BARNWELL, S.C. — The southwestern corner of South Carolina can be seen as a microcosm of the impact of national trade policy on the textile industry.
This story first appeared in the March 31, 2009 issue of WWD. Subscribe Today.
The region is feeling the pain of the falling economy as two major textile employers, Milliken & Co. and Hanesbrands Inc., plan to shut plants and put more than 400 people out of work.
Milliken’s plant, which employs 120, has been operating alternating weeks and plans to close its doors for good in June, county officials said. Hanesbrands, which employed 319, plans to close its plant by the end of April. Milliken is shifting work from the Barnwell plant to other South Carolina locations, a spokesman said. Hanes is expected to move operations offshore.
Spokesmen for both companies did not return telephone calls to discuss the closures. But a source with knowledge of Milliken said the plant closure is a response to the economy.
“Milliken doesn’t want surplus capacity if it doesn’t use it,” he said, noting the company has almost halved its employee rolls in the past 20 years. “Milliken will always survive, but it has to restructure and it has to navigate through this economic crisis.”
The loss of these two plants isn’t the only blow to this part of the state. A Mohawk Carpet plant in neighboring Allendale County closed last year and put 225 people out of work. Also, in February, Allied Air enterprises in the town of Blackville, which is in Barnwell County, said it would close with the loss of 350 jobs. The plant makes heat pumps and cooling units, and manufacturing is being consolidated in Mexico.
Kay Maxwell, marketing director for the Southern Carolina Regional Development Alliance, which is trying to attract jobs to this rural area, said, “The textile industry was good to this part of the country for a long time.”
Some say that in addition to a faltering economy, U.S. trade policies such as the North American Free Trade Agreement have struck a fatal blow to U.S. industry. Revival of import duties and trade-distorting subsidies from world traders such as Russia, China, India, Argentina, Australia and the U.S. are haunting the upcoming G-20 summit on Thursday in London. Those same calls are being made by many in rural South Carolina.
“Trade policies have ruined us,” said Barnwell City Mayor Edward Lemon, adding policies should be revisited so U.S. industries are better protected from foreign competition.
“I don’t agree with policies that force our companies overseas,” he said. “I just think that every job will end up overseas. If we’re willing to bail out banks and car companies, why aren’t we bailing out the textile industry?”
Pointing to the upcoming closure of the Milliken plant, Lemon said, “When our trade policies hit Milliken, then you know something’s wrong.”
Milliken, based in Spartanburg, S.C., is revered in the state for its ability to survive the vicissitudes of the economy. It has diversified into chemicals and found production niches that enabled it to survive, said Robert Becker, director of the Strom Thurmond Institute of Government and Public Affairs at Clemson University. Just as Milliken has moved quickly in response to economic pressures, so should rural areas such as Barnwell County, Becker said.
Free trade policies have only accelerated what is an inevitable shift in U.S. manufacturing, he said.
“Lower wage jobs and companies would have relocated regardless of trade because of the need for increased productivity,” he said. “Most job losses are because of efficiencies within sectors.”
He points to the automobile industry as an example and said because of heightened efficiencies, fewer man hours are put into each newly manufactured car.
Instead of barriers that would ultimately raise prices, Becker said government could take another tack toward saving domestic industries, such as tax or investment tax credits.
“Much more could have been done,” he said. “Trade barriers are not as effective as people like to believe. There are other ways to be competitive.”
As jobs disappear from Barnwell County, officials have to turn to different sectors to rebuild its employer base, Becker said.
“They have to figure out how to link to sectors that are growing, not to sectors that won’t come back,” he added.
South Carolina Gov. Mark Sanford, a Republican, bucks the conventional sentiment among the state’s textile industry and is an opponent of trade barriers and an advocate of open trade policies. An opponent of the federal stimulus package, Sanford has opposed subsidies to the banking and auto industries, as well.
“Yes, there’s pain in textile job losses, but we’re still able to survive by attracting new industry,” said Sanford’s communications director Joel Sawyer.
Economic survival of rural areas spanning South Carolina depends on human capital, he said. Barnwell County’s workers, with about 10 percent holding college degrees, need to be retrained and educated, Becker said.
“If they don’t have a high school diploma, they need to get it,” he said. “If they don’t have an associate’s degree, they need to get one. Those young enough should go back to school and get retrained.”
Bruce Yandle, dean emeritus of the College of Business & Behavioral Sciences at Clemson University, said South Carolina’s economy is in a natural transition that has been ongoing for decades. He agrees the transition has been accelerated by trade policies such as NAFTA and the Caribbean Basin Initiative, and notes it’s in the end stages.
