State of the U.S. Textile and Apparel Industry: Output, Employment, and Trade (Updated September 2019)

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The size of the U.S. textile and apparel industry has significantly shrunk over the past decades. However, U.S. textile manufacturing is gradually coming back. The value added of U.S. textile manufacturing totaled $19 billion in 2018, up 25% from 2009 and reaching its highest level in the past ten years. In comparison, U.S. apparel manufacturing dropped to $9.2 billion in 2018, its lowest level in history (Bureau of Economic Analysis, 2019).

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Nevertheless, the share of U.S. textile and apparel manufacturing in the U.S. Gross Domestic Product (GDP) dropped to only 0.14% in 2018 from 0.57% in 1998 (Bureau of Economic Analysis, 2019).

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The U.S. textile and apparel manufacturing is also changing in nature. For example, textiles had accounted for nearly 70% of the total output of the U.S. textile and apparel industry as of 2018, up from 58% in 1998 (Bureau of Economic Analysis, 2019). Meanwhile, clothing had only accounted for 12% of the total U.S. fiber production by 2012, suggesting non-apparel textile products, such as industrial textiles and home textiles have become a more important part of the industry (Census Bureau, 2019).

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Despite the growing popularity of “Made in the USA”, manufacturing jobs are NOT coming back to the U.S. textile and apparel industry. From January 2005 to August 2019, employment in the U.S. textile manufacturing (NAICS 313 and 314) and apparel manufacturing (NAICS 315) declined by 44.3% and 59.3% respectively (Bureau of Labor Statistics, 2019). However, improved productivity is one important factor behind the job losses.

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Consistent with the theoretical prediction, U.S. remains a net textile exporter and a net apparel importer. In 2018, the U.S. enjoyed a $1391million trade surplus in textiles and suffered a $79,406 million trade deficit in apparel (USITC, 2019). Notably, over 40% of U.S.-made textiles (NAICS 313 and 314) were sold overseas in 2018, up from only 15% in 2000. Meanwhile, from 2009 to 2018, the value of U.S. yarns and fabrics exports increased by 31.3% and 43.6% respectively (OTEXA, 2019). On the other hand, because of the regional trade patterns, close to 70% of U.S. textile and apparel export still, go to the western hemisphere today.

by Sheng Lu

Discussion questions:

  1. Why or why not do you think the U.S. textile industry and the apparel industry are in good shape?
  2. Based on the statistics, do you think textile and apparel “Made in the USA” have a future? Please explain.
  3. What are the top challenges facing the U.S. textile industry and the apparel industry in today’s global economy?

USITC Releases New Study on the State of the U.S. Textile and Apparel Manufacturing Sector

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A recent study released by the U.S. International Trade Commission (USITC) provides a comprehensive review and valuable insights into the state of textile and apparel manufacturing in the United States. According to the study:

First,  data suggests a mixed picture of the recovery of textile manufacturing in the U.S.

  • Total capital expenditures in plants and equipment for the textile sector increased by 36 percent in the 2013–16 period. Interesting enough, much of the new investment is by foreign firms, including new investments by Chinese and Indian firms, as well as by firms from Mexico, Canada, Turkey, and Saudi Arabia.
  • U.S. textile shipments increased in 2017 to $39.6 billion, but remained 3 percent below the 2013 level. The result suggests that rather than simply increasing capacity, some of the new investment is likely replacing existing equipment, as firms upgrade and modernize their manufacturing processes and/or focus their operations on different products. [Note: shipments measure the dollar value of products sold by manufacturing establishments and are based on net selling values, f.o.b. (free on board) plant, after discounts and allowances are excluded]
  • At $10.6 billion, U.S. textile exports in 2017 were also below the five-year high of $12.1 billion in 2014.
  • Employment in the textiles sector declined by 4 percent from 131,000 in 2013 to an estimated 126,000 in 2017. Meanwhile, official data on labor productivity index for yarns and fabrics show steady declines during 2013–16.

Second, some evidence suggests that reshoring has taken place in recent years in the apparel sector, although on a modest scale.

