September, 2003: The Yankee Trader

By Greg Rushford

Published in the Rushford Report

For the U.S. textile lobby: the sound of a plan coming together

            Washington Post reporter Michael Barbaro filed a story from Kannapolis , North Carolina last month, documenting the miseries of Americans in the hometown of towel maker Pillowtex Corp, which has filed for bankruptcy and thrown more than 6,500 textile workers throughout the South onto the streets.

            Barbaro reported the poignant story of Jimmy and Verleen Bennett, two unemployed former Pillowtex workers who now have “slim” options in a dismal job market. The Bennetts have high school diplomas and lack either technical training or higher education to land easily on their feet. “Everybody keeps telling us we should go back to school, but it’s a little late for that,” 38-year old Verleen Bennett declared. Two years ago, the couple bought a $100,000 home. Now, they wonder how they will pay the mortgage. They told the Post reporter that they had believed the promises of lifetime employment with Pillowtex.

            Until now, there was no reason to doubt those claims,” Barbaro wrote.

              Until now, there was no reason to doubt those claims?

            Talk about denial. Talk about culture stuck back in time.

            Pillowtex has been in and out of bankruptcy for years. Decades of protectionist quotas and high tariffs clearly have not worked. Mill towns in the south have been slowly dying for many years — more than 273,000 textile workers have lost their jobs in the last decade. There have been many warnings over the years that uneducated people in these towns would be well-advised to start preparing themselves for a future without mills.

            On April 22, 2001 , for instance, Taft Wireback observed in the Greensboro , N.C. News & Record that that city has been receiving periodic wake-up calls since at least 1987, when a study called Greensboro Visions warned that the textile industry was tanking. “So far, nothing has produced a cohesive vision of where the city is headed and how it should get there,” Wireback pointed out. But few listened. Now, the citizens of Greensboro are paying the price for their lack of vision.

            But the textile lobby has had a consistent political vision. To the mill owners, the cries of anguish that are presently coming out of troubled mill towns are the sound of a plan that is coming together — a plan that turns on continued protectionism, with China as enemy number one.    

            The plan was locked into place in January 1995 with the creation of the World Trade Organization and its 10-year phase-out of quotas on textiles and apparel that the United States and other rich countries have imposed on more than 40 mostly poor countries. But there was never any intention to spend the decade preparing poorly educated workers to get the training and further education to move on. The idea was to back load the phase-out, so when the 2004 elections approached, people in the mill towns would be screaming to the politicians that they were suddenly being pushed off a cliff — in desperate need of continued trade protectionism.

            In the first seven years after 1995, only lesser items like seat belts and baby clothes were phased out. It wasn’t until January 2002 that quotas on economically important items like brassieres, some gloves, dressing gowns, luggage, and knit fabrics were eliminated. Not until December 31, 2004 will the remaining 80 percent of clothing that real people actually wear outdoors — pants, suits, dresses, blouses, shirts — all suddenly come off quota. The political rationale was that politicians would hear the cries of anguish as the 2004 election season loomed, and would push for additional trade protection. People in the mill towns have always been treated as political fodder.

            The plan’s working. Unemployed workers are crying. Reporters are reporting the sad stories, without much analysis. Politicians are playing their predictable roles, blaming foreigners in general and China in particular.

            Last month, President George W. Bush’s Commerce Department started a mainly pro-forma “public consultation” process that is expected to re-impose quotas in about three months on Chinese imports of knit fabric, brassieres, and dressing gowns. The president and Commerce Secretary Don Evans — trolling for southern votes next year — have repeatedly promised that they would not trade away the interests of U.S. textile workers in international trade negotiations. Part of China ’s price for its WTO accession was to agree that its trading partners could impose such “safeguards” quotas to protect their uncompetitive domestic industries, should Chinese entrepreneurs become too successful at capitalism.

            And predictably — since China ’s comparative advantage is so clear — Chinese exports to the U.S. shot up 540 percent after quotas on robes and dressing gowns were removed. The export bounce for brassieres was 198 percent last year, and China ’s exports of knit fabrics shot up 234 percent. While China only accounts for about 12 percent of the $72 billion in textiles and clothing that the U.S. imported in 2002, the American Textile Manufacturers Institute believes — not without reason — that in a quota-free world, that 12 percent could become perhaps 75 percent.

            Horrors, says the ATMI and other domestic interests that are screaming about China . But the fact of life is that foreigners are going to dominate anyway, no matter what the mix of import share is between various countries. You don’t have to look too closely at the numbers to see that China is mainly competing with other exporters.

            In brassieres, for instance, China competes with countries like Honduras , Indonesia , Thailand , and Mexico . Mexican exports of brassieres to the United States dropped 18 percent last year to just over 8 percent of the American market. China ’s comparative advantage is so strong that even preferential rules of origin granting Mexico and Caribbean countries duty-free access to America — as long as they use U.S. yarn and fabric — still aren’t enough to knock China out.

            Somewhere in the United States there must be workers busy making dressing gowns, gloves, and bras, but nobody seems to know exactly where. An ATMI spokesman only points out that “the Commerce department still reports substantial US production of these products.” Last month, I made the sacrifice of a journalistic undercover venture into a Victoria ’s Secret store in the Virginia suburbs of Washington , D.C. and asked a saleslady if she could show me some American-made bras. She laughed. I found bras made in Indonesia , Thailand , and Sri Lanka . Then I found a frilly thing made of nylon and spandex that announced on its label that it had been “Made in China of US and foreign fabric.”

            Domestic textile lobbyists also complain that it is unfair that U.S. mills have to compete with Chinese mills that are still owned by the state and hence don’t have to worry about turning profits. This is certainly a valid point, and one that has been frequently been made by Willis Moore III, ATMI’s chairman.

            On July 24, Mr. Moore warned that “630,000 textile and apparel jobs will be lost and 1,200 plants will close,” and that China could take over 75 percent of the US rag trade if additional quotas are not imposed on China .

            In his day job, Mr. Moore is executive vice president of Unifi, Inc., a yarn maker that is based in Greensboro . Exactly one week earlier, Unifi announced that it had signed a letter of intent to form a joint venture with a Chinese state-owned company. Unifi will own 75 percent of the joint venture and the Kaiping Polyester Enterprises Group Co., which is owned and operated by the Kaiping city government, will own the remainder.

            Unifi is also looking to its future by taking advantage of “the power of globalization,” according to the company’s website. “We continue to evaluate global markets to identify potential locations for future manufacturing,” Unifi announced last October. “ Asia , which currently consumes approximately 77 percent of the world’s total textured polyester supply, is a particularly important area of focus today.” I guess that’s his Plan B: adjusting to global realities, knowing that decades of protectionism have failed. Mr. Moore declines to comment.

            Too bad that hard-working Americans like Jimmy and Verleen Bennett who trusted their employer’s promises of lifetime employment, weren’t told that many of these same companies have themselves been preparing to move on when their protectionist string runs out. Mrs. Bennett, I know that it’s hard — but it’s not too late to get back in school.

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