Most Recent Articles In Government and Trade
Latest Government and Trade Articles
- Rana Plaza Victims File Suit Against Retailers
- Global Shifts Leave India’s Exporters Exposed to Lofty Rupee
- Vivienne Westwood Carries Mutilated ‘Baby’ in Anti-Fracking Campaign
More Articles By
WASHINGTON — John Bakane, chief executive officer of Frontier Spinning Mills, is focused on keeping export financing competitive for the U.S. textile industry in his new role on the advisory committee of the Export-Import Bank of the United States.
Bakane, who has spent 30 years in the textile industry, is well-positioned for his new role on the Ex-Im Bank’s committee, a newly created position for the textile industry stemming from legislation passed last year. In this post Bakane has been tasked with making recommendations on how the bank can serve the industry. His four goals include recommending ways the bank can better promote the financing of textile exports; improving outreach and assistance to small businesses in the textile industry; raising awareness about the bank’s products and services through outreach programs, and improving communication about the bank’s role in financial transactions with a positive environmental impact, such as recycling.
While export financing for the industry has improved markedly from the credit crunch in 2008 that pushed the industry to the brink, it is more important than ever today, as multinational corporations and apparel brands continue exploring new options in the Western Hemisphere, the largest export market for U.S. textiles.
Combined yarn, fabric and made-up exports to Mexico and Canada (North American Free Trade Agreement partners) and Central America and the Dominican Republic (Central America Free Trade Agreement partners) accounted for 62 percent of the U.S. textile exports, which fell 0.9 percent to $17.1 billion in 2012, according to the National Council of Textile Organizations.
The U.S. textile industry, keeping pace with renewed interest in Western Hemisphere apparel production and striving to maintain competitive financing for exports, is counting on Bakane to provide recommendations to the Ex-Im Bank’s committee that will help the industry face new challenges.
“Bakane brings 30 years experience in financing of textile shipments and will lend valuable expertise and experience as the advisory committee examines innovative ways to ensure that textile exports are fully financed and supported,” said Sarah Pierce, senior vice president at NCTO. “Export financing for the U.S. textile industry from private sources has become increasingly fluid since the 2008-2009 financial crisis and NCTO members are reporting an improved environment.”
In an interview, Bakane said, “When the crisis in 2008 hit, the industry really hit the wall in terms of regular financing from banks and factors. When that happened, quite frankly, banks and factors tried to play it safe by preserving their own liquidity. Instead of lending to their clients, they basically had to finance their own capital costs.”
The impact on small to medium-size textile mills was significant. Bakane said a textile mill with $1 million in revenue often saw its business slashed by 75 percent because executives could not find financing to support a high line of credit. However, the economy started turning around in 2010, the Federal Reserve injected more liquidity into the system and export financing became more fluid, he noted.
The Ex-Im Bank is an independent federal agency that provides financing mechanisms to help foreign buyers purchase U.S. goods. It approved $35.8 billion in authorizations in fiscal year 2012, $6.1 billion of which directly supported small-business export sales. It began making support of small businesses a priority and strengthened its export credit insurance program, Bakane noted. It has also introduced a working capital guarantee program, which has helped the textile industry.
“The export credit insurance program has been available for a long time, but they became more responsive to the particular needs of U.S. manufacturing companies,” Bakane said.
The working capital guarantee program has also been a strong financing tool, for example, helping the industry when cotton prices shot to $2.24 a pound from 65 cents in spring 2011, Bakane said.
Frontier’s export shipments account for more than 80 percent of sales, with shipments going to 16 different countries, primarily in Central America. As credit became more available and the economy rebounded, Frontier added 400 jobs to employ 1,100 people today, spent $60 million on capital improvements and increased sales substantially, according to Bakane.
“Traditional export financing has been a one-off type of arrangement,” Bakane said. “You have a small manufacturer of T-shirts in Honduras or the Dominican Republic, and typically they are undercapitalized and we would have to provide trade credit to them so they can buy our goods. That is where the Ex-Im Bank comes in.”