experiences of Herb include: Commercial Counselor at the U.S. Embassy in Bangkok, Thailand, Commercial Attaché at the U.S. Embassy in Tokyo, Japan, U.S. Consulate General in Osaka, Japan, and Action Officer at the State Department’s Office of Japanese Affairs.
Born in North Carolina, Herb earned a B.A. from the University of North Carolina at Chapel Hill (History), and a Certificat from the Institut d’Études Politiques (Sciences Po) in Paris. He is also a graduate of the Industrial College of the Armed Forces in Washington DC (National Defense Strategy).
Interview Part
Sheng Lu: Can you provide us an overview about the US-Vietnam business ties?
Herb Cochran: Vietnam has succeeded at attracting foreign direct investment (FDI) and increasing trade. U.S. – Vietnam trade in 2015 will likely reach over $45 billion, another annual increase of over 20%. Vietnam accounts for 25% of all U.S. imports of goods from the Association of Southeast Asian Nations (ASEAN). The numbers are likely to reach $80 billion and a 33% market share by 2020.
More details can be found from a few recent AmCham statements to government officials and to press inquiries:
Note: Vietnam Business Forum a “structured dialogue” of about three hours 2 times a year, in June and in December, where the business associations present their views of the business ties and business environment and suggest areas for improvement.
Sheng Lu: What are the main reasons that U.S. companies come to invest in Vietnam? Are most U.S. business operations in Vietnam profitable?
Herb Cochran: Foreign Direct Investment into Vietnam has been increasing recently, as companies prepare for ASEAN integration, for the Trans-Pacific Partnership (TPP), and for the expectation that 59% of global middle class consumer spending will be in the Asia – Pacific region by 2030, up from 23% in 2009. For example:
These are all world-class factories, by global companies, for export to ASEAN, TPP, and Asia-Pacific markets. Not to mention the high-tech investments by Intel, Samsung, Apple, and others in the microelectronics and consumer electronics sector.
Main reasons that U.S. companies come to invest in Vietnam include:
Regarding Vietnam’s business and investment environment, please also see the summary below from ASEAN AmChams’ Business Outlook Survey 2016.
Sheng Lu: Given the increasing labor cost in China, many people see Vietnam as an alternative sourcing destination for labor-intensive products such as apparel and footwear. What’s your view on this trend?
Herb Cochran: I agree. In Aug 2013, we had a delegation visit AmCham HCMC from AmCham Hong Kong, Footwear and Apparel Committee. They said, “We represent 80% of the apparel and footwear sourcing in the world. We are in Hong Kong because most of our sourcing is in China. But we are leaving China, for various reasons. Vietnam’s participation in TPP is certainly an attraction, but we are leaving China with or without TPP. We want to know if Vietnam will welcome us.”
It should be particularly noted that between 2013 – 2015, about $3 billion was announced in FDI in textiles to meet the yarn-forward rules of origin requirements of TPP. One estimate projects Vietnam’s apparel exports to the U.S. under TPP “… would be as high as US$ 22 billion” by 2020. Another projects that Vietnam’s apparel and footwear exports would increase by 45.9% over the baseline by 2025. A third expert said she expects the TPP will “change the sourcing landscape drastically;” and Vietnam’s share of the U.S. apparel import market could go from 10% to 35% very quickly.” [Note: 35% of the U.S. apparel imports market is $35 billion. I think this is the most interesting estimate, a microeconomic estimate from an industry expert and not a “macroeconomic model estimate.”] And Mr. Le Tien Truong, Deputy Director of VINATEX, expects that Vietnam’s exports of textiles and apparel could reach $50 billion by 2025. [I think this estimate is overoptimistic.]
Below is a historical comparison of U.S. imports of apparel from China, “2nd Tier Countries,” and “Other.” from 2005 to 2025. The actual trade statistics from 2005 to 2015 show that U.S. Imports of Apparel from China doubled from 2005 (when quotas on WTO members were lifted) to 2010, but they have been “flat” since then. Value of imports from 2016 to 2025 are forecasted numbers.
Sheng Lu: In your view, what commercial opportunities does the Trans-Pacific Partnership (TPP) present to U.S. companies in Vietnam, especially in the textile and apparel industry?
Herb Cochran: The most authoritative study was done by Professor Peter Petri of Brandeis University and the Peterson Institute. According to the findings:
The TPP would increase Vietnam’s exports from the expected “baseline” in 2025 without TPP of $239.0 billion (of which apparel and footwear exports would total $113 billion) by $67.9 billion to $307 billion (of which apparel and footwear exports would increase by $51.9 billion to $165 billion). In percentage terms, total exports would increase by 28.4% over the baseline, and apparel and footwear exports would increase by 45.9% over the baseline. Total Net Exports increase: 67.9 / 239.0 = 28.4%.
In addition, the expected Gross Domestic Product (GDP) growth benefits are substantial, Vietnam’s GDP in 2025 with TPP, would be 10.5% higher than the baseline estimate. This is particularly important now that Vietnam is in a “structural growth decline” period, according to the World Bank. Those are economic projections that give a general idea.
Sheng Lu: How is TPP discussed in Vietnam such as its local media?
Herb Cochran: Very positively. For example, see the below link: “89% of public in Vietnam thinks the TPP is “ … a good thing.” http://www.amchamvietnam.com/30448353/89-of-public-in-vietnam-supports-tpp-pew-research/
Part of the reason for this positive viewpoint is the series of seminars that we in AmCham HCMC organized in 2013 to explain about the TPP, create better understanding of and support for the TPP especially in the Vietnam business community.
Sheng Lu: What is the outlook for TPP ratification in Vietnam?
Herb Cochran: Very good. At the closing ceremony of the 14th Plenum of the 11th Party Central Committee, the Party General Secretary, Nguyen Phu Trong, said members of the Party Central Committee reached consensus on the signing and ratification of the Trans-pacific Partnership Agreement in conformity to laws on signing and joining international treaties. Mr. Trong said: “The TPP will bring great benefits but also opportunities and challenges to Vietnam. These challenges have been identified during Vietnam’s 30 years of renewal and international integration. With efforts, creativity, and determination of the Party, army, people, and the business community, we are confident that we will overcome all challenges and grasp opportunities created by the TPP to achieve rapid, sustainable growth.”
Sheng Lu: While living in Vietnam, have you encountered any culture shock? Can you share some stories with our students?
