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WASHINGTON — Made in USA is proving to be a key battleground of the presidential campaign and some experts are predicting that a shift in sourcing back to the U.S. has just begun.
This story first appeared in the September 5, 2012 issue of WWD. Subscribe Today.
As job growth wavers between anemic and modest every month— the overall economy added 163,000 jobs in July and the unemployment rate edged up to 8.3 percent from 8.2 percent — the government is trying to find ways to jump-start the economy, while President Obama and Republican presidential candidate Mitt Romney work feverishly to convince voters their plans will bring jobs back to the U.S.
The fashion industry is watching the political debate over job creation closely and pressing for a wide range of proposals, ranging from government stimulus intervention and tax breaks to a more aggressive trade policy and overhaul of the tax code.
Apparel and textile manufacturing has contracted significantly over the past two decades. In 2011, the apparel and textile manufacturing sector employed a combined 506,000 workers, according to the Labor Department, less than half of what it was a generation ago. Combined apparel specialty store, department store and discount store employment was 4.41 million.
“I’m very optimistic about this onshoring or reshoring move you hear about,” said Edwin Keh, a lecturer at the Wharton School at the University of Pennsylvania and former chief operating officer and senior vice president of Wal-Mart Global Procurement. “We went offshore because the American dollar was so valued overseas that it made everything more affordable for 30 years. In the last couple of years, chiefly in the relationship of the U.S. dollar to the Chinese renminbi, it became less. Coupled with stubbornly high oil prices, suddenly the question became why take on so much risk to offshore when you are not getting the value you wanted to create in the first place?
“The challenge now is we don’t have a supply chain that can respond to the turbulent times we live in. But I think it is a lot more feasible to think about high-quality products that can be made onshore and that can respond to much faster marketplace turbulence,” Keh continued. “How fast onshoring happens will depend on the momentum. If one or two big brands decide to make a commitment and bring the whole supply chain ecosystem with them, from zippers, button and thread suppliers, then all of a sudden this becomes much faster in terms of velocity.”
The economy is a centerpiece of this year’s presidential election and Obama and Romney have put forth their economic and job growth plans in a bid to woo voters at the polls in November.
Obama’s plan places an emphasis on the middle class and American manufacturing, extending tax cuts implemented by former President George W. Bush, which expire at the end of the year, only for families making less than $250,000 and individuals making less than $200,000; giving tax breaks to small businesses and companies moving production back to the U.S., and opening more markets abroad for U.S. exports with an emphasis on trade enforcement.
Romney’s plan focuses on repealing regulations and laws enacted under the Obama administration, including the President’s signature health care plan and the Dodd-Frank financial regulations; shrinking the size of the government through federal spending cuts; extending tax cuts for everyone, including the wealthy, and passing more free trade deals, while cracking down on China’s undervalued currency.
As the two presidential candidates battle it out in the final stage of the election, the White House and Congress have passed and implemented some policies and programs aimed at job creation.
The Obama administration, through the Commerce Department and U.S. Trade Representative’s office, has placed the fashion industry at the center of its Made in America campaign, which has trade officials promoting U.S. jobs and visiting several apparel companies from coast to coast.
The focus on the fashion industry is part of the Obama administration’s initiative to boost U.S. manufacturing and meet its goal in the National Export Initiative to double exports by the end of 2014. For the year ending May 31, U.S. exports of textiles and apparel to the world rose 7.5 percent to $22.6 billion, compared with the year earlier period, according to Commerce’s Office of Textiles & Apparel. U.S. textile and apparel exports to the Western Hemisphere rose 8.6 percent to $15 billion in the same period.
Kim Glas, deputy assistant secretary for textiles and apparel at the Commerce Department, said her office has received many phone calls and e-mails all year from brands and retailers “looking for sourcing finished apparel here in the USA.” To facilitate that, Glas said OTEXA is developing a Made in USA database where U.S. textile and apparel suppliers can upload information to the government Web site and make information available to retailers and sourcing executives.
OTEXA expects to have the database operational this year, although there is not currently a target date, she said. On request from brands and retailers, the office will share the list of suppliers available to produce apparel and other products in the U.S.
“This is a result of brands and retailers constantly coming to our office over the last six months to a year looking to source products closer to home,” Glas said. “They want Made in USA labels in their stores because customers are demanding that. This project came as a direct result of companies asking about it.”
Commerce also joined forces with the Sourcing at MAGIC trade show for the second installment of the “Sourcing in the Americas” pavilion and summit, highlighting U.S. apparel producers, as well as those in the Western Hemisphere, at the Las Vegas Convention Center last month.
“I think what Francisco Sánchez [undersecretary for international trade at the Commerce Department] is doing is great,” said Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association. “He is promoting jobs in the U.S. and the Western Hemisphere.…And we fully support that. We think that is good for the industry.”
Burke said even though the majority of apparel consumed in the U.S. is imported, the combined industry still supports 4 million jobs in the U.S. and he said the government should place more of a positive emphasis on imports as it does with exports.
“Don’t try to make imports look bad because certain parts of the American base are not doing as well as before,” said Burke, addressing the government. “The economy as a whole has to be balanced. If we can make things in the U.S., terrific. But if we bring value [he estimated that 75 percent of a product’s value is added in the U.S.] to the American economy by importing, we will continue to do it.”
The Obama administration also pressed Congress to pass two trade measures in early August that could help maintain or stimulate more jobs at home. One in particular helps U.S. textile producers and apparel importers doing business in Central America. The bill closed a loophole in the Central American Free Trade Agreement that allowed companies to substitute a fine yarn as sewing thread and get around a requirement that sewing thread be made in the U.S. or Central America.
“There are 1,800 [employees making] sewing thread in the U.S. alone,” Glas said. “This will have an impact on their jobs. I am starting to hear from companies that are actually looking to hire more workers to produce the sewing thread.”
Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, said: “By closing [the loophole], we are confident that U.S. thread producers can begin to recapture market share in the CAFTA region, leading to more jobs and increased U.S. exports.”
“I think the apparel and textile manufacturing industry is really on the cusp of seeing significant growth for many years if the right policies are put into place, because you see this increase in costs in China and a greater interest in buying goods made in the U.S. by consumers,” said Cass Johnson, president of the National Council of Textile Organizations. “So you have two great drivers and you have already seen some manufacturing come back. Whoever is in the government needs to put in trade, economic and regulatory policies that help to ensure that growth actually occurs.”