Lingerie Reveals a Complex Trade Fight
In America’s escalating battle over trade with China, nothing is off-limits, not even women’s underwear.
Last week, 165 members of Congress from 36 states sent letters to President Bush urging him to move quickly to protect besieged domestic textile and apparel producers from surging Chinese imports. Among their demands: Restrict the import of Chinese-made bras, dressing gowns and knit fabric.
As evidence of trade’s critical role in a hotly contested presidential race, the letters carried the signatures of all five Democratic presidential candidates in Congress, including longtime free-traders Sens. John F. Kerry of Massachusetts and Joe Lieberman of Connecticut. The letters blamed China’s “illegal” manipulation of its currency and resulting export boom for an “enormous wave of textile and apparel plant closures and worker layoffs.”
To capitalize on the election-year tensions, U.S. manufacturers are organizing a grass-roots lobbying campaign, setting up voter registration programs at their factories and wooing media in textile-dependent states in the South. The American Manufacturing Trade Action Coalition, which filed the China safeguard complaints, was organized by textile and yarn producers that along with apparel makers have shed 271,100 jobs since January 2001.
The message to the White House is clear: Take action now or risk losing at the polls next November.
“I have been a lifelong Republican. I have supported this president,” said Steve Dobbins, president and chief executive of Carolina Mills, which has closed 10 North Carolina factories and laid off 1,400 people the last four years. “The way things are going, I can’t in good conscience vote for him while I am telling people that have worked for me for 25 years that I can’t give them a job.”
U.S. retailers and importers opposing the import restrictions complain that China is being used as a scapegoat by U.S. manufacturers that are not competitive because of high wages and rising costs at home. China’s defenders deny that a recent gush of Chinese exports has crippled domestic producers, pointing out that the move of labor-intensive manufacturing offshore has been happening for decades.
They also say that the domestic coalition behind the safeguard complaints doesn’t include the handful of apparel firms still producing bras in the United States. Bayonne, N.J.-based Maidenform Inc. and Leading Lady, the world’s largest producer of maternity and nursing bras, oppose the calls for protection because they source their goods from all over the world -- including China.
“Implementing a safeguard on bras would not increase jobs in the U.S.,” said Steve Masket, executive vice president at Maidenform. “If anything, the inability of U.S. producers to balance the costs of production around the world would result in lower long-term sales growth and fewer domestic jobs.”
In the bizarre and complex world of international trade politics, it is often difficult to separate the victims from the villains. Though the fate of Chinese-made lingerie might seem trivial, this is shaping up to be a major struggle pitting an increasingly desperate U.S. domestic textile industry against the Bush administration and huge importers such as Wal-Mart Stores Inc., Target Corp. and J.C. Penney Co.
As the presidential race gets underway, the decline in manufacturing jobs and the ballooning U.S. trade deficit with China, which reached a record $103 billion last year, have become the Bush administration’s biggest headaches. Last year, China’s exports of textiles and apparel to the U.S. grew by 117% and have increased an additional 75% so far this year. In August, China accounted for 21% of the U.S. textile and apparel market, up from 7% in 2001, according to the textile industry.
Commerce Secretary Don Evans just completed a visit to Beijing, where he warned Chinese leaders that they must move faster to open their markets or risk a backlash from unhappy U.S. investors. He followed Treasury Secretary John W. Snow, who a few weeks earlier urged China to loosen controls on its currency, the yuan.
Last week, a Treasury Department report to Congress on the policies of major trading partners in managing their currencies said China had not violated any trade laws by pegging the yuan to the U.S. dollar. The currency peg means that when the dollar weakens, as it has in recent months, the yuan also falls. But U.S. manufacturers contend that the yuan is drastically undervalued and has given Chinese exporters an unfair advantage.
Looming in the background is Jan. 1, 2005, when the quota system used to control the global textile and apparel trade is phased out. The American Textile Manufacturers Institute claims that China could gain up to 65% of the U.S. market once those restraints are lifted. That is why U.S. negotiators pushed to get the textile and apparel safeguards included in China’s deal to join the World Trade Organization in 2001. Those measures allow the United States to impose sanctions if a surge in Chinese apparel or textile exports disrupts the U.S. market.
Given the political pressures, U.S. importers fear the government will trigger safeguards in at least one or two products. The government has until Nov. 17 -- 60 days after the requests were filed -- to rule on the safeguard petitions or extend its deliberations.
The Bush administration “clearly wants to find a way to demonstrate that they’re doing something to help manufacturing,” said Brenda Jacobs, counsel for the U.S. Assn. of Importers of Textiles and Apparel, a Washington trade group. “This may give them something to do that is very public. But it won’t save a single manufacturing job. If this sourcing doesn’t go to China, it won’t come back here.”
Bush administration trade officials declined to comment on the China safeguard petitions.
U.S. textile makers acknowledge there is no guarantee that apparel and textile production will return to the U.S. if the safeguards are imposed, because a lot of other low-cost producers are scrambling for those contracts.
But bras and nightgowns are just the first line of defense.
Lloyd Wood, spokesman for the American Manufacturing Trade Action Coalition in Washington, said his members hoped the imposition of safeguards would pressure China into agreeing to voluntarily restrain its exports. That’s what Japanese automakers did during the 1980s, when that country was the target of U.S. competitive angst.
In addition, U.S. producers want the Bush administration to agree to keep existing tariffs on textiles and apparel and to ensure that new trade agreements, such as the one being negotiated with Central American countries, include provisions that give special preference to manufacturers that use U.S.-made fabrics and yarns.
But U.S. apparel importers and their retail customers contend that the U.S. textile industry is fighting the wrong enemy. They say the imposition of safeguards against China will simply create production headaches and increase prices, resulting in the shift of U.S. production to other low-cost countries such as Thailand and Vietnam.
Such a move would be financially devastating for Leading Lady, the maker of customized bras, nightgowns and hospital wear, said Francie Buckles, supply chain manager for the family-owned firm. The Beachwood, Ohio based company makes some customized products, such as post-mastectomy bras, in three plants in Illinois that employ about 250 people. But the company also sources about 19% of its goods from China, which offers a low-cost and highly skilled labor force and ample supply of the two-dimensional-stretch fabrics used in the industry.
By manufacturing in China, Leading Lady has been able to sell its most labor-intensive products at a competitive price to big-box retailers such as Wal-Mart, one of the firm’s largest customers, Buckles said. Leading Lady’s nursing bras, for example, are composed of 25 to 35 pieces, each of which must be handled by a different sewing operator.
“If a safeguard is placed on bras, it’s going to cost more jobs in the U.S. because companies such as ours ... will lose our top customers,” she said.
U.S. apparel makers and retailers have offered an alternative plan for helping domestic textile producers. That includes eliminating duties on imports manufactured from U.S. cotton, yarn or fabric and capital equipment used in the textile industry, establishing low-interest federal loans for capital investment in the textile industry and revamping tax policies to encourage manufacturers to produce in the United States.
“They need to focus on what is going to make them more competitive in the new environment, especially after the quotas disappear,” said Eric Autor, vice president of the National Retail Federation, a Washington trade group whose members include Gap Inc., Target and Federated Department Stores Inc. “We’ve put forward some pretty imaginative ideas on how to do that. Their recipe is the same old failed protectionism.”