  • For the 2013–16 period, capital expenditures were up 5 percent to $301 million, suggesting capital investment in the apparel sector may be increasing, as the industry begins to adopt more labor-saving technologies.
  • Domestic shipments of apparel showed modest increases in the past two years, reaching $12.0 billion in 2016 and $12.5 billion in 2017, after a record low of $11.5 billion in 2014 and 2015.
  • Employment in the apparel sector steadily declined during 2013–17, down 21 percent from 145,000 workers in 2013 to 120,000 workers in 2017. Official data on labor productivity also showed steady declines during 2013–16.
  • U.S. fashion companies continue to source apparel from the United States, although in a relatively small amount.

Third, the advantages of making textiles and apparel in the United States include:

  • Advantages of producing textiles in the United States include local and state incentives for investment, and the benefits afforded by free trade agreement (FTA) preferences (i.e., the “yarn-forward” rules of origin) that encourage the use of U.S.-produced inputs in downstream production in FTA partner countries, energy cost and the availability and reliability of high-quality cotton. Meanwhile, product innovation and automation are important aspects of the U.S. textile sector’s competitiveness strategy.
  • Advantages of producing apparel in the United States include improved lead times, better quality control, and more flexible production. Many domestically made products also use “Made in USA” branding to capitalize on the buy-American trend and the appeal of “Made in USA.” The adoption of various automation and digital technologies to accelerate the process of product development, improve the fit of the final product and reduce the needs for skilled sewing operators may also help improve the competitiveness.  

BIS Released Assessment Report of the U.S. Textile and Apparel Manufacturing Sector

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The Bureau of Industry and Security (BIS) under the U.S. Department of Commerce recently released its assessment report of the U.S. textile and apparel (T&A) manufacturing sector. The report was based on a survey of 571 U.S. T&A manufacturers in summer 2017. These respondents include 230 textile mills (NAICS 313), 128 textile product mills (NAICS 314), and 213 apparel manufacturers (NAICS 315).

Below are the key findings of the study:

The state of the U.S. textile and apparel (T&A) manufacturing sector

  • U.S. T&A manufacturing has shrunk significantly: the value of T&A shipments (seasonally adjusted) in 2016 ($68 billion) was almost 56% decrease in real terms since 1995 ($153 billion).
  • U.S. T&A manufacturing has undergone substantial structural change: textiles and textile products accounted for 82% of the total shipments of the U.S. T&A industry as of 2016, compared to 57% in 1995. Notably, only 18% of shipments came from apparel manufacturing in 2016, compared to 43% in 1995.
  • U.S. T&A manufacturing sector is hiring less: Between 1990 and 2016, total employment decreased by 79%, from 1.7 million to 352,000 workers; over the same period, over 86% of apparel manufacturing jobs disappeared.
  • U.S. T&A manufacturers are making more capital investments: The overall total Capital Expenditures (CAPEX) of the 571 respondents increased 90 percent from 2012 to 2016 (from $1.6 billion to $3.1 billion). Particularly, the CAPEX of textile mills grew by 80 percent over that period—mostly on “Machinery, Equipment, and Vehicles.”
  • North Carolina hosted the largest number of U.S. T&A facilities (22 percent of the respondents), followed by Georgia (10 percent), and South Carolina (9 percent).
  • China, Mexico, and Canada are the most popular destinations for foreign investments by U.S. T&A manufacturers.

Competition landscape and factors

  • Respondents listed a total of 1,309 U.S. competitors and 552 non-U.S. competitors. Chinese companies were cited as the number one source of foreign competition.
  • “Quality,” “Lead Time,” and “Innovation” were the top three competitive advantages of U.S. T&A manufacturers as they related to foreign competition. “Labor Costs” was regarded as the top disadvantage of U.S. T&A manufacturing.
  • 43 percent of respondents believed that reshoring was occurring in U.S. T&A manufacturing. Almost all of these respondents believed that “Shorter Lead Times” and the “Marketability of the ‘Made in USA’ Label” were the factors driving the trend.
  • The Affordable Care Act (ACA), Minimum Wage regulations (Federal, State, and Local), and U.S. Trade Policy were the top governmental regulations and provisions cited as negatively impacting the competitiveness of U.S. T&A manufacturers.
  • 61 percent of respondents reported that they had difficulties hiring and/or retaining employees for their T&A operations, specifically production line workers such as operators and machine technicians. The skill gaps in the labor market for those positions were by far the biggest ones identified for the industry.
  • 43 percent of respondents believed that reshoring was occurring in T&A manufacturing (i.e., the practice of transferring a business operation that was moved to a non-U.S. location back to the United States.) Textile manufacturers were more likely to be aware of reshoring.