Herb Cochran: No culture shock. During my career as a U.S. Foreign Service Officer, I lived in Vietnam, Japan, and Thailand for about 22 years, so I am used to living abroad. And I have lived in Vietnam since Jan 1997. I guess rather than “culture shock,” you might say that I have “culture insights” from time to time. The most common insight here in Vietnam is how polite, warm and gracious most people are. It is still a traditional society, very family oriented. One cultural insight is how they celebrate “death anniversaries” for many years, with special celebrations on certain multi-year anniversaries, to keep family ancestors in their memories, called lễ giỗ.
Sheng Lu: Last but not least, for our students interested in working/interning in Vietnam, do you have any suggestions?
Herb Cochran: It’s very tough to get started. Click the below link for some comments that I have put together in response to many questions: http://www.amchamvietnam.com/faqs/faq-how-do-i-find-employment-opportunities-with-amcham-member-companies/. A short commentary is that I think it is probably better to start in the U.S. with a large organization that has global operations, e.g. Walmart, Nike, etc., and learn about that organization’s international operations and get started that way. Especially when your students are younger, maybe not yet married, no children, etc. One real problem for American citizens is that they are taxed in the U.S. and in the country of employment, so that they are generally 25% to 50% more expensive than U.S. non-citizens.
–The End–
International trade plays a critical role supporting textile and apparel (T&A) “Made in USA”, according to latest firm-level data from the Office of Textiles and Apparel (OTEXA) under the U.S. Department of Commerce.
First and formost, textile and apparel “Made in USA” today contain imported components. Data collected from the OTEXA “Made in USA” Sourcing database shows that using imported inputs such as cut parts, fabrics, accessories and trims is a very common practice among the total 122 companies which claim making either yarn, fabric, home textiles, technical textiles or apparel in the United States. Particularly, more than 76% of companies which make apparel in the United States say they use imported inputs, followed by companies which make technical textiles (52%) and fabrics (46%). Moreover, the lack of sufficient supply of locally made fabrics is the top reason why U.S. T&A companies use imports as alternatives.
The supportive role played by imports to T&A “Made in USA” also explains why the U.S. T&A industry is in favor of the passage of the American Manufacturing Competitiveness Act 2016 (Miscellaneous Tariff Bill, MTB). The Bill, which passed by the U.S. Congress in May, will eliminate or reduce hundreds of import duties on textile raw materials and intermediate products that are not produced or available domestically in the United States.
On the other hand, export promotes “Made in USA” textiles and apparel as well. Data from the OTEXA “Made in USA” sourcing database shows that as many as 88.9% of U.S.-based yarn manufacturers, 82.9% of technical textile manufacturers, 75% of fabrics manufacturers and 76% of home textile manufacturers currently export and sell their products overseas.
For more detailed data and analysis, please stay tuned…
Sheng Lu
Julia K. Hughes is President of the United States Fashion Industry Association (USFIA), which represents textile and apparel brands, retailers, importers, and wholesalers based in the United States and doing business globally. Founded in 1989 as the United States Association of Importers of Textiles & Apparel with the goal of eliminating the global apparel quota system, USFIA now works to eliminate tariff and non-tariff barriers that impede the industry’s ability to trade freely and create economic opportunities in the United States and abroad. Ms. Hughes represents the fashion industry in front of the U.S. government and international governments and stakeholders.
Ms. Hughes has testified before Congress and the Executive Branch on textile trade issues. She is recognized as an expert in textile and apparel issues and frequently speaks at international conferences including the Apparel Sourcing Show, MAGIC, Foreign Service Institute, National Association of Manufacturers, Cotton Sourcing Summit, International Textiles and Clothing Bureau, Young Presidents’ Organization, World Trade Organization Beijing International Forum, and others.
Ms. Hughes served as the first President of the Organization of Women in International Trade (OWIT) and is one of the founders of the Washington Chapter of Women in International Trade (WIIT) and WIIT Charitable Trust. In 1992, she received the Outstanding Woman in International Trade award and in 2008, the WIIT Lifetime Achievement Award.
Ms. Hughes has an M.A. in International Studies from the Johns Hopkins School of Advanced International Studies and a B.S. in Foreign Service from Georgetown University.
Special thanks to Samantha Sault, Vice President of Communication for the U.S. Fashion Industry Association for facilitating and supporting this exclusive interview. Ms. Sault is responsible for the development and execution of the association’s communications strategy, including public relations, policy research and messaging, and social media. Prior to joining the association, Ms. Sault honed her communications expertise at DCI Group, a global public affairs communications firm headquartered in Washington, D.C. Previously, she worked in media as a web editor and fact checker at The Weekly Standard and an editorial assistant at Policy Review, the journal of the Hoover Institution. She began her career in the apparel industry at 17 at abercrombie kids in Bethesda, Maryland.
Interview Part
Sheng Lu: Our students are interested in knowing who the members of the U.S. Fashion Industry Association (USFIA) are. Can you name a few of your member companies?
Julia Hughes: Our members range from major global brands and fast-fashion retailers, to small importers and wholesalers. While all of our members must be doing business in the United States, our membership roster also includes some international companies with a retail presence in the United States. Some of our most actively engaged members include iconic brands and retailers like Ralph Lauren, Macy’s, Levi Strauss & Co., JCPenney, Urban Outfitters, PVH Corp., and American Eagle Outfitters. We also represent small and medium-size importers, wholesalers, and manufacturers that you might not know by name, but supply to many of your favorite brands and retailers—companies like Michar, MGF Sourcing, and Golden Touch Imports, to name a few.
Sheng Lu: The USFIA is an advocate for trade liberalization and removal of trade barriers. Can you talk with us about the benefits of free trade, especially for the fashion industry both in the United States and globally?
Julia Hughes: As you know, USFIA was originally founded in 1989 (then known as the United States Association of Importers of Textiles and Apparel) with the mission to eliminate the global quota system. We were successful! But of course, as you also know, that work is not over. The quotas may have gone away, but there still are import barriers that are unique to the apparel industry. USFIA member companies continue to face some of the United States’ highest tariffs. Textiles and apparel, combined with footwear, still account for some of the highest peaks in the U.S. tariff schedule, with many double-digit tariffs and a high of 32 percent.
Not only are these tariffs higher than on other products, but these tariffs also are a regressive tax. We believe it is simply wrong for a single mom to pay a 32 percent import tax for her baby’s onesies and a 16 percent tariff for her baby’s booties, while the wealthy pay a 1.2 percent tariff for their silk scarves. In total, apparel tariffs take more than $10 billion out of the pockets of hard-working Americans annually. So eliminating these tariffs would be an immediate benefit to American consumers and to American families.
