Despite a sluggish retail environment for apparel and textile companies, US trade broke records last year. But with the phase out of quotas just over the horizon, can trade stay this good in the future? asks Mona Frastaci.

Washington's got good news and bad news for the American apparel and textile industry, according to data just released by the US Department of Commerce. US textile and apparel imports totaled 32.8 billion square meter equivalents (sme) for 2000, a 14.8 per cent increase over 1999. For the year, textile imports alone increased 16 per cent over 1999 to 16.8 billion sme, while apparel imports increased 13.7 per cent to 16 billion sme.

Record exports in 2000
What does this mean in terms of cash? In dollars, US exports of textile and apparel also increased to record levels last year with textile exports climbing 14 per cent to $10.5bn. Apparel exports, consisting mostly of cut fabric pieces sent offshore for assembly and return to the United States, rose just 2.7 per cent to $8.2bn.

But here's the bad news. Textile and apparel imports for December 2000 declined 0.2 per cent - the first monthly decline in imports in four-and-a-half years.

"This is a good news bad news situation for our industry," says Roger Chastain,


"many people still do not realise that the US textile industry is the largest contributor to the country's gross domestic product (GDP"
president and COO of Mt. Vernon Mills and president of the American Textile Manufacturers Institute (ATMI). "Of course we're grateful that December's imports did not increase at the double-digit rates they did throughout the year, but this negligible decrease in December clearly points to a very sluggish retail environment for textile and apparel products - and that is not good news for anybody, least of all domestic manufacturers."

"Our economy is in a slow period right now," Chastain continues. "And very sluggish retail is contributing to that - everything is down so it's a very difficult time in the textile industry." Reflecting on the impact of the industry on the economy, Chastain notes that many people still do not realise that the US textile industry is the largest contributor to the country's gross domestic product (GDP).

There are important issues that need to be addressed in order to turn things around, according to Chastain. "The export markets are not there for US textiles," he says. "The laws of the World Trade Organization (WTO) are there but they're not being enforced. Our government should protect the industry even if it has to limit it - like it did with cars - limit what's brought into this country."

Calls for more legislation
The question of whether the United States is helping other countries or hurting itself is one Chastain feels is important to consider, and he believes the industry needs more legislation like the Caribbean Basin Initiative.

"I think CBI is a great trade bill for the US, from a standpoint that the goods come in duty-free and are made of US fabric and yarn," he says. "That to me is a preferential trade because of the fact that it has to be US fabric. We're not hurting the textile industry - we may lose a few apparel jobs - but most of them are gone now and there's nothing we can do about that."

Chastain feels the Caribbean bill is trying to help both parties while the North American Free Trade Agreement (NAFTA), being an open border agreement, makes things harder to control and monitor. "Without help from our legislatures an individual company can't really do anything," Chastain says.

Mexican trade
Thanks to NAFTA though, trade with Mexico - the United States' largest source of apparel imports - continues to grow, with an increase of 9.5 per cent last year. Imports from Canada, the United States' eighteenth largest foreign supplier, rose 11.8 per cent, leaving the rest of the world with a 14.6 per cent year-to-year increase.

Other above average increases in apparel imports were seen with Bangladesh (up 25 per cent); Thailand (up 21.8 per cent); Turkey (up 29.5 per cent) and Pakistan (up 39.3 per cent).

Not so surprising, exports to Mexico - the United States' leading textile and apparel export market - increased more than 15 per cent above last year. Exports to Canada - the United States' second largest foreign market for textiles and apparel - rose less than two per cent, thanks to a strong US dollar. Exports to CBI countries - cut fabric pieces, trim, linings, thread and other assembly items - increased more than 17 per cent.

Average increases in apparel exports, clockwise from top left : Bangladesh (up 25 per cent); Pakistan (up 39.3 per cent); Thailand (up 21.8 per cent) and Turkey (up 29.5 per cent). 

Intense price competition


"Any business person with a strategic outlook will have to ask themselves, 'Where am I going to be when these quotas go away?"

The apparel and footwear industries are facing a period of continued intense price competition due to an increasingly global market for apparel, according to Jack Morgan, director of communications for the American Apparel and Footwear Association (AAFA). "This will only increase with the phase out of apparel quotas in 2005. Our association has supported a number of measures designed to promote trade, and we think that's the best vehicle for the industry to stay competitive over the long haul," Morgan says.

The AAFA was instrumental in the recent passing of CBI legislation and now looks on the horizon to developing the free trade area of the Americas, an issue that's starting to get the attention of the new administration, Morgan says.

" Any business person with a strategic outlook will have to ask themselves, 'Where am I going to be when these quotas go away?'" he says. "It's helpful if you can operate cost effectively in the Western Hemisphere. Then you're putting production in closer proximity to the consumer, which helps in terms of fast turn, getting products on the shelf and resupplied faster."

Cautious optimism


"We're strongly in favour of renewing the Andean Trade Preference Act and would be open to the possibility of extending expanded benefits to Colombia for apparel and textiles"

In terms of state of the industry, Morgan describes a sluggish retail environment that is fraught with mixed signals but in which consumers are still buying. Yet some department stores are still down in the post-holiday period. "The economy is still relatively strong," he says.

"We'd been at a very high level so to dip a little in a month, it's too early to say. And we're coming down from unprecedented growth. This doesn't really change the equation, it only adds to the competitive pressures already there: price competition coupled with a scarcity of labour for domestic producers - the state of economy hasn't changed that situation much," Morgan continues.

"We feel optimistic over the long term, but that doesn't change the fact that you've got a phase-out of quotas on the horizon. Lower barriers to overseas markets will help our members operate more competitively."

AAFA members still need opportunities to produce and sell goods in as many markets as possible with minimal restrictions on trade, and the organisation would like to see new markets open up for the sale of goods in countries like Brazil and Argentina where it is presently difficult due to the duty situation.

One particular act the AAFA supports is the Andean Trade Preference Act, which is up for renewal and includes four South American countries, including Colombia. "We're strongly in favour of renewing the Andean Trade Preference Act and would be open to the possibility of extending expanded benefits to Colombia for apparel and textiles," Morgan says.

The new administration is getting on its feet, and the government could have an early opportunity to renew fast track legislation. "If Congress can't agree to enact trade legislation that would allow companies to access other markets either for sourcing, or to sell to the people there, it's going to be much harder," Morgan says.

By Mona Frastaci