Trade and U.S. textile and apparel manufacturing

  • On average, respondents say 48 percent of their textile and textile products are “100 percent made in the U.S.”, while for apparel it was around 54 percent.
  • U.S. T&A exports dropped 10 percent between 2012 and 2016, from $2.2 billion to $1.98 billion. On average, exports accounted for only 12 percent of respondents’ total sales.
  • 33 percent of respondents considered themselves to be dependent on foreign sources for supplies, which was highest among textile mills.
  • 37 percent of respondents reported that they considered themselves to be dependent on non-U.S. sourcing for their machinery or equipment.

Berry Amendment and U.S. textile and apparel manufacturing

  • For textile mills, an average of 12 percent of U.S. output was Berry Amendment-related; for textile product mills the average was 21 percent, and for apparel production, it averaged 26 percent. 67 percent of respondents believed that the Berry Amendment had a positive impact on their organization’s business.

What Will Happen to the U.S. Textile and Apparel Industry if NAFTA Is Gone?

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Since its taking effect in 1995, NAFTA, a trade deal between the United States, Mexico, and Canada, has raised heated debate regarding its impact on the U.S. economy. President Trump has repeatedly derided NAFTA, describing it as “very, very bad” for U.S. companies and workers, and he promised during his campaign that he would remove the United States from the trade agreement if he could not negotiate improvements.

The U.S. textile and apparel (T&A) industry is a critical stakeholder of the potential policy change, because of its deep involvement in the regional T&A supply chain established by the NAFTA. Particularly, over the past decades, trade creation effect of the NAFTA has significantly facilitated the formation of a regional T&A supply chain among its members. Within this supply chain, the United States typically exports textiles to Mexico, which turns imported yarns and fabrics into apparel and then exports finished apparel back to the United and Canada for consumption.

So what will happen to the U.S. T&A industry if NAFTA no longer exists? Here is what I find*:

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First, results show that ending the NAFTA will significantly hurt U.S. textile exports. Specifically, the annual U.S. textile exports to Mexico and Canada will sharply decline by $2,081 million (down 47.7%) and $351 million (down 14%) respectively compared to the base year level in 2015.Although U.S. textile exports to other members of the Central America Free Trade Agreement (CAFTA-DR), will slightly increase by $42 million (up 1.5%), the potential gains will be far less than the loss of exports to the NAFTA region.

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Second, results show that ending the NAFTA will significantly reduce U.S. apparel imports from the NAFTA region. Specifically, annual U.S. apparel imports from Mexico and Canada will sharply decrease by $1,610 million (down 45.3%) and $916 million (down 154.2%) respectively compared to the base year level in 2015 (H2 is supported). However, ending the NAFTA would do little to curb the total U.S. apparel imports, largely because U.S. companies will simply switch to importing more apparel from other suppliers such as China and Vietnam.

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Third, ending NAFTA will further undercut textile and apparel manufacturing in the United States rather than bring back “Made in the USA.” Specifically, annual U.S. textile and apparel manufacturing will decline by $1,923 million (down 12.8%) and $308 million (down 3.0%) respectively compared to the base year level in 2015 (H3 is supported). Weaker demand from the NAFTA region is the primary reason why U.S. T&A manufacturing will suffer a decline.

These findings have several important implications. On the one hand, the results suggest that the U.S. T&A will be a big loser if the NAFTA no longer exists. Particularly, ending the agreement will put the regional T&A supply chain in jeopardy and make the U.S. textile industry lose its single largest export market—Mexico. On the other hand, findings of the study confirm that in an almost perfectly competitive market like apparel, raising tariff rate is bound to result in trade diversion. With so many alternative suppliers out there, understandably, ending the NAFTA will NOT increase demand for T&A “Made in the USA,” nor create more manufacturing jobs in the sector. Rather, Asian textile and apparel suppliers will take away market shares from Mexico and ironically benefit most from NAFTA’s dismantlement.

*Note: The study is based on the computable general equilibrium (CGE) model developed by the Global Trade Analysis Project (GTAP). Data of the analysis came from the latest GTAP9 database, which includes trade and production data of 57 sectors in 140 countries in 2015 as the base year. For the purpose of the study, we assume that if NAFTA no longer exists, the tariff rate applied for T&A traded between NAFTA members will increase from zero to the normal duty rate (i.e. the Most-Favored-Nation duty rate) in respective countries.

by Sheng Lu

Outsoucing and “Made in USA” An Ongoing Debate

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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?

