Knight Ridder Newspapers

Knight Ridder Newspapers
CHARLOTTE, N.C. -- For evidence that U.S. textile jobs could be headed for free fall, take note of recent changes in where our clothes are made.
Last year, U.S. imports of Chinese clothing jumped 30 percent.
Meanwhile, U.S. apparel imports from Mexico are slumping, and growth has stalled in shipments from Caribbean nations. That shift matters in the Carolinas.
Mexican and Caribbean sewing production has helped save jobs in Carolinas mills and at other U.S. makers of yarn and fabric because trade pacts provide benefits for sewing clothing made of American fabric.
On Jan. 1, longtime import limits, called quotas, expire on textile and apparel products from 40 countries. That marks the end of a 10-year phaseout that so far has eliminated quotas on less than half of textiles and apparel.
U.S. mills will be stripped of protections from lower-cost competitors making major products such as shirts, sheets and jeans. The industry is most worried about China, expected to claim half or more of apparel sales.
China's gains come at the expense of other countries, including Mexico and Caribbean nations. That threatens the partnership that has helped preserve Carolinas and other U.S. mill jobs because China is unlikely to use American fabric.
The Caribbean remains the top source of U.S. apparel imports, but as of September China had nearly overtaken it. China surpassed Mexico last year for the No. 2 spot. That means China is the top single country shipping clothing to the United States.
After quotas end, U.S. apparel imports from Mexico, the Caribbean and other Western Hemisphere locations could shrivel to 8 percent from more than 27 percent, according to a World Trade Organization estimate.
"If China is able to knock out the Caribbean and Mexico, then we're out of the picture, too," said Cass Johnson, president of the National Council of Textile Organizations. The Washington trade group estimates ending quotas on China will wipe out two-thirds of U.S. textile and apparel jobs.
Caribbean partners
The U.S.-Caribbean partnership has evolved over 40 years and took off in the 1990s as U.S. clothing makers sought to compete with lower-cost imports. The Caribbean trade pact gave apparel makers access to low-wage workers. Companies that sew clothes of U.S. fabric in the region also pay lower U.S. import taxes.
The United States lost sewing jobs in the deal, but preserved the typically higher-paid jobs of making, cutting and shipping fabric to foreign sewing lines. Participants range from the Bahamas to Belize, 25 countries in all. Honduras is the leader.
Textile executives saw a similar partnership with Mexico as a way to further help itself. In the early 1990s, the industry broke almost universally from its protectionist stance to support the North American Free Trade Agreement, or NAFTA. The 1994 pact, which includes Canada, was broader than the Caribbean deal.
Mexico quickly became the top country supplying U.S. clothing, but since peaking in 2000, it has been in decline as its wages rose and China began shipping more.
The Caribbean's big sewing players include Sara Lee Corp., with its $6.5 billion apparel unit based in Winston-Salem and 9,000 Carolinas workers.
In June, the Chicago company said it would cut 3,675 factory jobs in preparation for "growth in a quota-free" market. Most of the jobs lost are in Mexico, Honduras and Puerto Rico. The company also said it would eliminate 200 jobs with the partial shutdown of an underwear plant in Asheboro, N.C.
In its September annual report, Sara Lee said it is evaluating supplier choices in view of quotas' end "including the ability to relocate production . . . to lower cost locations that previously may not have been available due to the import quotas."
Sara Lee and Greensboro, N.C.-based VF Corp., another leading apparel maker, expect to consolidate production when quotas end, but both say they won't concentrate supply too narrowly.
"We've always spread our supply over many locations because you've always got economic risk, political risk, as well as weather, like hurricanes," said Gerald Evans, who heads the Sara Lee group. Sara Lee includes the Hanes brand, founded in Winston-Salem more than 100 years ago.
Following the fabric
At Jintan Apparel in eastern China, overhead conveyors jolt from one sewing machine to the next, delivering fabric that workers stitch into jeans and overalls for the youngest customers of Sears, Lands' End, Old Navy and VF.
The neat, well-lit plant, owned by Hong Kong's Crystal Group, has 2,500 workers. The plant, which also makes adult clothing, is expanding in Jintan, a town of about 500,000 people, 120 miles west of Shanghai in Jiangsu province.
Women in white caps and turquoise vests sewed and packed mounds of baby britches for export, during an August visit. They have helped China stitch $816 million worth of baby clothes for U.S. shoppers in just the first nine months of the year. That's more than half the total U.S. imports of baby clothing -- up from just 6 percent in 2001.
Baby clothes were among the textile and apparel items freed of U.S. quotas in 1998. China's ascension to the World Trade Organization late in 2001 allowed it to share quota-free access to U.S. markets.
"The reason we're doing infants and toddlers in China is because the United States dropped quotas, and China is one of the most competitive places to do it," said Tom Glaser, VF's managing director of global sourcing, who is based in Hong Kong.
VF moved some production of baby clothes to China from the Caribbean, where VF has extensive sewing production. But baby clothes, a small part of VF's $5.2 billion in sales, aren't a good indicator of how supply locations might change, Glaser said. The company is one of the world's largest apparel makers, with brands that include Lee jeans, Vanity Fair and Nautica.
VF, with 3,400 Carolinas workers, expects the Caribbean region will remain its most important source for supplying U.S. customers, said Glaser, who has 21 years in the garment industry. The company needs production close enough to quickly replenish retailers' shelves.
Ocean shipping from China adds a week or more to delivery.
Other concerns about doing business in China include rising wages in some regions, power shortages, tapped-out cotton supplies and worries about legal protections for brands and other property rights.
"I think people are overly hyping China," Glaser said. "It's going to be very important, almost critical to our business, but it's not going to be the only place in the world to make stuff."
Post-quota winners will be low-wage countries with a lot of people looking for work, often people moving from farms to towns. The best places for apparel production also will be countries with a good supply of cotton and a well-developed textile industry -- not just sewing factories. China is the front-runner on all counts, with India No. 2 and countries such as Pakistan and Indonesia viable contenders.
"In the future, people like us will follow the fabric," Glaser said.
That means Carolinas fabric makers are likely to follow VF and others.
Cone Mills, based in Greensboro and the world's largest denim supplier, plans a denim mill employing 700 people in China. This month, Cone CEO John Bakane spent nearly two weeks in China, scouting locations.
"You cannot afford not to be in China," he said.
VF's Caribbean sewing plants are a major customer for the company. Cone also plans a $90 million denim mill in Guatemala. That's part of a trend that began in the late 1990s of moving fabric production closer to the sewing.
The end of quotas, Bakane said, will be "a bare-knuckles fight between the Western Hemisphere and Asian sourcing."
That's a battle Carolinas mill workers aren't likely to win.