U.S. textile industry crisis deepens

Rarely, if ever, have the fortunes of a major U.S. manufacturing industry fallen as quickly and as devastatingly as those of the textile industry.

“The textile industry successfully weathered the Great Depression and 12 subsequent recessions,” says Ray Bowen of the Georgia Textile Manufacturers Association. “But our fortunes have contracted swiftly in the past three and a half years, and especially during the past several months.”

To put things into perspective, as recently as 1997, the U.S. textile industry posted record shipments, near-record profits, near-record investments in plants and equipment and record fiber consumption, says Bowen.

“There also was record productivity growth and record exports. Industry employment across the United States stood at nearly 600,000. In Georgia, 108,000 people were employed in textiles,” he says.

During each of the past three years, however, the U.S. textile industry has experienced declining shipments, fiber consumption and prices, he adds. “And in 2000, the industry posted it first annual loss ever — some $350 million. And the crisis has deepened further. Press reports indicate that nearly 75 U.S. textile mills have closed, including two in Georgia that had been in business for more than 100 years.

“Dozens of once-strong textile companies have filed for bankruptcy, including Burlington Industries, America's leading apparel fabrics manufacturer. That filing is perhaps the singular indicator of the severe state of the U.S. textile industry,” says Bowen.

Since the terrorist attacks of this past Sept. 11, 12,000 U.S. textile workers have lost their jobs, he continues. “Over the past 12 months, we've seen our workforce contract by about 15 percent, or 60,000 workers, including 7,200 in Georgia,” he says.

Several factors have worked together to bring about this severe downturn in the U.S. textile industry, says Bowen. “Opinions vary due to the complexity of economic and political influences that must be considered. Obviously, the softening U.S. economy, which is officially in a recession, is a factor.”

Economic growth, he says, has contracted from its torrid pace of the late 1990s, thanks in some measure to the actions of the Federal Reserve. The decline of the Dow Jones Industrials and the collapse of the NASDAQ have reduced the wealth of individuals by $4 trillion.

“Consumer confidence fell to its lowest level in seven years in 2001 while consumer debt is at record levels. In addition unemployment is increasing. In fact, 2001 will mark the first annual net job loss for Georgia since 1991, and the largest since 1975. With the exception of a few mass merchandisers, retail activity is stagnant.

“Housing starts are declining. And, once the zero-percent financing has run its course, auto sales probably will decline.”

Foreign economies, he adds, are in a similar or worse condition. The worldwide economic environment currently is hostile, he says.

“Compounding the effects of a softening economy is the impact of the devaluation of the Asian currency which began in 1997 and continues until this day. Since 1997, the currencies of the top 10 Asian textile exporting countries have declined by an average of about 33 percent.

“Exchange rates are creating a comparative advantage for Asia that could destroy our industry if nothing is done. After years of relatively low growth, imports from Asian countries have jumped nearly 80 percent in the past four years.”

The collapse of the Asian currencies has been exacerbated by U.S. inaction and flawed trade policies, notes Bowen. U.S. trade policy has proven harmful in several areas, he says.

“Widespread customs fraud totals billions of dollars and represents lost sales and jobs for the U.S. textile industry. While U.S. Customs and the textile industry have repeatedly documented a continuing flood of illegal textile transshipments through dozens of countries, U.S. Customs has proven either unwilling or unable the devote the time or effort necessary to affect these shipments.”

China, he says, is the “all-time champion” of customs fraud, and it continues to ship textiles illegally.

Recently, another type of customs fraud has emerged, he says. “In the past few years, billions of dollars in textiles and apparels have been smuggled into Mexico — most of it passing through the United States — to avoid paying duties and to illegally gain NAFTA origin. It's been estimated that 40 percent of the Mexican market for apparel is made up of goods smuggled from Asia that enter Mexico directly through the United States. These illegal shipments have taken jobs and business away from U.S. and Mexican textile industries, and they have undermined the true benefits of NAFTA for our domestic textile industry.

“To its credit, the Mexican government has cracked down on its side of the border, seizing thousands of containers of illegal Asian textile products and replacing dozens of ineffective or corrupt customs officials.”

The U.S. textile industry has urged the Congressional textile caucus to ask the Bush Administration to activate the U.S. Customs Service to help stop the flow of illegal textiles, says Bowen. Customs priorities, however, currently are focused on terrorism and drugs, he says.

In addition to fraud, the strong U.S. dollar has helped to unleash a flood of artificially low prices for exports, he says. “By continuing to promote the strong dollar, particularly during these weak economic times, the U.S. government encourages predatory behavior by our trade partners. The strong dollar also has paralyzed U.S. textile exports.

“And the damage isn't limited just to the textile sector. We've also seen it in agriculture. The dollar is pricing our products out of markets both at home and abroad.”

The inaction of the U.S. government in opening markets for U.S. textile products also has contributed to the current crisis in the industry, says Bowen. In 1994, he notes, the U.S. government assured the U.S. textile industry that it would get access to lucrative Far Eastern markets that have been closed to U.S. textile exports.

“Seven years later, these market openings have failed to materialize, but the U.S. government has refused to take punitive steps against Asian countries that continue to keep their markets closed. The industry has registered its anger about denied market access with the Congressional textile caucus.

“The opening of foreign markets would help our industry and other import-impacted industries by relieving some pressure on the United States as being the most open, lucrative market in the world. Our industry is recognized as the most productive textile industry in the world, absent unfair competition.”

The U.S. textile industry, however, will survive despite what appear to be insurmountable odds, says Bowen. “I can't overstate the seriousness of the current crisis, and I'll acknowledge that it has had a permanent impact on industry. But there is some cause for optimism. Some of this optimism can be found in some of the same factors that have brought about the current crisis.”

Turning to the U.S. economy, low inflation and declining tax rates should help to boost consumer confidence, he says. In addition, energy prices have retreated from record highs and are expected to remain relatively stable in the near term.

“Factory production should increase following the success of most businesses in reduced excess inventories. Employment levels also should stabilize or increase somewhat. The Fed's fund rate is at its lowest level since 1961, and the effects of low interest rates will begin to be seen in increasing corporate profits, business investments and eased consumer debt burdens.”

The stock market also is rebounding, says Bowen, and productivity growth in most industries and in the service sector is expected to be at the top of historic ranges.

“Legislators and policy makers appear more interested in enforcing existing laws and regulations relating to fair trade. The steel industry has been successful in this regard and that gives us optimism.”

There is a determination by the U.S. textile industry to be a successful global competitor, he says, and strategies are at work to insure that result.

“We believe that we've experienced the extreme of this crisis, and the industry will emerge somewhat smaller in terms of participants but with more opportunities for profits and more global in perspective. The industry will remain committed to U.S. cotton.”

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