GREENSBORO, N.C. — The U.S. textile industry is at a crossroads that is starkly reflected in the dwindling number of mill towns in the hills of the Carolinas.

The once-thriving center of commerce for much of the South is at the core of a polarizing confrontation over the Central American Free Trade Agreement. As the debate intensifies and the Bush administration awaits Congressional action on the trade bill, experts say it appears to have a good chance of passing in the Senate, although it must overcome opposition from members in sugar-producing states. They fear it will hurt domestic manufacturers.

The House vote is too close to call. The vote might depend on representatives from North and South Carolina, whose constituents appear divided on the issue.

In towns like Greensboro and Lumberton in North Carolina and Spartanburg and Mauldin in South Carolina, the smokestacks of textile mills still dot the landscape — their presence a reminder of an industry that helped shape the region for a century. But it is an industry that has been declining for 25 years because of soaring imports, automation, rising costs, economic instability and the movement of the population to cities with white-collar jobs.

Central America is a boon for U.S. fabric and yarn exports, which totaled $4 billion in 2004. But that business was built under a trade-preference program that largely required the use of U.S. fabric and yarn in finished products to qualify for duty-free import status.

CAFTA’s rule of origin strips away that requirement and allows the use of yarn, fabric and threads from any of the signatory countries. In addition, the trade accord contains more exceptions for the use of foreign fabrics and yarns than the existing program.

The divide in the industry generally lies between fabric producers that oppose the deal because of the allowance of foreign fabric, and yarn spinners and fiber producers that support it for the export opportunities.

In North Carolina, the textile and apparel industries lost a total of 171,000 jobs from May 1993 through May 2005 and employment stands at 98,400. During the same period, employment in the industries in South Carolina fell by 78,500 to 46,500.

Many companies are prepared to build plants in Central America if CAFTA passes, while others plan to stay committed to their domestic operations. On another level, the decision to oppose or support the proposal comes down to the beliefs of the Southern mill owners.

This story first appeared in the June 28, 2005 issue of WWD. Subscribe Today.

Financier Wilbur L. Ross, who formed International Textile Group, based here, through the acquisition of Burlington Industries and Cone Mills and serves as its chairman, is unusual because he is a free-trade advocate who favors CAFTA although his firm is a major fabric producer.

“It’s polarized, frankly, because there are a number of people in the industry who have done nothing about anything except lobby the government [for protection],” Ross said. “There were a number of companies experiencing financial difficulties without the quotas going off, largely because they are totally domestic in orientation and still [operate] with an old-fashioned attitude.”

Ross was referring to the elimination of global quotas in January, which many in the domestic industry said was another blow to U.S. manufacturers. It also resulted in surging textile and apparel exports from China. Some proponents argue the proposed agreement with Costa Rica, Honduras, El Salvador, Guatemala, Nicaragua and the Dominican Republic will balance the trade waters.

ITG is poised to open a Cone Mills denim plant in Guatemala if CAFTA is approved. Cone already has a mill in Mexico and joint ventures in India and Turkey. ITG also established its first manufacturing operation in China. In December, the firm signed a deal with China Ting Group, a major Chinese textile producer, to invest a combined $20 million to build a dyeing and finishing plant in the city of Linping, about 100 miles southwest of Shanghai.

While Ross has ITG operating with a global strategy to take advantage of free trade, Milliken & Co. in Spartanburg, S.C., represents the other end of the spectrum. Milliken is one of the largest privately held textile and chemical manufacturers in the world. The company employs in excess of 12,000 people in more than 60 facilities worldwide and produces some 38,000 products. In its factories outside the U.S., Milliken sells to the local market and does not export.

Chairman and chief executive officer Roger Milliken is legendary in the textile industry for his protectionist bent. He declined to comment on CAFTA.

However, the company’s Washington counsel, Jock Nash, left no doubt where Milliken stands.

The U.S. has “lost jobs but they have not been replaced farther up the valued-added chain,” Nash said. “We’re losing jobs in steel, electronics, textiles and automotives … and as a consequence it is hollowing out the good part of our middle class … and that is unacceptable to Mr. Milliken and that is what we are fighting for. If someone wants to call us naysayers, so be it.”

Nash said Milliken has been concerned about prevailing trade policies for decades.

“We consider ourselves realists,” he said. “We’re not in denial about the storm clouds that are gathering — and there are serious ones. We desperately want a reevaluation of our trade policies that continue to make agreements … like CAFTA, which have the ability to produce for export to our market but have no ability to buy.”

A similar view is held by Roger Chastain, president and chief operating officer of Mount Vernon Mills, based in Mauldin, S.C., which employs 4,134 people in the U.S.