But even removing these tariffs would not mean that there is “free trade.” For example, the fact that the United States maintains these peak textile and apparel tariffs creates problems for new policy initiatives to expand export markets for U.S. products. Market access for American brands and exports is hindered by prohibitively high tariffs in attractive third country markets such as India and Brazil. Our own peak tariffs only encourage other governments to maintain their own high apparel and textile tariffs to “protect” their domestic industries. American brands such as Levi’s and Polo are among the most recognized brands in the world. American yarn spinners and fabric makers operate highly efficient operations that make them among the world’s most competitive producers. For all of these companies, we need every opportunity to remove barriers to trade.
There is a great opportunity to create high-paying jobs here in the United States, too. Fashion brands and retailers offer quality design, product development, logistics, sourcing, and service jobs in the United States, along with manufacturing jobs. These jobs are supported by global value chains, and will be on track to grow IF free trade agreements contain rules of origin and market access provisions that will decrease the cost of those fashion products. This would not only help the brands and retailers grow and create more jobs, but also help consumers by providing access to affordable, high quality apparel.
Finally, free trade isn’t just about tariffs – but also non-tariff barriers like regulations, certifications, and testing requirements all represent non-tariff barriers to trade. And since today’s global brands are selling everywhere from the United States to the UK to Japan to Dubai, we are working to eliminate these barriers, too.
Sheng Lu: The Trans-Pacific Partnership (TPP) is a buzzword for the fashion industry, with Vietnam and China at the core of the discussion. Many people see Vietnam as an alternative sourcing destination to China for labor-intensive apparel and footwear products. You’ve visited both Vietnam and China recently. What’s your first-hand observation? How competitive is “Made in Vietnam” compared with “Made in China”?
Julia Hughes: The TPP is a top priority for USFIA and for our member companies. But unlike some, we do not see the TPP as creating an either/or scenario for sourcing apparel and footwear. China remains the top supplier to the U.S. market, and we do not see that changing any time soon. The breadth of manufacturing operations in China, combined with the state-of-the-art infrastructure and logistics operations, mean that sourcing executives are comfortable with placing orders and knowing that they will get the quality product that they want delivered on time.
However, you are correct that Vietnam is seen as an alternative sourcing destination.—not just by U.S. sourcing executives, but also for Chinese companies. Both the TPP and the EU-Vietnam Free Trade Agreement make Vietnam an especially attractive destination for making apparel and for investments in manufacturing yarns and fabrics. But Vietnam is not necessarily the destination for companies searching for lower prices.
Sheng Lu: In the 2015 USFIA Benchmarking Study, around one-third of respondents report sourcing from 6-10 different countries and another one-third report sourcing from 11-20 different countries. What are some of the reasons that U.S. fashion companies today would choose to have such a diversified sourcing base?
Julia Hughes: There are a couple reasons why companies have such diversified sourcing bases. First, it is a holdover from the quota era, because companies were pretty much forced to diversify their sourcing since they couldn’t import everything from China. Following the elimination of the quotas in 2005, companies had cultivated trusted suppliers all over the world in countries as diverse as Vietnam, Sri Lanka, Mexico, and Colombia, so there was no reason to leave these good suppliers after they had spent the time and resources developing their supply chain. Second, diversification is a method of risk management. There are lots of risks that could impact your supply chain—from natural disasters to labor strife to terrorist attacks. The last thing a company wants is to have all of their production in one place—because when disaster strikes, you won’t be able to get your product to your customers. By keeping a diverse supply chain, you can ensure that you’ll always have products moving to the shelves. Finally, different countries have different specialties—and truthfully, no one country can do it all. Companies don’t necessarily prefer to source fabric, yarn, zippers, and buttons from four different countries and ship to a fifth for cutting and sewing, but sometimes, that’s the way it must be done in order to produce the best product at the best price for your target customer.
Sheng Lu: We know that the African Growth and Opportunity Act (AGOA) has been extended for another 10 years. How has the U.S. fashion industry reacted to the AGOA extension? Are U.S. consumers going to see more “Made in Africa” apparel in the retail stores?
Julia Hughes: USFIA member companies are definitely looking at sourcing opportunities in Africa after the extension of AGOA. Today a little more than 1 percent of U.S. apparel imports come from Sub-Saharan Africa—and there are only a few countries that ship apparel to the U.S. market. Kenya, Lesotho, Mauritius, and Madagascar are the major producers of apparel today – representing 87% of the U.S. imports. The ten-year extension of AGOA is allowing companies to take a fresh look at what is available to source in Africa today, as well as to plan to long-term growth. Both PVH and VF, for example, have been very public about their commitment to develop a vertically integrated industry in Ethiopia.
What is exciting is that new sourcing supply chains are opening up in Africa. While the level of U.S. imports remains low there are some growing suppliers. For example, during March 2016–a month when the overall U.S. apparel imports plunged by -21 percent compared to March 2015—there were a few Sub-Saharan African suppliers that bucked the trend. U.S. imports from Madagascar jumped by 160 percent, from Ethiopia by 83 percent, and from Ghana by 371 percent!
Sheng Lu: Textile and apparel trade policy is always one of the most challenging topics for students in FASH455. Many students wonder why the rules governing the global textile and apparel trade are always far more complicated than most other sectors. For example, in the past, students had to learn about the quota system, from the Short-term Arrangement (STA) to the Multi-Fiber Arrangement (MFA). The quota system is gone, but it seems students now have to know even more “terms”: the yarn-forward rules of origin, short supply list, third country fabric provision, trade preference level (TPL) and earned import allowance… What makes the textile and apparel trade so unique in terms of trade regulations?
Julia Hughes: This is a great question–and one that does not have an easy answer. Absolutely, when I first started working with the industry, it was a revelation to understand about quotas and labeling requirements classification issues. Today, the industry is even more complicated. I think that a lot of the complexity today is due to protectionism. Negotiators looked for ways to limit the market opening impact of trade agreements, and to try to protect their domestic industry. This isn’t just an issue for the United States. Starting with NAFTA in the 1990’s, the rules are more complicated in every free trade agreement—and none of the free trade agreements exactly matches the others. But the complexity isn’t just for FTAs, of course. Today, we also face more regulations, different labeling requirements for different countries (and unfortunately sometimes even different labels are required in different states!), and more testing and certification requirements.