[Discussion is closed for this post].

U.S. Department of Commerce Releases Factsheet on TPP and the U.S. Textile and Apparel Industry

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According to the factsheet released by the U.S. Department of Commerce, the Trans-Pacific Partnership (TPP) will create exciting new export opportunities for the U.S. textile and apparel (T&A) industry. The report highlights Vietnam and Japan as two promising markets in TPP for certain T&A products “Made in USA”, including:

Vietnam:

  • Cotton fiber, yarn, and Cotton woven Fabric (U.S. exported $394 million in 2014 with 16% market share only after China; tariff will be cut from 12% to zero on day one)
  • Non-woven fabrics (U.S. exported $23million in 2014, up 951% from 2009; tariff will be cut from 12% to zero on day one)

Japan

  • Synthetic fiber, yarn, and fabric (U.S. exported $61 million in 2014, up 61% from 2009; tariff will be cut from 2.7%-10% to zero on day one)
  • Industrial and advanced textile fabrics (U.S. exported $91 million in 2014, the fourth largest supplier after China, Taiwan, South Korea; tariff will be cut from 8.2% to zero on day one)
  • Men’s and boy’s apparel (U.S. exported $32.6milion in 2014, up 30.9% from 2009; tariff will be cut from 9.8% to zero on day one)

The factsheet also argues that TPP is a “balanced” deal for the U.S. T&A industry: long U.S. tariff phaseout schedule, strict “yarn-forward” rules of origin and textile safeguard mechanism in TPP will serve the interests of those stakeholders that seek protection of U.S. domestic T&A manufacturing, whereas duty savings from import tariff cut and the short supply list will create greater market access opportunities for U.S. fashion brands and retailers.

According to the report, the United States is the fourth largest textile exporter in the world. 54% of total U.S. T&A exports went to TPP markets in 2014. The United States is also the single largest importer of T&A in the world. 372,300 T&A manufacturing jobs remained in the United States in 2014.

The Future of “Made in China”: Robots are taking over China’s Factory Floors


The video echoes one recent Wall Street Journal article about Levi Strauss using automation technologies to revamp their apparel production in China:

“In an apparel factory in Zhongshan, a gritty city of three million stuffed with industrial parks across the Pearl River from Hong Kong, lasers are replacing dozens of workers who scrub Levi’s blue jeans with sandpaper to give them the worn look that American consumers find stylish. Automated sewing machines have cut the number of seamstresses needed to stitch arc designs into back pockets. Digital printers make intricate patterns on jeans that workers used to do with a mesh screen.”

One important factor that gives a push to adopting robots in China’s factory floor is the end of very cheap labor in China. China’s wage level has been rising in double-digit percentages for the past decades. And as a consequence of its “one-child policy”, by 2050, the working-age population in China could decline by 212 million according to estimation from the United Nations.

But Levi executives say they have largely abandoned a strategy of relocating production to one impoverished country after another, known as “chasing the needle,” in favor of other forms of cost-cutting.” “Labor is getting more expensive and technology is getting cheaper,” says Andrew Lo, chief executive of Crystal Group, one of Levi’s major suppliers in China.

“Levi is adapting its laser technology so it can etch different patterns to make one type of denim look like another, reducing costs by buying less fabric. For a new line of women’s wear, Levi said it needed only 12 fabrics, rather than 18. In the past three years, Levi said, it cut the number of its suppliers by 40% and the number of fabrics by 50%.”

“The changes also give Levi greater flexibility, said Ms. O’Neill, the 44-year-old executive who helps oversee the company’s supply chain. If a pair of jeans using a particular fabric is selling well, she says, Levi can use lasers to produce more of the desired look, and pare back designs that are losers. “The idea is to delay decision-making for as long as possible,” said Ms. O’Neill.”

And this is only the beginning! Some technologists think that inventions such as 3-D printing—essentially printers that replicate solid objects like copiers reproduce printed pages—will have a big impact by 2050. In such a world, printers could spew out clothing, food, electronics and other goods ordered online from a nearly limitless selection, with far fewer workers involved in production.

