WILL GLOBAL TRADE HURT DENIM’S DOMAIN?

Byline: HOLLY HABER and MICHAEL McNAMARA

As global trade promises to spread apparel production throughout the four corners of the earth, one big question remains: Will the western Texas town of El Paso remain the blue jeans producing and finishing capital of the world, or will low-cost production and low-cost labor drive companies out?
For the time being, at least, executives said the bulk of denim manufacturing, laundering and finishing will remain north of the Rio Grande.
Nearly 21,000 workers in the river valley area are making apparel, and most of them are stitching up, laundering and finishing the 800,000 to one million pairs of denim jeans that are produced here each week, according to the Texas Employment Commission and the Fashion Development Center in El Paso.
The city has even managed to gain 4,000 apparel manufacturing jobs since 1989, despite a 10 percent slide nationally in industry employment. A sizable pool of skilled labor is the key reason that firms like Levi Strauss & Co. and Lee Co. have both expanded their El Paso operations.
Throw in the abundant water supply and millions of dollars of recent capital investment in area plants, and the 103 El Paso manufacturers, launderers and finishers — for now — are thwarting the apparel manufacturing exodus.
Claude Blankiet, an owner and vice president of American Garment Finishing, a denim finisher and launderer in El Paso, said as more denim makers establish operations outside U.S. borders, one key element may be severely lacking: “European launderers are very good, as are the Japanese. But in the emerging countries, it’s a crap shoot. You’ll get what you pay for.”
Blankiet, whose firm does finishing and laundering for virtually all of the top denim apparel makers, said, “Good finishers, even more so than good denim fabrics manufacturers, are harder to come by. In 99 percent of the cases, it’s the finish that sells a denim garment.”
Hector Venegas, labor market analyst in the El Paso office of the Texas Employment Commission, has been tracking the impact of NAFTA and GATT on the garment industry.
“There is a concern that we may lose labor-intensive jobs here in El Paso, but it’s too early to tell,” Venegas commented. “I believe the best yardstick would be the companies that have filed Transitional Adjustment Assistance petitions, and only those that have been approved constitute jobs lost due to NAFTA.”
Since last June, the TEC in El Paso has received 14 applications for relief for workers claiming their jobs were lost due to NAFTA. Six applications have been rejected, and eight have been approved so far, including one for a glove manufacturer that laid off 15 workers.
If the petitions are approved, the workers are eligible for job search and relocation allowances, up to two years of training and other benefits beyond standard unemployment benefits.
“I think those that are leaving, it’s part of an inevitable weeding-out process that all companies go through,” said Keith Hull, president of the Avondale Fabrics division of Avondale Mills. “The denim industry, in terms of the apparel industry, is still the least impacted by trade agreements. It may someday be greatly impacted, but it hasn’t happened as yet.”
Hull went on to say that the advantage U.S. denim manufacturers have is their technological know-how, “which is the best in the world.”
“I also think our facilities are as cost competitive as most anywhere,” Hull said. “Because of that, they’re able to run them at peak efficiency.”
Avondale currently has a very small distribution to Europe and South America, “as the bulk of our capacity is to service North American customers.”
As denim mills begin to explore establishing operations outside U.S. borders, a key point remains: Manufacturers need to be near good quality finishers.
Take Levi Strauss, the region’s biggest civilian employer, with 4,600 people working in five sewing factories, a laundry and a cutting plant that produce mostly 501-style jeans.
“Levi’s plan right now is to continue investing in domestic facilities in order to make them more globally competitive,” said Armando Ojeda, company spokesman for the El Paso office, noting that Levi’s doesn’t own any factories in Mexico.
The firm is in the fourth year of a $400 million, six-year program to convert all 37 domestic plants to team manufacturing, buy automated equipment and train workers. All El Paso factories were converted by the third quarter last year, and results so far are promising.
“We’ve seen an improvement in worker morale, a significant drop in our defect rate to below 2 percent, and we’re also finding we’re meeting our production quotas with greater regularity, so it’s a far more efficient process than piece-rate production,” Ojeda explained.
Lee Apparel Co., which expanded operations in El Paso last year and this year, now employs 2,000 workers, who sew 15 million pairs of jeans annually. The company contracts some sewing in Mexico, but it’s not clear whether it plans to do more production there.
“The best launderers and finishers in the world, bar none, are in El Paso,” said Dutch Leonard, president of Burlington Denim. Burlington manufactures solely in the U.S. While the company has invested heavily in Europe, Mexico and other parts of the world, its denim roots remain entrenched in the U.S.
“It doesn’t matter how cheaply you can do something in other parts of the world,” Leonard said. “If you don’t get the right wash or finish, the jeans or skirt or shirt isn’t worth much. I’ve said it all along: We can access those countries from right here.”
The garment industry in El Paso got started with inexpensive immigrant labor and is still driven mostly by workers and management of Hispanic descent who reside legally in the city, Venegas pointed out. Few of the workers are unionized, he noted.
A strict blockade of the once easily crossed border in El Paso that began last September has had little impact on the city’s industry, Venegas said. “Interestingly enough, from studies I’ve done, it didn’t adversely affect El Paso’s labor market,” Venegas observed. “It did not seem that our job orders for workers here at TEC increased appreciably during that period, and I don’t think the price of labor went up.”
And so far, El Paso’s garment industry continues to churn at high velocity, and there are few signs of operations moving across the border.

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