Sheng Lu: Looking ahead in 2016, what important sourcing trends and trade patterns shall we expect in the U.S. fashion industry? What are the policy priorities for the USFIA this year?
Julia Hughes: The implementation of the Trans-Pacific Partnership (TPP) remains at the top of our list of policy priorities. But implementation is still a long way off, especially since the U.S. Congress is unlikely to vote on the agreement before the November elections. We don’t expect to see a huge shift to sourcing in Vietnam, Malaysia, and the other TPP partners in 2016-2017, since duty-free treatment is a long way off, but we do expect to see companies taking a closer look at opportunities there—and it helps that Vietnam is already the #2 supplier to the United States, so many companies are already sourcing there. We’re also prioritizing completion of the Transatlantic Trade & Investment Partnership (T-TIP) between the United States and European Union. The EU is a great source for luxury brands and companies manufacturing leather goods, but this agreement has an even greater potential in terms of regulatory harmonization, making it easier for many of our members to break into the retail markets in Europe. We’re also focused on enhancing the African Growth & Opportunity Act (AGOA), cumulation of free trade agreements, and customs and ethical sourcing issues, too. As far as future trends, we’re looking forward to seeing the results of our third-annual Fashion Industry Benchmarking Study, which will give us a lot of insight into what brands are thinking about sourcing and expansion!
Sheng Lu: Last but not least, our students wonder what makes you and your staff personally interested in the fashion industry. Particularly, through your daily work, how do you see the impact of the fashion industry in the 21st century global economy?
Julia Hughes: My path to the world of fashion is from the policy side. I was always interested in international policy and after graduating from Georgetown University and SAIS, I was fortunate to hear about an opportunity to be the Washington Representative for Associated Merchandising Corporation (AMC). It was a terrific opportunity to be engaged in policy discussions, but also to spend time with the buyers, with the sourcing teams, and also with the overseas offices and vendors to understand the impact on trade policy on the clothes we wear. Let’s face it, it is a shock to realize the way that Congressional actions, and negotiations, can determine whether a jacket is made with down, or synthetic fibers, or cotton–or maybe it is manufactured to qualify as a shirt instead of a jacket. It also is inspiring to work with industry executives who are committed to fashion as well as doing good for the global economy. Textiles and apparel has always been an industry that can be a gateway for economic development–and I have seen the positive impact by creating jobs where there were none before–as well as expanding U.S. jobs in design, product development and compliance.
Samantha Sault: I have always loved fashion—in fact, my very first job in high school was folding clothes and working the register at abercrombie kids at the mall in my hometown!—but I never thought about fashion as a career until I had been working for a few years after college. I started my career in political media in D.C., and eventually started covering the intersection of fashion and politics for various publications, including exciting events like New York Fashion Week and President Obama’s first inauguration (and the First Lady’s fabulous dresses). After five years in media and public affairs, I found my way to USFIA and the business and policy side of the fashion industry. The most inspiring part about working in fashion has been getting to know our contacts at our member companies, and seeing how committed they are not only to their brands, but also to ethical sourcing and compliance. These are not just buzzwords—I’ve learned firsthand that many of the individuals at our member companies are deeply committed to ensuring that they are doing the right thing in their supply chains from the factory floor (especially for women) to the retail store, and it has made me appreciate these brands even more than I already did.
–The End–
The following questions are proposed by students enrolled in FASH455 Spring 2016. Please feel free to leave your comment and engage in our online discussion.
L.L Bean: A Business Model for “Made in USA”?
L.L. Bean has been a strong business for hundreds of years, yet recently their sales of Bean Boots have skyrocketed because they are now seen as trendy. Even though L.L. Bean’s orders and demand has gone up, they still somehow manage to have their products being handmade, sourced locally, and all in the US.
#1: Can L.L. Bean become a model for other businesses looking to manufacture in the US? How has L.L. Bean managed to keep this business model up for so many years and why have they not changed or decided to outsource?
#2: Why doesn’t L.L Bean look into other American cities for manufacturing options so they do not lose productivity by being exclusively made in Maine?
#3: Do you think it would be beneficial for L.L. Bean to outsource to foreign companies for their manufacturing? Would there still be as high of a demand if these boots were manufactured abroad?
Outsourcing v.s. “Made in USA”
#4: It is said that one reason why American brands choose to offshore their manufacturing is because there isn’t as many cutting edge machines readily available in the States as in other countries. Is it realistic for the American manufacturing market to invest in these machines for domestic manufacturing? If so, how can America make sure to stay relevant with these technologies and not fall behind as we have currently?
#5: One aspect commonly mentioned throughout these readings was the lack of skilled labor in the US in the fashion industry. Is the decrease in skilled areas, such as shoemaking and needle trade, due to the increase in skilled labor overseas? Are these professions considered outdated for young Americans to be learning? How can we jumpstart a desire for young people to take up these skills once again?
#6: One major problem the US has been facing regarding keeping production domestic has been the lack of skilled workers to work in factories. Is the cost of providing training to interested workers too high? Should it be required that all fashion majors should take a sewing class? Where does the decision to train apparel workers begin?
#7: Many American manufacturers refrain from manufacturing in the United States because it is too expensive because more people are formally educated and are not willing to work for a low wage, but only 15% of respondents actually are working towards that. Is it realistic to reach out to homeless communities looking to get back onto their feet to see if they would work in factories? Would this help promote American manufacturing and decrease importing?
#8: In today’s fast paced fashion world, trends come and go rather quickly. The striking disadvantage of manufacturing overseas is the slow turnaround time which could be up to 3-5 months. By manufacturing domestically, turnaround can be as quick as 2 weeks. Why do the majority of fashion companies still choose to manufacture overseas when there is a possibility the trend could be over by time they reach store shelves (Thus, a lack in profit)? When will trend pressures become too much for overseas production?
#9: Is it even worth it to bring manufacturing back to America if it is not benefitting the workers and creating jobs? If manufacturing in the US is simply machine based, what is the point of doing so when it could be cheaper elsewhere and benefit countries that need the jobs?
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In the recently released 2016 President’s Trade Agenda, the textile and apparel (T&A) sector was mentioned four times (up from only once in 2015*):
1.Trade enforcement
“THE OBAMA ADMINISTRATION has a record of trade enforcement victories that have helped to level the playing field for American workers, businesses, farmers, and ranchers. In 2016, we will continue to aggressively pursue a robust trade enforcement agenda, including by using new and stronger tools under the bipartisan Trade Enforcement Act of 2015 to hold our trading partners accountable.
