China Dons Even Bigger Export Hat

An explosion in Chinese apparel and textile exports is fueling a backlash in the United States and Europe, while triggering labor shortages in China and job losses elsewhere.

The outcry was triggered this week by new data showing a sharp increase in China’s clothing and textile exports in January. New Year’s Day marked the expiration of a decades-old global quota system that had limited China’s market share.

Unhindered by quotas, China’s sales to the United States surged 65%, to $1.4 billion, compared with the same month last year, according to data released this week by the China National Textile and Apparel Council. Shipments to the European Union jumped 46% to $1.5 billion.

Even more stark was the increase in China’s exports of cotton knit shirts and trousers, two of its most popular items. In January, China shipped nearly 27 million cotton trousers, up from 1.9 million a year earlier, according to a U.S. industry analysis of Chinese customs data. The Asian country shipped 18 million cotton knit shirts in January, up from 941,000.

Those statistics -- which will be accompanied by U.S. figures to be released today -- are further straining relations between China and its major trading partners. This week, the Italian government called on the European Union to impose tariffs on Chinese textiles and apparel. EU officials said they needed more information before taking such a step.

Meanwhile, U.S. manufacturers are set to hold a news conference in Washington today to urge the Bush administration to move quickly to impose controls on the most popular Chinese imports. They blame China for flooding the U.S. market with goods, triggering plant closures and thousands of job cuts in January and February.

An appeal last year by manufacturers for the U.S. government to restrict imports based on the threat of a surge in Chinese imports is tied up in court.

“This is no longer just a threat,” said John Emrich, chief executive of Guilford, a Greensboro, N.C.-based textile maker. “Are they going to wait until the house is burned down and then call in the fire department?”

For their part, U.S. retailers are fighting import restraints, arguing that quotas were costly for them and their customers. Retailers also said the best way to help struggling foreign suppliers was for Congress to pass a proposed Central American Free Trade Agreement, which would expand opportunities for producers from that region.

Analysts said it was still too early to know how the end of the quota system would play out. It’s also premature to draw conclusions from only one month’s data, they said, because China isn’t always so accurate with these sorts of records. Year-over-year comparisons could also be misleading. For one thing, the Chinese New Year holiday last year fell in January, shutting down factories for several weeks. This year, that holiday was in February.

Still, most industry observers believe that the latest data confirm what many predicted -- that China is well on its way to dominating the global apparel and textile market, and the biggest losers will be competitors in many of the world’s poorest countries.

“We hope that maybe some more orders will get here by winter, which comes in April,” said B. Shaw Lebakae, a union organizer struggling to help the thousands who have lost their jobs in the AIDS-ravaged African country of Lesotho.

Since last fall, Lebakae said, six large factories have closed and three more are struggling to stay afloat.

The global effect of the phase-out can be seen around the world, starting in China.

Chinese officials anticipated the backlash, and in an effort to ease tensions, the government late last year imposed export duties on garments, particularly cheaper items. Although acknowledging the sharp increase in exports, Du Yuzhou, president of China Textile Assn., said this week that he expected overseas shipments to slow down.

In January, Chinese textile and apparel exports totaled $8.4 billion, up 29% from a year earlier. For all of 2004, China’s overseas shipments of textiles and apparel gained 21%.

Garment shipments kept China’s export-driven economy booming at the start of the year.

On the whole, China recorded an $11.1-billion trade surplus in the first two months of this year, contrasted with an $8-billion deficit in the same period a year earlier. The unexpectedly large surplus is expected to drive China’s economic expansion in the first quarter to an annualized growth rate of 9.3%, about the same pace for all of last year.

Given the backlash, Chinese garment producers were reluctant to comment Thursday on their good fortunes. But places like Shaoxing, a textile stronghold in China’s entrepreneurial province of Zhejiang, have been hopping since January.

The only thing holding back many companies seems to be getting raw materials fast enough, and finding enough hands to sew and package goods.