“In some communities, such as Barnwell County, it’s a struggle of decline,” he said, noting young workers are migrating to the city and growing areas along the coast. “There’s no way of knowing if protectionism would have made any difference in places like Barnwell County.”
The unemployment rate in Barnwell County was 15.9 percent in December, among the highest in South Carolina. Allendale has the highest unemployment rate in the state at 23.4 percent. The state’s unemployment rate in January was 10.4 percent, its worst since April 1983. South Carolina follows only Michigan, with an unemployment rate of 11.6 percent, in national unemployment rates.
The nation’s unemployment rate is 8.1 percent and some predict it could reach 10 percent by early next year.
The textile industry, which once sustained the South Carolina economy, started to disappear in 1994 when NAFTA took effect, statistics show. Now, with the economy faltering, the slide has accelerated. The number of jobs in apparel and textile manufacturing has dropped by 1.1 million nationwide since December 1994, or 71.4 percent, according to the U.S. Department of Labor Statistics and MGB Information Services. As of last month, 446,100 jobs are left nationwide from a domestic industry that once employed almost 1.6 million.
In South Carolina from 1990 to 2005, 90 percent of the apparel jobs disappeared and 60 percent of the textile jobs were eliminated, said David Barkley, director of the University Center for Economic Development and professor of applied economics and statistics at Clemson University.
Textile and apparel makers remaining in this rural part of the state are hanging on and determined to stay in business. At International Apparel Group LLC in Allendale, business is down 70 percent, said owner and president Toby Williams. In recent years, most of his business has come from the military and two years ago the family-run business employed 100 people making trousers for the Navy, Williams said. Now, the plant employs 25.
“We have a positive outlook and we hope things pick up,” Williams said. “We’re just thankful we have the business we have.”
Williams is one of those who blames much of his business decline on international trade policies that have opened U.S. borders to imports. He ruefully says he bought his plant in 1993, the year before NAFTA took affect.
In the beginning, he contracted with Mexican factories to sew in South Carolina, but as U.S. fabric making moved to China, his job became more difficult.
“Our business is as much about fabric as cheaper labor,” he said.
In recent years, he has prospered on sewing contracts that stipulate items must be made in the U.S., such as military and government uniforms.
At Rockland Industries Inc., which operates a textile plant in Bamberg, a third of its business has gone to Asia, said chief executive officer Mark R. Berman. The South Carolina plant makes blackout drapery lining and fabric for home sewing, and business has dropped as fewer hotels and businesses renovate, Berman said.
“We’ve tried to match our labor needs with incoming orders,” Berman said about the furloughs and temporary layoffs that have been put in place at the plant. “We’re trying to be innovative, but the economy is hurting us. We’re OK for now and if things don’t get any worse than they are now, we’ll be able to ride this out. But it’s a very scary time and there are no guarantees.”
He acknowledges he can’t compete with the prices and subsidies of foreign firms, and says it’s his specialization and efficiency in producing blackout fabric that has kept him in business.
The closures of the Milliken and Hanesbrands plants mean lost revenue for the city and county of Barnwell. Almost 3 percent of the county’s $10 million annual budget will be lost in tax revenue from the two plants, said county administrator Pickens Williams Jr. The city of Barnwell will lose about $500,000 from its $2.5 million budget from lost water treatment fees from the two facilities, said Mayor Lemon.
“It’s a real kick in the britches,” said Lemon, noting that to make up the shortfall, the city likely will cut services, primarily police protection. “We’re a county of 24,000 people and we’ve lost 1,000 jobs in the last four months.”
Also, the county and city are looking at the massive federal stimulus package to try to recoup some of the losses. The White House turned down Republican Gov. Sanford’s request to use federal stimulus cash to pay down state debt. The state is slated to get $2.8 billion in federal help and state lawmakers have said they’ll use the money if Sanford doesn’t. While Rep. James Clyburn (D., S.C.) inserted a provision in the bill that would allow state legislatures to bypass governors in receipt of the money, it’s not as clear cut as it initially appeared. State Rep. Lonnie Hosey, who represents Barnwell and Allendale counties, said the legislature is wrestling with obtaining the money and has been told it can’t get it without Sanford’s cooperation.
“That money means a whole lot to Barnwell and Allendale,” he said. Because of budget shortfalls, the state has cut Barnwell County’s budget allocation by about $280,000, and Allendale County’s allocation by about $100,000.
“That’s too much for either one of those counties,” Hosey said. “It will mean a tax hike and those people can’t afford it.”