Ongoing disputes include challenges to:
2.Trade preference programs
“Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE) program, which supports nearly $900 million in garment imports from Haiti, is an essential support for Haiti’s long-term economic growth and industrial development. HOPE supports thousands of jobs in Haiti’s textile and garment sectors, while providing important protections to workers. Early extension of this program will provide the necessary stability and continuity for companies to continue investing in Haiti’s future.”
3.Benefits of trade to the American people
“More recent trends are similar, with families steadily gaining purchasing power as the price of traded goods, such as smart phones, apparel, and toys, falls. While all households benefit, the gains from trade have predominantly benefited lower-income Americans, who spend a greater portion of their incomes on highly-traded staples like food, shoes, and clothing.”
4.Trade and labor
Our engagement has produced an Implementation Plan Related to Working and Living Conditions of Workers that is helping to address concerns about workers’ rights and working conditions in Jordan’s garment sector, particularly with respect to foreign workers. Jordan has issued new standards for dormitory inspections, submitted new labor legislation to its parliament and hired new labor inspectors. USTR and Department of Labor continue to work with Jordan on the issues under the Plan.
Overall, it seems:1) Reflecting the global nature of the sector, T&A is a topic that involves multiple trading parties for the United States; 2) Economic development and foreign aid are important elements in the U.S. trade policy for T&A. 3) Social responsibility and labor practices in the T&A sector remain a grave concern and need further improvement through international collaborations. 4) The T&A sector is involved in some topics with divisive public opinions, such as the impact of imports.
* Textile and apparel mentioned in the 2015 U.S. Trade Policy Agenda:
Our engagement has produced an Implementation Plan Related to Working and Living Conditions of Workers that is helping to address concerns about workers’ rights and working conditions in Jordan’s garment sector, particularly with respect to foreign workers. Jordan has issued new standards for dormitory inspections, submitted new labor legislation to its parliament and hired new labor inspectors.
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1. Trade keeps the US economy growing. Since 1960, trade in the US on average has grown at double the rate of growth of the economy as a whole. Exports of goods and services—produced by businesses employing millions of Americans—are fourteen times what they were six decades ago.
2.Trade pushes countries to produce and export what they are relatively more efficient at making. This is called comparative advantage. The US has abundant skilled-labor and has become one of the world’s leading exporters of high-tech machinery, electrical equipment, vehicles and other capital goods. The same can be said for US exports of business, professional and technical services. The chart shows the trend of higher average earnings in manufacturing industries that export more per worker. More broadly, workers producing US exports are higher paid on average, by 16 to 18 percent more than other workers. And by all metrics, exporting industries are generally more productive than non-exporting industries.
3.Imports are essential to US production and exports! Export competitiveness relies on access to high-quality, low-cost imports. US production processes rely on multiple countries forming parts of the supply chain.
4. U.S. public opinion on trade has long been divided, although in recent years Americans appear to be more persuaded that the potential gains outweigh the costs. The unequal benefits from growing international trade, loss of manufacturing jobs and the downward pressure on wage level remain the top concerns of trade skeptics.
References:
While shopping in SoHo (NYC), Nicole Farese, a student from FASH455, found the label of a Splendid sweater reads “Made of Italian Yarn” and “Made in China”. Splendid is a casual wear store which is known for their high-quality clothing sold at a premium price.
Do you find any example of globalization from your clothing label or closet? Please feel free to leave your comment or send your pictures to shenglu@udel.edu (selected pictures will be shared through the blog).
1. Potential Impact of TPP on the Textile and Apparel Sector: A Summary of Recent Studies
2. 2014 World Textile Industry Labor Cost Comparison
3. Global Trade of Used Clothing (Updated: October 2015)
4. Market Size of the Global Textile and Apparel Industry: 2014 to 2018
5. When Will TPP Take Effect? Let’s look at the History
6. China to Become the World’s Largest Apparel Market in 2019
7. Are US Textile and Apparel Imports Using Free Trade Agreements?
8. 2015 US Fashion Industry Benchmarking Study Released
9. Exclusive Interview with Erin Ennis, Vice President, US-China Business Council
10. US Tariff Phaseout Schedule for Textile and Apparel in TPP by OTEXA Code
Potential impact of the Trans-Pacific Partnership (TPP) remains a hot topic among the U.S. textile and apparel industry. A recent news report suggests that implementation of the agreement will negatively affect clothing manufacturers in LA, where most remaining U.S. apparel manufacturing capacity is located.
According to the news report, “small, independent apparel manufacturers (in LA) did not see big gains from TPP because they did not want to outsource their work, but it put them at a competitive disadvantage.” One local industry estimation quoted in the report claims that “Southern California’s apparel manufacturing will shrink an additional 20 percent if the TPP goes into effect.”
The report further says that “A key question for the apparel industry is whether the agreement includes a yarn-forward provision, which requires material to come from a TPP country in order to be duty-free.” However, the report does not explain why the “yarn-forward” rule could potentially benefit apparel manufacturing in the United States.
The followings are my personal preliminary estimation* of the potential impact of TPP on U.S. T&A manufacturing. Results show that, compared to the base year level in 2011:
*Note:1. The estimation is conducted based on the latest Global Trade Analysis Project (GTAP) 9.0 database which includes complete bilateral trade information, transport and protection linkages of 140 countries and 57 sectors. Four scenarios are estimated:
2. TPP1 includes Australia, New Zealand, Malaysia, Singapore, Burnie, Chile and Peru; NAFTA1 includes Canada and Mexico; CAFTA1 includes all other CAFTA members except the United States.
Sheng Lu
[Note: The 2016 U.S. Fashion Industry Benchmarking Study has been released]
The U.S. Fashion Industry Association (USFIA) released its 2015 benchmarking study today. The report examines the industry’s business environment and outlook, sourcing practices as well as U.S. fashion companies’ viewpoints on critical trade policy agendas. Among the key findings:
This benchmarking study was based on a survey of 30 executives at the leading U.S. fashion companies from March 2015 to April 2015. The findings well reflect the views of the most influential players in the U.S. fashion industry, with 90 percent of respondents having more than 100 employees (including 60 percent with more than 1,000 employees).
The full report can be downloaded from HERE.