Chastain said the industry is split among executives who believe in promoting U.S jobs, those who don’t and those “who don’t have a dog in the fight.”

“You don’t really gain anything out of CAFTA unless you want to take your equipment and move down there,” Chastain said. “You are really voting to get rid of American jobs and that is one of our big problems with it.”

In Washington, the so-called textile vote could be the trump card in the CAFTA showdown. The House Textile Caucus, comprising some 80 lawmakers, represents a significant voting bloc.

The Bush administration is lobbying hard for the agreement. Commerce Secretary Carlos Gutierrez, for example, arrived this month at a Greensboro Chamber of Commerce luncheon in an effort to rally support among textile and business executives. He touted the benefits of CAFTA to an audience made up primarily of proponents of the trade deal, including ITG, National Textiles, National Spinning, Glen Raven Inc. and VF Corp., which has a Wrangler plant in Greensboro.

North Carolina exports a total of $1.7 billion in goods annually to the CAFTA region and textiles and apparel exports account for $1.32 billion, he said, adding the state is third behind Texas and Florida in state exports to the area.

Gutierrez said CAFTA would help preserve and create jobs in the U.S.

“I encourage you respectfully to beware of the naysayers,” he said. “They sit around complaining about reality and then develop a strategy that suggests we can go back 20 to 30 years, and it may sound very compelling. It may be what people want to hear. But make no mistake about it, they can’t do it, and over time that becomes very, very obvious.”

The political fractures surfaced publicly when the Bush administration won the endorsement of Sen. Elizabeth Dole (R., N.C.) and the National Council of Textile Organizations after pledging to try and ease some of the effects of the accord.

The American Manufacturing Trade Action Coalition and National Textile Association, representing a large portion of the industry, remain opposed to CAFTA.

Gerald Cauthen, vice president of sales and manufacturing for circular knitting mill Contempora Fabrics Inc., in Lumberton, N.C., opposes the trade deal and fears it could negatively impact the domestic industry.

Cauthen said he sits on his patio at night or in the wee hours of the morning and wonders how he can obtain a slice of business from Wal-Mart. He worries about his own livelihood — he recently took a salary cut — and the migration of business and his customers offshore, and he reevaluates his business strategy daily to make sure he is meeting the needs of his remaining customers. He is relying on Defense Department orders to boost his bottom line.

Contempora, an employee-owned company founded in 1972, employs 175 workers and produces greige goods and a small amount of finished apparel fabrics. Cauthen said business has been tough for the past four years, but he can’t afford to move his factory to Central America and he doesn’t want to sacrifice the jobs at home.

“I’m going to slug it out here as long as I can slug it out,” he said. “We are going to work hard to do whatever we can to try to make it in this industry and I believe if we can manage to hang on — and I don’t have stockholders I have to report to — there could be a reversal in a few years.”

Cauthen predicted there will be a backlash against Wal-Mart, which he argued forces competitors to seek lower-priced countries and leads to more job losses in the U.S.

Across the state, Jerry Rowland, ceo and president of Winston-Salem, N.C.-based National Textiles, which employs 3,500 workers, supports CAFTA and is ready to move a portion of his business to Central America if it passes. He said 1,500 workers in the yarn manufacturing side of the business could “easily” remain in the U.S.

Rowland, who operates 10 factories producing five million pounds of knit goods a week and 8.5 million pounds of yarn, said he ships 100 percent of what he produces to Central America or Mexico and fears the repercussions if CAFTA is not approved.

“With CAFTA, retailers and importers have more opportunities to import and they will put more resources in the area,” Rowland said. “It also gives us the ability to increase our business in the region.”

The textile and apparel industries nationwide have lost a total of 893,400 jobs, or 57.4 percent of the workforce, since December 1994. Employment in the two industries is 663,100.

Gary Gereffi, professor of sociology and director of the Center on Globalization, Governance & Competitiveness at Duke University in Durham, N.C., said his state, which has the largest concentration of textile production, has suffered dramatic job losses for several reasons, including shifts in sourcing patterns, the rise in manufacturing capabilities globally and the global quota phaseout of textiles and apparel on Jan. 1.

In 1993, North Carolina had 2,250 textile and apparel plants, employing 267,741 people, but by 2003, the state saw a 30 percent decline in the number of plants to 1,578 and a 57 percent decrease in employment to 116,309 workers.

Gereffi said Southern mill owners who insist on clinging to outdated business models will not survive, but he is also concerned that U.S. textile executives who move offshore will not be able to compete with Asian textile companies in foreign markets.

“Sooner or later, lower-wage locations will affect textiles as it has apparel,” Gereffi said. “The truth is the U.S. textile industry does rely quite heavily on Mexico and the CAFTA countries.”

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