Debate on Sourcing and Manufacturing in the U.S. Apparel Industry–Discussion Questions from FASH455

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(Figure source: USITC 2016 Shifts in US Merchandise Trade)

The value and future of apparel “Made in the USA”

#1 What are the primary obstacles in bringing apparel manufacturing back to the United States? Why or why not the labor cost is a detrimental factor?

#2 Shall policymakers encourage “jobless recovery” in the U.S. apparel manufacturing sector—meaning using more machines to make apparel but with empty factory floors?

#3 If apparel manufacturing generates the lowest added value to the final product, why not just let it go? Isn’t most U.S. apparel brands and retailers which moved production overseas and invested in design, product development, branding and retailing are doing very well financially?

2017 US Fashion Industry Benchmarking Study and Apparel Sourcing

#4 Why do you think respondents say that social compliance and sustainability issues are more important today than five years ago? Is this because of the many issues that have occurred in the recent years? What has changed?

#5 If the majority of respondents answered that they have increased their concerns and decisions on ethical sourcing and sustainability, why are there still manufacturing incidents overseas related to American-based brands?  All the respondents even audit their suppliers.  Should there be a standardized code for the process and requirements for auditors especially with overseas suppliers to ensure the ethical supply chain brands promise?

#6 According to the study some US fashion companies source from places with duty-free programs but don’t claim the benefits. They claim it is because of strict, complicated rules of origin and heavy documentation requirements by NAFTA and CAFTA-DR. How can these rules and regulations be changed? What are the obstacles?

#7 Through this article we understand that larger companies generally have a more diversified sourcing base than smaller companies. How could these extended operations correlate to our previous discussions of supply chain management and how it affects humanistic aspects of production such as workers’ rights and various labor laws?

#8 The benchmarking study finds that hiring plans of businesses within the fashion industry are beginning to shift.  Companies plan to increase their talent to include more diverse educational backgrounds such as engineering and business analytics. What are the implications for conventional fashion educational programs like FASH? How should FASH keep up with the changing nature of the apparel industry and improve the competitiveness and employability of our students?

(Please feel free to join our online discussion. In your comment, please mention the question #.)

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North Korea’s Apparel Exports: Four Things to Know

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First, apparel (defined by HS Chapters 61 & 62) is one of the top categories of North Korea’s merchandise exports. Statistics from the International Trade Center (ITC) show that of North Korea’s total US$2,339.9 million merchandise exports in 2016, US$564.7 million (or 19.4%) were apparel.

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Second, apparel is also one of the fastest-growing categories of North Korea’s exports over the past decade. From 2003 to 2016, the value of North Korea’s apparel exports surged by 416%, compared to only 171% increase of other products over the same period.

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Third, over 99.4% of North Korea’s apparel exports went to China in 2016. Notably, back in 2003, China only accounted for 49.7% of North Korea’s apparel exports. However, apparel exports from North Korea to China received two substantial boosts just in the past ten years: one in 2009 (the year when UN resolution 1874 was adopted) and another in 2013 (the year when UN resolution 2087 was adopted).

Fourth, interesting enough, North Korea’s apparel exports predominantly concentrate on men and women’s overcoats (HS 6201 and 6202) as well as suits, jackets, and blazers (HS 6203 and 6204). This is a notable difference from most other developing countries, such as Bangladesh, Vietnam, and Cambodia whose apparel exports usually focus on more basic items like shirts and trousers.  

by Sheng Lu

Extended readings:

Disclaimer: All blog posts on this site are for FASH455 educational purposes only and they are nonpolitical and nonpartisan in nature. No blog post has the intention to favor or oppose any particular public policy, nor shall be interpreted in that way.

US Textile and Apparel Industry Associations Comment on NAFTA Renegotiation

This week, several leading U.S. textile and apparel industry associations submitted their comments to the Office of the United States Trade Representative (USTR) regarding the renegotiation objectives of the North American Free Trade Agreement (NAFTA). Below is a summary of these organizations’ viewpoints based on their submissions:

NAFTA renegotiation

Appendix: Submitted written comments

Market Size of the Global Textile and Apparel Industry: 2015 to 2020

Textile Mills Market

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The textile mills market includes yarns and fabrics. The market value includes domestic production plus imports minus exports, all valued at manufacturer prices.