I hope you all enjoy the guest lecture given by Ambassador Friedrich Löhr on his global travel stories as a career diplomat over the past 37 years. Actually, topic of our class is closely connected with “international relations”. As observed by Michael Forman, US Trade Representative, “trade is what most of international relations are about and trade policy is national security policy”; “leaders have come to see the economic clout that trade produces as more than merely a purse for military prowess; they now understand prosperity to be a principal means by which countries measure and exercise power”.
Several readings/case studies/discussions in our class have touched the strategic aspects of international trade in the 21st century. For example, I hope at this point you not only understand the technical aspects of the Trans-Pacific Partnership (TPP) such as “yarn-forward” and “short supply list”, but also can see TPP as a strategic movement for the US to become more deeply embedded in the Asia-Pacific region. Similarly, the Trans-Atlantic Trade and Investment Partnership (T-TIP) is a free trade agreement, but a successful conclusion of T-TIP will also send “an unmistakable signal to the world about the strength of the US-EU bond—a timely reminder as the crisis in Ukraine has triggered deep unease across the continent.”
The strategic aspects of international trade can also be understood from the development perspective. There is a direct correlation between integration into the multilateral trading system and economic growth and between growth and poverty reduction. What then UN Secretary Kofi Annan said remains very true “The main losers in today’s very unequal world are not those who are too much exposed to globalization. They are those who have been left out”. No example can be more convincing than the case of textile and apparel (T&A) to illustrate this point. In many low-income countries in the world, T&A accounts for two-thirds of local employment and over 60 percentage of total merchandise exports. This is why trade preference programs such as AGOA, GSP and HOPE play a critical roles in providing greater market access opportunities to those most vulnerable countries.
To understand the strategic aspects of trade, you may further recall our case study 2 and the discussions on the necessity of maintaining a sound operation of the GATT system in the setting of 1970s. Without a rule-based multilateral trading system, international trade simply couldn’t happen. Yet the current multilateral trading system established shortly after World War II needs an update to better reflect the changing nature of world economy and format of trade. This is why so much attention has been given to mega-trade agreements such as TPP and TTIP. These free trade agreements will have a huge impact shaping the future rules of the game, no matter in terms of adding new agendas such as state-owned enterprises, digital trade and facilitating supply chain, or more effectively establishing a level playing field for issues such as environmental and labor standards.
So think strategically about international trade and think big about the impact of our T&A industry in the 21st century global economy.
According to a recent study conducted by McKinsey, the global women’s apparel market growth rate is forecasted to increase by 50 percent over the next 12 years, largely driven by the increasing weight of emerging markets such as China and Russia. Historically, the global women’s apparel market has grown at just over 3 percent per year; However, by 2025 the growth rate is expected to approach 5 percent per year. By 2025, women’s apparel is expected to account for 55% of global apparel sales and 60% of sales growth.
For fashion players, cities are mattering more than any other product category. Top 600 growth cities will account for 62% of women’s apparel market’s growth by 2025; and 16 out of top 20 growth cities are from the emerging markets, adding an additional $100 billion to the global women’s apparel market.
However, when looking at total size, mature-market cities will still have half the women’s apparel market worldwide, according to McKinsey. Particularly, growth in the luxury markets is still heavily dependent on the mature market, where 70 percent of top growth cities are located.
With the help of city level analysis, rather than discussing Europe or Asia as alternative destinations, or even the U.K. versus France, companies can now ask themselves, “in what 10 key cities should we next establish a strong presence?”
William L. “Bill” Jasper has been Unifi’s Chairman of the Board since February 2011 and has served as Unifi’s Chief Executive Officer (CEO) and member of Unifi’s Board of Directors and the Company’s Executive Committee since September 2007. Prior to his role as Chairman of the Board, he served as President and CEO, Vice President of Sales and General Manager of Unifi’s polyester division. He joined the company with the purchase of Kinston polyester POY assets from INVISTA in September 2004. Prior to joining Unifi, Mr. Jasper was the Director of INVISTA’s DACRON® polyester filament business. Before working at INVISTA, he held various management positions in operations, technology, sales and business for DuPont since 1980.
Bill Jasper is also a University of Rhode Island alumni! He graduated in 1977 with a Master of Science in Mechanical Engineering.
Founded in 1971 and Headquartered in Greensboro, NC, Unifi, Inc. is a leading producer and processor of multi-filament polyester and nylon textured yarns. Unifi provides innovative, global textile solutions and unique branded yarns for customers at every level of the supply chain. Unifi’s core business consists of the manufacturing of POY (partially-oriented yarn), the texturing, air-jet texturing, twisting, and beaming of polyester and the texturing and covering of nylon filament yarns. Branded products of Unifi include aio® — all-in-one performance yarns, SORBTEK® A.M.Y.®, MYNX® UV, REPREVE®, REFLEXX®, INHIBIT® and SATURA®, which can be found in many products manufactured by the world’s leading brands and retailers.
Interview Part
Sheng Lu: How would you describe the current status of the U.S. textile industry? What’s your outlook for the industry in the next 5 years? What are the top challenges the U.S. textile industry is facing?
Bill Jasper: The industry has undergone a revival after years of decline, so the current status is strong and I believe we’ll see that environment continue for several more years in this region. The industry is expanding in practically every key economic indicator, including output, employment, exports and investment.
The U.S. industry is also benefitting from several domestic advantages, including reliable and relatively inexpensive energy supplies, infrastructure, access to raw materials, and proximity to markets. We are gaining competitive advantages due to conditions outside the U.S., including rising costs in Asia, high shipping costs, and port capacity restraints. In addition, you’ve probably seen Wal-Mart’s advertising and P.R. blitz that it is committing to buy hundreds of billions of additional dollars in American-made products over the next decade to help support and spur U.S. manufacturing and innovation. With Wal-Mart leading the way, there is definitely a movement afoot to “reshore” some U.S. manufacturing, including textiles and apparel.
Finally, I believe a major driver of recent investments and one of the biggest contributors to the renaissance described above is also one of the biggest challenges the industry is facing. Virtually all of our free trade agreements to date have been based on a yarn forward rule of origin. This means that all processes, including the yarn extrusion, spinning, texturing, fabric formation, and the dyeing, finishing and assembly of the finished garment must take place in a free trade agreement member country to receive duty-free benefits. This rule has benefited the U.S. industry especially in NAFTA and DR-CAFTA, as U.S. yarn and fabric producers have dramatically increased our exports to the region under this regime.
