ATMI Talk: Fending Off Far Eastern Competitors

ATMI’s annual meeting addressed barriers facing Western firms in establishing a regional trade block that can compete with Asian suppliers.

Members of the American Textile Manufacturers Institute reacted warmly to Under Secretary of Commerce Grant Aldonas’ comments at their annual meeting.

Members of the American Textile Manufacturers Institute reacted warmly to Under Secretary of Commerce Grant Aldonas’ comments at their annual meeting.

CORAL GABLES, Fla. — The talk at this month’s annual meeting of the American Textile Manufacturers Institute focused on one key topic: How U.S. mills can survive in an apparel industry that’s increasingly dominated by Asian production.

This story first appeared in the April 15, 2003 issue of WWD.  Subscribe Today.

But the three-day event, which wrapped up April 4, also wrestled with the barriers that Western Hemisphere companies face in trying to establish a regional trade block that can compete with Far Eastern suppliers.

As reported, Grant Aldonas, under secretary of Commerce for international trade, told the group that his department had reached a final set of guidelines U.S. companies and other interested parties could use to petition that Chinese imports were causing market disruption in the U.S. The U.S.-China trade accord that paved the way for China’s entry into the World Trade Organization contained a safeguard measure allowing the U.S. to reimpose quotas on Chinese imports if they damage the U.S. market.

While attendees said they were pleased to hear that, there was some griping that it had taken so long — a theme that was repeated last week in a letter to President Bush from the House Textile Caucus calling for quick action on China.

Aldonas also said he considered it “critical” that the U.S. and Vietnam reach a bilateral trade agreement soon. Vietnam’s textile and apparel shipments to the U.S. last year grew explosively to $951.7 million, more than 18 times higher than they’d been in 2001.

The two nations last week resumed negotiations in Washington on the proposed trade deal, which would set quotas on Vietnamese imports.

“If the U.S. is not successful [in reaching a deal],” Aldonas said, “the U.S. will use its right to put unilateral restraints on imports from Vietnam.”

Vietnam is not a member of the WTO, so its shipments to the U.S. will still be subject to quota limits in 2005, when the 146 members of that organization are to drop quotas on textiles and apparel.

Aldonas also said in his comments that Commerce has zeroed in on three technologies for the proposed marker system that would allow U.S. companies and the Customs Service to determine whether fabrics originated in the U.S. The technologies — ultraviolet fluorescent marks, nano bar codes and a DNA-based market system — will be tested in the coming months.

Several speakers at the event addressed the topic of how U.S. and Caribbean Basin companies can work more closely together to take advantage of the duty- and quota-free Caribbean Basin Trade Partnership Act program to better compete with Asian suppliers.

Carlos Arias, executive vice president at Guatemala City-based pants manufacturer Koramsa, said it will be key for U.S. and Latin American companies to learn how to offer full-package garment production.

“It’s important for us to understand that this is a global market,” he said. “When you see a big customer like Gap, like Levi Strauss, like VF, they are struggling even to understand how relevant this hemisphere will be [after quotas are dropped],” he said.

Many Caribbean apparel manufacturers evolved as cut-and-sew operations under the old 807 programs, in which they didn’t need to buy their own raw materials, a function that U.S. importers used to perform. Now, Arias said, customers expect his company to do that.

Noting that his firm produces 550,000 pairs of pants a week and that 95 percent of the fabric it uses is made by U.S. mills, he acknowledged that he needs to better understand the textile industry if he’s to offer full-package service.

“We were understanding too little about denim, too little about twill,” he said, explaining that he’s realized it’s critical that full-package apparel producers understand how long it will take textile suppliers to fill orders so that they can give their importer customers more realistic delivery dates.

While Asian competition is formidable, it has its weaknesses, said Jesus Juan Canahuati Canahuati, general manager of Elcatex, a major Honduran textile manufacturer.

“When I speak to retailers, their frustration with China is lead time,” he said. Still, he noted that Chinese shipments to the U.S. “keep on growing because we’re not doing much to stop them.”

He suggested that U.S. textile executives need to spend less energy trying to change political decisions that have hurt their businesses and more time figuring out how to adapt to the changing trade environment.

Arias, of Koramsa, noted that one of the key problems businesses in Latin America face is limited access to financing.

He noted that Caribbean manufacturers historically weren’t responsible for buying the fabric they cut and sewed, and said U.S. mills have been reluctant to extend credit.

“There are a number of companies in the region that could do packaging, if they had access to capital,” he said. “There needs to be more discussion. Mills can help by letting us know what are the capital structures that could be available.”

David Hastings, chief financial officer of Mount Vernon Mills Inc., said: “A lot of our customers are moving offshore. With domestic customers, traditionally we were happy to sell them on open account and, for various reasons, we may be uncomfortable with that with foreign customers. We all need some alternatives.”

Part of the reason for that discomfort is that many Latin American countries have less rigorous financial disclosure laws and weaker banking systems than those in the U.S. or western Europe.

James Morris, director of the Southeast region for the Export-Import Bank of the U.S., said that’s one area in which the U.S. government can help.

He noted that, as a federal agency, the bank’s mission is to provide financing for exports to areas that are underserved by other financial institutions and said the bank offers credit insurance to U.S. companies looking to sell into developing markets.

The Export-Import Bank currently offers such financial backup to most Western Hemisphere countries, with the exception of Argentina, Venezuela, Bolivia, Ecuador and Haiti, due to financial problems. Cuba is also an exception, for political reasons.

Speakers at the conference also took on the issue of the U.S. economy and when it’s likely to recover from its slump.

Larry Chimerine, president of Radnor International Consulting, said that during the boom of the Nineties, the U.S. economy underwent a major shift.

“The most significant development, from a macroeconomic perspective, has been the process or trend of disinflation in this country,” he said. “We are now in a secular, long-term period of disinflation.”

That, he said, has made U.S. businesses focus most closely on productivity improvement as a way to boost profitability, since it is now difficult to raise prices in most consumer and commercial sectors. He noted that it’s not only the U.S. economy that’s been weak in recent years. He suggested that foreign countries aren’t doing enough to stimulate consumer demand at home, and instead are trying to export their way out of downturns.

“We need economic growth throughout the world now and we need it outside the U.S. in domestic demand,” he said.

He also hit a theme close to many ATMI members’ hearts when he suggested that the U.S. economy will lose its long-term strength if it loses its manufacturing sector.

That was a theme that outgoing ATMI chairman Van May, president and chief executive officer of the Plains Cotton Cooperative Association, hammered home in his final address to the group.

“It’s amazing to me, the shortsighted vision of so many people who are willing to trade away our industrial base,” he said.

He noted that manufacturing employment has been a key source of middle-class jobs in the U.S. for decades, and asked rhetorically what the economic future of the country will be “without a way for our working-class citizens to have a shot at achieving the American dream?”

While many in the industry argue that the shift to manufacturing outside the U.S. is good for the economy in that it allows for lower prices, he said lower prices will prove to be a small advantage to American consumers in the coming decades if they can’t find jobs.

He also questioned the logic of claims that the shift to foreign manufacturing is driven by consumer demand.

“The consumer doesn’t have a choice,” he said. “The decision of what’s on that shelf is made by two-dozen global sourcing managers.”

He added that simply increasing the volume of consumer goods available at U.S. retailers isn’t necessarily a way to strengthen the economy.

“I wasn’t raised up to believe that what it’s all about was what you consume,” he said. “It’s what you can grow and what you can keep.”