Textiles & Apparel: After Quotas, What?

Companies wonder if they have a future in the U.S.

The 1974 international Multifiber Agreement is history. And with its expiration on Jan. 1, following a 10-year phase-out, quotas on textile and apparel imports are gone. What's next for the industry? No one can be absolutely certain. "If I knew exactly . . . I'd be a trillionaire," quips Frederick H. Abernathy, a professor at Harvard University and a principal investigator at the Harvard Center for Textile and Apparel Research in Cambridge, Mass.

One estimate is that Chinese garments and textiles could account for 45% to 70% of the world market, up from about 20% now.

However, for 2,465 WestPoint Stevens Inc. workers in the U.S., the future is now. They're losing their jobs as the West Point, Ga.-based home fashions company, which Jan. 20 filed a reorganization plan under bankruptcy protection, restructures its operations. Five plants are slated to be closed in late-March or early-April. "These closings and workforce reduction are directly related to the removal of textile quotas from low-wage countries," the company says.

Maybe -- and maybe not.

"We're going to see old industries like textiles closing plants anyway," says Elliot J. Feldman, a partner in the international trade practice at law firm Baker & Hostetler LLP. "If there had been no change in the international regime, we would see that fate in the same way that we saw shoe factories close in Maine 30 years ago.

"We [the U.S.] are still a modernizing economy. And in a modernizing economy, we will still be moving toward service industries. We'll still be moving toward higher technology. And in those things in which high technology isn't enough, we will be moving out of those activities."

Maybe -- and maybe not.

"There's always going to be a need for customized fabric manufacturing in this country," contends Anand Sharma, CEO of TBM Consulting Group in Durham, N.C. For example, supplying high-quality, monogrammed towels to Ritz-Carlton's luxury hotels "cannot be done from China or India," he says. "Rather than focusing on cost, cost, cost and trying to be competitive" with overseas competitors at the low end of the market, U.S. textile producers "need to look at responsiveness, customization, [and] customer intimacy -- understanding [customers] and trying to solve their problem, real or perceived," he says.

In the meantime, Feldman expects such groups as the National Council of Textile Organizations (NCTO) to be challenging the level of Chinese textile and apparel exports to the U.S. under the temporary "safeguard" provisions of the pact that allowed China to join the World Trade Organization in 2001. "These lobby groups are going to be pressing hard for protection. And they are going to get it -- to a large degree," predicts Feldman.

The NCTO expected to have a decision on the threat posed to the U.S. industry by Chinese exports of trousers, knit shirts, woven shirts and underwear by now. But a preliminary injunction issued by the U.S. Court of International Trade on Dec. 30, 2004, at least temporarily snagged those cases.

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