“In 2050, you could potentially have a 3-D printer at home that could produce all the fabrics you want,” said Roger Lee, the chief executive of Hong Kong’s TAL Group, which makes 1 of every 6 dress shirts sold in the U.S. for brands from Banana Republic to Brooks Brothers. “That would make us obsolete.”

Ironically but not surprisingly, automation also keeps wages down. Levi said it expects China production to rise only “modestly” next year; new orders are up for grabs. Apparel InternationaI’s president, Oscar Gonzalez, says the company now boasts an advantage over China—a large pool of apparel workers who were laid off in past downsizings. Excess labor has helped him keep wage increases to 2% or 3% a year he says. “Every Monday when we recruit,” he adds, “there are long lines of applicants.”

Welcome for any comments and discussion questions.

Exclusive Interview with William L. “Bill” Jasper, Chairman & Chief Executive Officer, Unifi Inc.

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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.

  • U.S. textile shipments topped $56 billion in 2013, up more than 5% from 2012
  • U.S. textile exports were $17.9 billion in 2013, up nearly 5%
    • The U.S. has also enjoyed an investment surge in new plants and equipment. Over the past year, 8 foreign companies have made public announcements regarding their intention to invest more than $700 million in new U.S. textile facilities and equipment. These investments are projected to provide approximately 1,900 new jobs in North Carolina, South Carolina, Georgia and Louisiana.
    • This $700 million does not include the ongoing re-investment activities that domestic textile companies have made.

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–

Employment in the US Textile and Apparel Industry (Update: August 2014)

[Please read the updated version: U.S. Continues to Lose Apparel Manufacturing Jobs in 2016]

Employment in the textile sector has remained stable since 2011. From the end of 2013 to July 2014, employment in textile mills (NAICS 313) even slightly increased 0.1 percent, mostly contributed by fiber & yarn mills (NAICS 3131) and fabric mills (NAICS 3132). The data supports the argument that textile manufacturing is gradually returning back to the United States.

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Employment in the apparel manufacturing sector (NAICS 315) continued to shrink. By July 2014, total employment in apparel manufacturing had declined by 15.6 percent since 2010 and went down 7.3 percent just from the end of 2013 to July 2014. Still it is getting harder and harder for US consumers to find “made in USA” apparel in the retail stores.

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Retailers remains the leading job providers in the U.S. textile and apparel industry. By July 2014, within the total 1.76 million employment in the US textile and apparel industry (NAICS 313, 314, 315 and 448), almost 80 percent came from the retail sector (NAICS 448).

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From 2010 to July 2014, employment in the US manufacturing sector as a whole enjoyed a 5.5 percent growth, much higher than the case in the textile and apparel sectors. This trend reminds us that the principal of “comparative advantage” is still working in the 21st century.

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Last but not least, geographically, manufacturing jobs in the US textile and apparel industry were gradually moving from the North to the South from 2007 to 2011.

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by Sheng Lu

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.

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

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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 21st 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

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

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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.

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2On 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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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.

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Review & Comments: “The People’s Republic of Capitalism”

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  • How do you like the documentary “The people’s Republic of Capitalism” we watched last Thursday?
  • What impressed you most? What surprised you most?
  • How do you compare your life with any characters in the documentary? (the Missourian lady, her boss who moved factories to China, the Mexicans who worked on US cotton farms, the Chinese girl working on the production line, the Chinese high school student who comes from a poor rural area and her mother….)
  • What arguments made in the video you do NOT agree?

Please feel free to share your thoughtful comments and I look forward to exciting discussions with you.

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

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(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 international aspect of the US economic policy: why and how we are all connected?


From 0:24′: Please enjoy an enlightening and inspiring dialogue with Penny Pritzker, US Secretary of Commerce and Michael Froman, US Trade Representative, on the international aspect of the US economic policy at the 2014 World Economic Forum in Davos.  The dialogue covers many interesting topics closely connected with our class lectures this & next week, for example:

  • Do we need more globalization? What is the impact of globalization on jobs and income inequality?
  • Why export matters to the US economy?
  • What will free trade agreements such as the Trans-Pacific Partnership (TPP) bring to the US?
  • Why foreign investment in the US is good for the US economy and job creation?
  • What is the connection between “global supply chain” and “made in USA”?

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

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More on Bangladesh: What’s Next?

