Apparel Firms Hope Textile Dispute Ends

Chen-Wei Chang will be watching closely when negotiators for the U.S. and China meet today in Beijing to try to resolve a festering textile dispute. The Southern California apparel executive has held off ordering next year’s inventory from China because she doesn’t want her clothing stuck on a dock -- again.

This year, the U.S. government imposed quotas on some Chinese apparel and textile goods when imports surged and domestic manufacturers cried foul.

The move held up a shipment of 2,000 T-shirts that were part of an outfit advertised in Draper’s & Damon’s fall catalog. The Irvine firm was forced to redo the catalog and reproduce the shirts in Taiwan so the outfits could be salvaged for the holiday season.

The clampdown on Chinese goods has been extremely costly for Draper’s and others that are now forced to ship goods by air to try to beat quota limits or scramble to find new suppliers to fill last-minute orders. Chang said Draper’s had suffered at least $300,000 to $400,000 in losses on airfreight, replacement goods and lost sales.

“It makes it impossible to plan anything,” said Chang, director of manufacturing for Draper’s, a mid-priced retailer catering to mature women.

The U.S.-China textile spat has been painful for the West Coast apparel industry, which includes specialty retailers of surf wear and ski wear that are dependent on Chinese suppliers.

“Any [new] restrictions on cottons, nylons or synthetics could have a very dramatic effect,” said Frank Hugelmeyer, president of the Outdoor Industry Assn., a Boulder, Colo., trade group representing 1,100 firms producing goods for outdoor activities.

Toby Bost, executive vice president of Irvine-based O’Neill Clothing, said his firm faced a “mad scramble” to get its cotton shorts into the U.S. before the quota reached its limit. Bost said his Chinese suppliers were able to shift production to other countries, such as India, Thailand and Vietnam. But it takes twice as long to import goods from India as China, so some of the popular items had to be shipped via air, he said.

One of China’s appeals is its ability to produce labor-intensive products, such as beaded and embroidered goods, at a low price. China is also a leading producer of outdoor gear because its factories have the skilled labor and equipment needed to work with Goretex and other high-tech fabrics. China produces “probably 95%” of the surfing industry’s board shorts, Bost said.

The dispute arose after a complex quota system that controlled the global apparel and textile trade was abolished this year. China’s production soared and the U.S. government, under pressure from domestic manufacturers, imposed quotas restricting Chinese imports. When it joined the World Trade Organization in 2002, China agreed that other countries could impose quotas on its textile goods if they disrupted the domestic market.

But the reimposition of quotas on some popular apparel products -- and the threat of more to come -- has created widespread uncertainty for importers, particularly small and medium-size firms.

“We’re looking right now at other alternatives, but there are just so few places outside of China to get these products made,” said Brian Cousins, president of Cloudveil Mountain Works Inc., a Jackson, Wyo.-based outdoor apparel company.

This year, he asked one Chinese factory to speed up making some $300,000 worth of men’s and women’s ski pants and ship them by air. But he was a day too late. The quota took effect and the popular ski pants are now sitting in a bonded warehouse at the start of Cousins’ peak sales season.

Hugelmeyer, of the Outdoor Industry Assn., said smaller firms were at a disadvantage because they were unable to strong-arm suppliers to put their orders at the front of the line before the quotas were filled.

“They can’t accelerate their order like a big company can or they’re not sophisticated enough to know that the safeguards have even been put in place,” he said.

Apparel firms are hoping U.S. textile negotiators, meeting today and Thursday, will strike a deal that will restore stability to their supply chain, even if it restricts how much they can buy from China.

But the U.S. and China have disagreed on the number of products to include in any new agreement and the size of the quotas, industry officials say. The European Union recently struck a similar pact to restrict Chinese imports in its market.

U.S. officials said this month that if Washington couldn’t reach a deal, they would consider renewing limits Jan. 1 for nine categories including underwear, knit shirts and pants, and could impose restrictions on four new products.

Demitri Coupounas, president of GoLight, a Colorado company that specializes in ultra-light backpacks, sleeping bags and other outdoor goods, isn’t taking any chances. He has told his supplier in China to hold off production of his most popular lightweight shorts and trousers until closer to year-end. He plans to import a shipment after Dec. 31., when the quota expires.

Coupounas doesn’t believe the quotas are creating jobs for Americans, despite such claims from struggling domestic manufacturers.

“Nobody is looking to bring this back to the U.S.,” he said. “Nobody here wants to do that work.”

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Weaving its way to the U.S.

Top exporters of apparel to U.S. in 2004 (in billions of square meters)

China: 2.97

Mexico: 1.90

Honduras: 1.20

Bangladesh: 0.94

El Salvador: 0.85