Some producers in Shaoxing face an estimated 30% shortage of labor, according to businesspeople there.

Yul Kim, who owns a textile and clothing company in Shaoxing, said he was surprised at the brisk activity. Usually after the Chinese New Year holiday, business slows before picking up gradually. But not this time.

“Orders have soared since the end of the quota,” Kim said.

At Shanghai’s port, Li Jia, sales manager of Hanjin Shipping Co., said some of the dramatic increases this year were inflated because exporters held back December shipments until the quotas were lifted.

If anything, Li said, the port of Shanghai hadn’t been as busy as he had expected in January, citing a 15% increase in outgoing containers carrying clothing. He said, however, that more Chinese companies were trying to export higher-end apparel -- a move the central government is encouraging -- which may have boosted the overall value of Chinese exports.

In Southern California, dockworkers and shipping companies at the ports of Los Angeles and Long Beach are racing to keep up with increased volume from China.

But many U.S. clothing manufacturers are struggling.

Since 2001, U.S. textile and apparel firms have cut 373,800 jobs -- about 35.7% of total employment. In February alone, 5,600 jobs were lost, according to the American Manufacturing Trade Action Coalition.

In Fullerton, employees at Springs Industries are packing up their plant, after the Fort Mill, S.C.-based firm decided that its survival depended on becoming smaller and more niche-oriented. The Orange County facility, whose 270 employees produced towels, was one of six plants that Springs Industries shuttered this year.

Ted Matthews, a Springs Industries spokesman, said the company was surprised at how tough price competition has been. In part, that’s because many big customers -- including Wal-Mart Stores Inc., Target Corp. and Federated Department Stores Inc. -- have started manufacturing their own goods now that quotas have disappeared. He said the company has seen price decreases of as much as 30% in its major product categories, such as bedding and towels.

“We have to do everything we can to continue to serve our customers and improve the value we offer them,” he said.

Among the hardest hit may be producers in Mexico and Central America. Their factories had for years supplied the U.S. market with the low-priced goods that China is now cranking out.

Experts have predicted that Mexico’s apparel industry, which has already lost 200,000 jobs since 2000, will continue its downward slide.

Many of Mexico’s apparel makers are small fry that lack the capital to invest in state-of-the art technology or the expertise to move beyond contract sewing. Mexico’s labor costs are at least four times higher than China’s.

Indeed, China is taking dead aim at Mexico’s top apparel export to the U.S.: men’s cotton trousers. Mexico had supplied about one-fourth of the casual pants that have become a staple in American men’s wardrobes. But China’s U.S. trouser shipments soared by 1,332% in January, according to an analysis of Chinese data by AMTAC, the U.S. industry group.

Raul Metsa’s company has already felt the effect.

The vice president of sales for Chihuahua, Mexico-based Grupo Diamante said the apparel contractor had seen orders vanish in recent years for products such as men’s pants, knit shirts and bluejeans. His firm has turned to niche categories such as uniforms and industrial sewing, which aren’t as sensitive to foreign competition.

But the transition has been painful. The company’s current workforce of 800 is just a third of what it was in the 1990s.

“The business is tougher because of globalization,” Metsa said. “It won’t disappear completely from Mexico. But I think we’re going to see less volume, fewer factories.”

Ernesto Moguel, a partner in Tlaxcala-based Ermo Industrial, which manufactures men’s cotton trousers, said he would like to see limits reimposed on China’s production.

“We can compete against any company in the world, but we can’t compete against the Chinese government,” he said. “They are subsidizing everything.”

Iritani reported from Los Angeles, Lee from Shanghai and Dickerson from Mexico City.

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Import boom

Percentage increase in Chinese apparel exports to the U.S. in January compared with a year earlier

Cotton knit shirts +1,836% Cotton trousers +1,332 Underwear +550 Trousers of man-made fiber +337 MenÕs woven shirts +267

Source: Global Trade Atlas