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I’m sure  you have all been reading about the current factory protests in Bangladesh, but here are the basics of the current situation. Factory workers of Bangladesh are asking for a $100 monthly minimum wage, as compared to their current $38 monthly wage. The issue is that factory owners are finding it difficult to pay such a dramatic increase on worker’s wages because of their customers (large global brands). The owners are looking to these global brands as the cause of these issues, claiming these large brands are unwilling to pay more for their goods manufactured in Bangladesh. Currently, factories are unable to produce the goods these global brands have ordered due to the protests.

My question is: What’s next not just for Bangladesh, but for the United States? How will our economy be affected if the factory workers, factory owners, and global brands cannot come to a solution relatively soon? What does this mean for us as consumers? Is there anything we can do as consumers? Welcome for any thoughts!

by MacKenzie Cahoone

Extended reading: http://world.time.com/2013/09/23/bangladeshi-garment-workers-set-factories-ablaze-in-bid-for-higher-wages/ 

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”.

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

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Is clothing “made in USA” more ethical? How “ethical” should be defined?

It has become a commonly held view that apparel workers in many developing countries are unfairly treated because they are much lower paid compared with their counterparts in the developed countries.  For example, American Apparel, a company that insists all of its products made in USA, claims itself to be sweatshop-free on the basis that it pays workers an hourly wage of $12.  However, does an hourly wage of $12 in the USA necessarily mean more “ethical” than an hourly wage of several cents in a poor developing country like Bangladesh?  

An often ignored fact is that in many developing countries, jobs in the apparel sector are better paid than positions in other sectors. For example, according to a recent study conducted by the World Bank, in Bangladesh, wage level in its apparel sector is 17.7% higher than the average level of all sectors, 72.2% higher than the wage level in the agriculture sector and 4.5% higher than the wage level in the service sector. This is not surprising, because in many developing countries, “moving from agriculture and low-end services into apparel jobs is a channel for social upgrading” (Lopez-Acevedo & Robertson, 2012).

Then, what does an hourly wage of $12 mean in a developed country like the United States? Data from the Bureau of Labor Statistics show that, in 2012, average wage level in the U.S. apparel manufacturing sector (NAICS 315) is 26.2% below the average wage level of all sectors. More specifically, the average wage level for the production occupations is 47.3% below the national average level and 53.6% below the national average level for sewing machine operators, the exact type of job that the hourly wage of $12 refers to. 

The point to make here after the comparison is that it is misleading to define “ethical” or comment on “corporate social responsibility” without putting the matter in the context of the stage of development and the nature of the economy.  Wage level is not determined by good will, but by the principle of economics 101.

By Sheng Lu

apparel payment

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Minimum Wage and Unemployment

minimum-wage

Although the graph above talks about the U.S. economy, the underlying principle applies to all countries in the world: raising minimum wage may reduce employment. The reason is fairly simple: just like how we purchase clothing given a cerain amount of budget, the higher the price, the less quantity we purchase. Similarily, when labor becomes more expensive, to reach the profit goal, companies also have to reduce hiring people if productivity remains unchanged. 

Moreover, a higher minimum wage makes capital, another production input, relatively cheaper. This is why in many developed countries, more and more machines are being used in production in replace of labor. The choice of labor versus capital is based on their relative cost and abundance. 

With that, it is easier to understand why many developing countries show grave concerns about paying more to their workers. The competition is so fierce in the textile & apparel industry and companies can hardly afford an increase of production cost. The only difference with the case of the U.S. economy is: because developing coutries have no money to capitalize production and apparel manufacturing is labor intensive in nature, therefore, a rising minimum wage will simply result in a shift of production to other places where cheaper labors are available.

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.?

output

output growth rate

employment

employment growth rate

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

Technology is driving a revolution in manufacturing

A latest comment made by the Economist on Peter Marsh’s book The New Industrial Revolution.

As metioned in our class, globalization does not mean “made in China” or “off-shore production”, but rather a much freeer movement of goods, services, capital and labor around the world, thanks to the economic growth, lowered trade & investment barriers and advancement of technologies.

In today’s global economy, “any firm, anywhere, can hook up to a global supply chain. A product may be designed in one country and assembled in another, using components from dozens more. Even a small local manufacturer can use the best suppliers the world has to offer.”

This concept is associated with the “new international division of labor” concept, which we will discuss this coming Tuesday.