THE PACIFIC : Textile Tensions : Apparel Prices May Rise if U.S. Firms Cut Imports From China

When the political disruption in China boiled over into violence early last month, U.S. apparel and textile importers began sounding alarms about possible price increases and shortages of clothing in retail stores by year-end.

They scrambled to get employees out of Beijing and to find new manufacturing sources in Taiwan, South Korea and other Asian lands for the mountains of cotton sweaters, silk and rayon that the United States imports from China.

Five weeks later, many manufacturers and trade officials say, most of the initial concerns have melted away. After some transportation delays, clothing commodities from China appear to be moving freely again, either by ship or, in some cases, by air.

“There are some delays in deliveries. . . but everything seems to be rather quickly returning to what it was before in China,” said Carlos Moore, executive vice president of the American Textile Manufacturers Institute, a Washington trade group.

Even so, some observers contend that serious effects could be felt months or years from now if U.S. manufacturers grow disillusioned with China as a dependable trading partner and move their business elsewhere, where labor costs would undoubtedly be higher. Another concern, which seems remote, is that the United States could impose trade sanctions to protest China’s repressive stance.

‘Long-Term Affects’ Seen

“Any time political turmoil raises its ugly head, anybody remotely involved in manufacturing in that country immediately panics,” said Thomas Hochfelder, executive vice president of Beldoch Industries, a New York clothing maker. “They’re afraid that the whole country will get shut down and they’ll never get another garment out.”

Although the political protests appear to have been squelched for now, he added: “I believe we’re going to see some long-term effects.”

Most industry observers agree that it is too soon to tell how serious the fallout from the bloody crackdown might be. Goods on their way to the United States when the violence broke out would have been ordered well in advance for the coming fall season. For future seasons, clothing companies could look to other countries with more stable outlooks.

Over the past few years, imports from China have grown considerably, primarily because of the nation’s reputation as a low-cost producer. (Chinese clothing workers make as little as $500 a year.)

Last year, China ranked as the third-largest supplier of clothing and textiles, behind Hong Kong and Taiwan, according to the American Apparel Manufacturers Assn. in Arlington, Va.

Clothing and textiles are China’s biggest exports to the United States. According to the National Knitwear and Sportswear Assn., a New York trade group, 16% of all sweaters imported last year came from China. And export figures mask the fact that Chinese factories make the piece goods for tens of millions of garments that are then finished in and shipped from Hong Kong.

Bureaucratic Delays

When the Chinese army started battling students in Tian An Men Square, favorable geography argued against large-scale disarray in Chinese clothing production. Most of the country’s apparel plants are on the southern coast, far from Beijing and Shanghai, where the students’ pro-democracy protests grabbed the rest of the world’s attention.

Some early problems were caused by disruptions in communications and the complex Chinese bureaucracy. Because many government offices were temporarily closed, some clothing shipments arrived at ports without the appropriate documents and were turned away or held. Many trucks waiting to cross the border from China into Hong Kong were delayed for inspections.

However, manufacturers say that most of those problems have disappeared and that things are more or less back to normal.

Trade troubles with China are not unusual. In 1987, the nation ranked second behind Taiwan in shipments of clothing and textiles but surpassed its quota allowances in 26 categories. As a result, the United States imposed embargoes on certain goods.

Generra Sportswear Co., a Seattle-based clothing firm that imports almost all of the pants, sweaters, shirts and other garments it sells, suffered far more from those embargoes than from any loss of production after the recent violence.

“We normally (import) about 85% to 90% of the goods we sell,” said Steve Miska, chairman and chief executive. When U.S. embargoes halted the flow of goods from China in the third quarter of 1987, he added, “we ended up shipping 65%. All that reduction was accounted for by China.”

Given that track record, Generra reacted quickly when the political troubles erupted, even though the immediate loss of production was “minute,” Miska said. The company has reduced its commitments from China for the holiday fourth quarter and has shifted production to plants in the United States and South and Central America.

“We believe most people will cut back a little bit,” Miska added.

Some Return to U.S.

Carl Priestland, chief economist of the American Apparel Manufacturers Assn., agreed. “I have to assume that people will be looking elsewhere for new sources as time goes on . . . unless they can see that China is back to normal,” he said.

Some business “has definitely come back here,” said Seth Bodner, who lobbies on behalf of U.S. manufacturers as executive director of the National Knitwear and Sportswear Assn. One $3-million sweater order was recently placed with a domestic manufacturer by a clothing company that had not been doing much business in the States.

“The big-volume people who have been doing the big-volume buying in the Far East have one vulnerability: They need a lot of goods,” Bodner said. “They realized they are too exposed.”

Bernard Lax, president of Louie Bernard Inc., a clothing maker in Vernon, said that since July 4 he has been getting calls from major national chains looking to replace supplies of pants and handknit sweaters. But he noted that domestic manufacturers won’t be able to provide handknit looks as cheaply as the Chinese.

All this leaves open the question of what will happen to prices if skittish U.S. companies turn to other sources.

“China’s a very big supplier,” Bodner noted. “If the Chinese system really falls apart, if could affect prices. But we don’t expect that.”