As the U.S. negotiates the Transpacific Partnership Agreement (TPP), if this same rule of origin is undermined by single transformation rules or other loopholes, it could erode the entire supply chain in this hemisphere. In addition, careful attention must be paid to market access for potential TPP members like Vietnam, who is already the second largest exporter of textiles and apparel to the U.S. The domestic industry has requested reasonable duty phase-out periods in market access for our most sensitive products under the TPP so that our partnerships in this region have an adequate adjustment period. The TPP is considered to be the model for all future trade agreements with the U.S., thus it is critically important that our negotiators consider the profound consequences it can have on U.S. jobs and the U.S. textile industry.
Sheng Lu: “Made in USA” is a very hot topic these days, yet we also live in a globalized world today. From the textile business perspective, what is the relationship between “Made in USA” and “going global” in the 21st century? Do US textile companies today still have to make a choice between the two?
Bill Jasper: Most apparel brands and retailers utilize a balanced sourcing strategy that incorporates production in this hemisphere, as well as Asia, Africa, or other global manufacturing and/or assembly. I do not feel that U.S. textile producers today must necessarily make a choice between the two, but must have a business plan that addresses the realities of the global market. In fact, nearly 98 percent of the clothing purchased in the U.S. is imported from abroad. Only two percent of clothing bought in this country is manufactured here in the U.S., and I doubt there is a business plan in any U.S. textile company that doesn’t reflect that reality.
Unifi, for example, works with downstream customers who want research and development, innovation, speed to market, sustainability, etc., from yarn and fabric production in this hemisphere. It is important that we provide flexibility and these same innovative products anywhere in the world our customers choose to do business. Thus, we export yarn to more than 30 countries from our domestic plants (not counting the exports of fabric from domestic weavers and knitters that use our inputs). Unifi also operates a wholly-owned subsidiary in Suzhou, China, where we focus on the development, sales and service of Unifi’s premium value-added yarns for the Asian market. Our expanding network of manufacturing facilities, sales and sourcing initiatives enables us to drive and capture growth in every major textile and apparel region in the world.
Sheng Lu: We know many products of Unifi are textile intermediaries like fibers and yarns. So how is Unifi’s brand promoted? How much can consumers recognize your product as “made in USA”?
Bill Jasper: As an upstream producer, making that connection with the ultimate consumer can be a challenge. Unifi has succeeded on several fronts. We have differentiated our product offering with premium value-added products, like REPREVE®, which we supply to our global customers wherever they are producing. Our downstream sales and marketing teams work extensively with brands and retailers to help them promote the unique properties of Unifi fibers and yarns. Some ways we do this includes, on product-labeling, hangtags, point of sale, cobranding, advertising and various consumer promotions. The “Made in the USA” message is and can be part of this effort, and I think we’ll see more demand for that as the brands and retailers move more of their sourcing from Asia back to this hemisphere over the next few years.
We recently began marketing directly to the consumer through the launch of our REPREVE #TurnItGreen campaign, which focuses on raising awareness around the importance of recycling and the products that can be created from plastic bottles when they are recycled. The initial launch took place at ESPN’s X Games Aspen in January 2014, where we literally and figuratively helped turn the event green using REPREVE-based product and color. At X Games Aspen, we recycled more than 100,000 plastic bottles to make X Games signage, lanyards and other merchandise. As we grow the REPREVE brand at retail and in the consumer space, we will continue these efforts with various partners, including current partners who have joined the REPREVE #TurnItGreen initiative, including NFL team, the Detriot Lions, where we will recycle more than 200,000 plastic bottles to help turn their stadium green on December 7th, 2014. We’re also driving recycling education by helping turn the live action event, Marvel Universe Live!, green through apparel for the cast and crew, merchandise items and banners, all made with REPREVE recycled fiber.
Sheng Lu: Unifi has opened factories in Brazil and Colombia. Why did Unifi decide to invest in South America? What is the connection between Unifi’s US-based operation and your operations in South America?
Bill Jasper: Both of these manufacturing plants were established in the mid to late 90s as wholly owned subsidiaries of Unifi, Inc. We purchased the small Colombia plant to give us more spandex covering capacity for our yarns that come back to the U.S. for use in pantyhose and socks. The Brazil operation was set up when we saw an opportunity to capture a share of the growing synthetic apparel market in that country. The majority of the textured polyester we make in Brazil stays in Brazil. Over the past several years we have introduced our premium value-added yarns in that market and hope to see strong growth in those product lines as the economy picks up down there.
Unifi also opened a 120,000 square foot polyester yarn texturing facility in El Salvador in 2010 to take advantage of the duty benefits in the DR-CAFTA trade pact and to better serve our growing customer base in the region.
Sheng Lu: What is the market potential of Asia and particularly China for Unifi and the US textile industry in general?
Bill Jasper: The expected growth in China and other Asian markets is enormous, and Unifi’s strategic plan reflects that. By 2020, China’s consumer market is expected to reach 22 percent of total global consumption, second only to the U.S. at 35 percent. Our wholly owned subsidiary (UTSC) is located at the center of one of China’s most important textile regions, Suzhou. UTSC customers will have quick access to new product introductions with the quality and technical service they have come to expect with Unifi. UTSC was established to provide the domestic Chinese market with a full complement of our specialty branded products, not only for their growing appetite for branded apparel, but for growth in their automotive and home furnishing markets.
The U.S. textile industry in general has invested heavily to take advantage of the growth in Asia by adding to their manufacturing facilities here or putting plants in Asia or China. Countries like Vietnam also offer strong manufacturing platforms due to lower wages than China and the prospect of duty-free exports to the European Union, the U.S. and Japan when announced trade agreements like TPP are completed. The growth of the Asian textile market certainly ups the ante in regard to whether there will be a yarn forward rule under TPP. Failure to include a strong yarn forward rule in this key agreement will likely cede key Asian markets to textile suppliers that are not a party to the TPP. To the contrary, inclusion of a yarn forward provision in that agreement will drive investment to partner countries and provides opportunities for U.S. fabrics and yarns to supply production meeting those guidelines.
Sheng Lu: How do you see “sustainability” as a game changer for the textile industry? What has Unifi done in response to the growing awareness of sustainability among consumers?
Bill Jasper: Reducing our environmental footprint through the entire supply chain has been an important focus of the industry for several years, driven by industry leaders like Unifi and our suppliers and customers.
Unifi has an on-site environmental team constantly reviewing everything we do to see how we can reduce, reuse, recycle and conserve. All of our U.S.-based plants are currently landfill-free; we recycle our shipping pallets, we have installed energy-efficient lighting and increased efficiency around our compressed air usage, for example.
