Even under the restraints of a new trade deal, Chinese socks and hosiery producers are likely to ship enough of their wares to the U.S. market next year to outfit every man, woman and child with about 2.6 pairs.
WASHINGTON — Even under the restraints of a new trade deal, Chinese socks and hosiery producers are likely to ship enough of their wares to the U.S. market next year to outfit every man, woman and child with about 2.6 pairs.
That deluge is likely to intensify for years, forcing socks producers in the U.S. and around the world to pay close attention to trade winds that increasingly blow to and from the manufacturing superpower.
China is the world's most populous nation with 1.3 billion people, and apparel and textile imports that were valued at $21.2 billion for the year ending Sept. 30. China's ability to tap that huge pool of labor and produce increasingly competitive goods, as well as the impact on U.S. producers, prompted the Bush administration to push for trade limits, resulting in a deal that imposes quotas on 34 types of apparel and textiles imports.
The agreement will restrain the import of socks and hosiery from China to 64.4 million dozen pairs next year, 74 million dozen in 2007 and 85.1 million dozen in 2008.
"It gives us time to come up with other means to deal with the predatory trade that is coming from China," said Jim Schollaert, the Washington representative of The Hosiery Association's manufacturers committee. "On balance, we're better off than we would have been without it, but it's certainly not our dreams come true."
U.S. manufacturers and elected officials have argued that China does not compete fairly because of an artificially depressed currency and state subsidies, along with low wages and other factors.
"We're hoping that more people will connect the dots and realize the unfairness and the craziness of this situation," Schollaert said.
One of the last bastions of U.S. apparel production, domestic socks producers held about 42.6 percent of the market last year, according to the Hosiery Association, which drew from government data. If history is any guide, those producers stand to lose even more business if China is given unrestricted access to the U.S. market in 2009, as laws dictate. China's share of the U.S. sock market grew to 16 percent last year from less than 1 percent in 2001 as trade restrictions loosened.Importers and retailers argue that the deal will lead to higher prices for them and their consumers, since it restrains access to cost-efficient production in China.
Part of the cost concern stems from the extra fees that might be generated depending on how the Chinese government allocates the quota. Thirty percent of next year's quota will be distributed in an auction beginning Tuesday, according to the Chinese government's official Web site. For those goods, the bidding process will determine the extra cost of the quotas to the Chinese factories and, ultimately, the U.S. retailers and consumers.
"People who buy socks are going to be paying the Chinese government for permission to wear them in some respects because that's who's going to allocate the quotas and they're the ones who are going to charge the fee," said Stephen Lamar, senior vice president of the American Apparel & Footwear Association.
Wayne Lederman, president of Leg Resource Inc., which produces goods for Anne Klein, Via Spiga and others, and has annual sales of about $15 million, said he is concerned about extra expenditures related to the quotas.
"That could drastically change whether China is cost effective in producing," Lederman said. "We are looking at exploring other countries in the future because we feel the Chinese situation is unstable."
The company will likely rely more on countries such as South Korea, Bangladesh and Turkey for styles that require a lot of labor, he said.
The twist is that 50 to 60 percent of Leg Resource's production is domestic.
"The more basic items we make in the U.S., and the fancier, more labor-intensive items we make offshore," said Lederman. "We have to diversify our product based on the type of product that it is. There is a definite need for us to import goods."
However, Lederman said there will continue to be a need for domestic production to be able to turn around some goods quickly.
Barry Tartarkin, president of JBT Legwear, is concerned about the quotas on China, but has several reasons for not doing a lot of business in the country.
"They want to run large quantities and we do a lot of smaller runs, and that gives us the flexibility with our retailers," Tartarkin said. "We prefer to have the flexibility of smaller minimums and smaller color runs. That combined with the quota issue keeps us out of China for the moment."
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