In 2010, Unifi opened our state-of-the-art REPREVE Recycling Center, where we use our own industrial yarn waste, recycled water bottles and even fabric waste to make REPREVE® recycled polyester fibers and yarns which go back into high end consumer apparel, like fleeces made by Patagonia, shoes and apparel by Nike, The North Face jackets, and eco-friendly Haggar pants. You can also find REPREVE® in Ford vehicles, including the 2015 Ford F150. In 2013, REPREVE® turned more than 740 million recycled bottles into fiber, and since 2009, we have recycled more than two billion plastic bottles to make REPREVE. Unifi’s recycled process offsets the need to use newly refined crude oil, uses less energy and water, and produces fewer greenhouse gas emissions compared to making virgin synthetic fibers.
Moreover, for Unifi at least, this is much more than a marketing concept. Our focus on environmental sustainability is now an engrained part of our culture. We believe that sustainability must be an unwavering core value of responsible manufacturing in the 21st century.
Sheng Lu: Given the changing nature of the US textile industry, what kind of talents will be most in needs by the US textile industry in the years ahead? Do you have any advice for textile and apparel majors in terms of improving their employability in the job market?
Bill Jasper: The U.S. textile industry is a diverse, technology driven, capital intensive, innovator of high quality products that is able and ready to compete effectively in the 21st century global marketplace, and a prepared workforce is critical in meeting the needs of this competitive industry. Not only do we look for skills in textile technology, we look for workers with high math and science aptitudes, technical and chemical engineering skills, process improvement, and industrial engineering capabilities. The ability to think strategically and globally is a big advantage in driving sales and creating marketing programs that meet the needs of our customers world-wide.
–The End–
While our case study 1 focused on the problem of corporate social responsibility practices in the Bangladesh garment sector, a recent study based on examining 1,395 households in 60 Bangladeshi villages in 2009 suggests that the growth of the garment sector has resulted in positive impacts on the lives of Bangladeshi women.
Specifically, the study finds that:
1) Girls exposed to the garment sector delay early marriage and childbirth at early ages (12-18). Many studies have suggested the negative welfare implications of early marriage and childbirth.
2) Girls exposed to the garment sector gain extra years of education. According to the study, on average, one additional year of working in the garment sector statistically will lead to a 0.48 years of education for girls. The authors further suggest that increased demand for skills in garment factories was one of the main driving forces behind such a positive correlation.
As argued by the authors, in developing countries such as Bangladesh, social policies such as education are often tied to trade policy and industrial policy.
However, one another interesting finding is that the average wage level of respondents working in the garment sector was almost 22% lower than those working in the non-garment sector in Bangladesh.
So, based on our case study and the above research findings, do you have any new thoughts about improving the corporate social responsibility practices in the global apparel industry? Do you think Western retailers shall stop sourcing apparel from Bangladesh because of the reported problem of factory safety and workers’ working condition? Please feel free to share your views.
Please feel free to share your thoughtful comments and I look forward to exciting discussions with you all.
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This week we looked at a critical activity closely associated with the textile and apparel industry in the 21st century: International Trade. Among the fundamental questions we examined, whether trade is beneficial or not is a one that all of us care much about but also has raised many debates.
Just this week, the Pew Research Center released its latest survey findings about the public opinion on growing trade and business ties between countries and views about the impact of trade on jobs, wages and prices. The results show that not only Americans, but also people in other countries, including those developing ones, are divided about international trade. Anyhow, the highest level of public skepticism about trade and foreign investment is found in the United States.
Job and wage are among the top concerns about trade among the general public. In Italy, nearly 59 percent survey respondents believed that trade destroy jobs and 52 percent believed trade lower wages. These two figures are 50 and 45 among US respondents.
After our discussion on various trade theories, which school of thought do you agree more: mercantilism or comparative advantage theory? Are these theories proposed hundreds years ago still working today? Do you think deepened globalization will reduce the gap or even widen the gap of people’s divided view on international trade? How do you think international trade affects your daily life and your future career opportunities? Last but not least, is trade beneficial for the US textile and apparel industry in the 21st century? Please feel free to share your views!
The following analysis is conducted based on the statistics released by the World Trade Organization on August 5, 2014.
1. Asia continues to dominate the world textile and apparel exports from 2012 to 2013.
2. Despite concerns about its rising labor cost, China continues to gain more market shares in world textile and apparel exports from 2012 to 2013.
3. World market for textiles remains relatively stable from 2000 to 2013; world market for apparel is gradually shifting and diversifying. Although Europe and North America still account for lion’s shares in world apparel imports (due to their higher GDP per capita), Asia is the fast growing market.
4. Intra-region trade remains a distinct pattern in world T&A trade, particularly in Asia, Europe and America. However, the pattern has become substantially weakened in Europe and America from 2000 to 2013, which could be the results of increasing number of FTAs in these regions.
5. US textile and apparel exports increased 3.3% and 4.4% respectively from 2012 to 2013. North America remains the single largest T&A export market for the United States.
by Sheng Lu
According to the 2014 World Investment Report released this week by the United Nation Conference on Trade and Development (UNCTAD), a sharp rise in greenfield foreign direct investment (FDI)* activity was observed in the textile and apparel (T&A) industry worldwide from 2012 to 2013, with the value of announced investment projects totaling more than $24 billion, more than doubled than the level a year earlier.
Although detailed country-level data is not available, the UNCTAD report shows that the developed countries as a whole attracted $13.7 billion inflows of greenfield FDI and invested $18.7 billion greenfield FDI overseas in the T&A industry from 2012 to 2013. The report further says that Cambodia and Myanmar, the two least developed countries in South-East Asia, have recently emerged as attractive locations for investment in textiles, garments and footwear.
FDI is another critical format of market access in addition to international trade.
*Note: Greenfield FDI means a foreign company opens a new physical facility from which to conduct business.
Key Findings
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.
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
95% of the consumers live outside the US, implying huge market opportunities for the US textile and apparel industry. Among the leading emerging markets for U.S. companies are China, Vietnam, India, Indonesia, Taiwan and Thailand. From watching the short videos below (prepared by the US Commerce Department), how do you see the importance of these markets? And what are the unique local business environment and culture in your view?
China
Vietnam
Thailand
India
Indonesia
Taiwan
Part I
Part II
Part III
FASH455 Global Apparel & Textile Trade and Sourcing 