The value of the global textile mills market totaled $667.5 billion in 2015 (around 83.1% were fabrics and 16.9% were yarns), up 1.5% from a year earlier. The compound annual growth rate of the market was 4.4% between 2011–15. Asia-Pacific accounted for 54.6% of the global textile mills market value in 2015 and Europe accounted for a further 20.6% of the market.

The global textile mills market is forecast to reach $842.6 billion in value in 2020, an increase of 26.2% since 2015. The compound annual growth rate of the market in the period 2015–20 is predicted to be 4.8%.

Apparel market

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The apparel market covers all clothing except leather, footwear and knitted items as well as other technical, household, and made-up products. The market value includes domestic production plus imports minus exports, all valued at manufacturer prices.

The value of the global apparel market totaled $842.7 billion in 2016, up 5.5% from a year earlier. The compound annual growth rate of the market was 5.2% between 2012–16. Asia-Pacific accounted for 60.7% of the global textile mills market value in 2016 and Europe accounted for a further 15.0% of the market.

The global apparel market is forecast to reach $1,004.6 billion in value in 2021, an increase of 19.2% since 2016. The compound annual growth rate of the market in the period 2015–20 is predicted to be 3.6%.

Apparel retail market

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The apparel retail industry consists of the sale of all menswear, womenswear and childrenswear. The industry value is calculated at retail selling price (RSP), and includes all taxes and duties.

The value of the global apparel retail market totaled $1,254.1 billion in 2015 (52.9% womenswear, 31.2% menswear and 15.9% childrenswear), up 4.8% from a year earlier. The compound annual growth rate of the market was 4.5% between 2011–15. Asia-Pacific accounted for 36.8% of the global textile mills market value in 2015, followed by Europe (27.8%) and the United States (24.0%).

The global apparel retail market is forecast to reach $1,65.2 billion in value in 2020, an increase of 31.8% since 2015. The compound annual growth rate of the market in the period 2015–20 is predicted to be 5.7%.

Data source: MarketLine (2017)

I am Textiles and Apparel

This video is a recent joint effort by faculty in the textile and apparel (T&A) programs across the country with the hope to inspire critical thinking on the future of the T&A academic discipline and help others know better about what we are doing in terms of teaching and scholarships.

How should the T&A academic discipline define itself in the 21st century? What are our unique contributions to the university community, the society and the world? How are we different from programs such as “Art & Design” and “Business”? What is your vision for the future of the T&A academic discipline? Please feel free to share your view.

What Will Happen to the U.S. Textile and Apparel Industry if NAFTA Is Gone?

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Since its taking effect in 1995, NAFTA, a trade deal between the United States, Mexico, and Canada, has raised heated debate regarding its impact on the U.S. economy. President Trump has repeatedly derided NAFTA, describing it as “very, very bad” for U.S. companies and workers, and he promised during his campaign that he would remove the United States from the trade agreement if he could not negotiate improvements.

The U.S. textile and apparel (T&A) industry is a critical stakeholder of the potential policy change, because of its deep involvement in the regional T&A supply chain established by the NAFTA. Particularly, over the past decades, trade creation effect of the NAFTA has significantly facilitated the formation of a regional T&A supply chain among its members. Within this supply chain, the United States typically exports textiles to Mexico, which turns imported yarns and fabrics into apparel and then exports finished apparel back to the United and Canada for consumption.

So what will happen to the U.S. T&A industry if NAFTA no longer exists? Here is what I find*:

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First, results show that ending the NAFTA will significantly hurt U.S. textile exports. Specifically, the annual U.S. textile exports to Mexico and Canada will sharply decline by $2,081 million (down 47.7%) and $351 million (down 14%) respectively compared to the base year level in 2015.Although U.S. textile exports to other members of the Central America Free Trade Agreement (CAFTA-DR), will slightly increase by $42 million (up 1.5%), the potential gains will be far less than the loss of exports to the NAFTA region.

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Second, results show that ending the NAFTA will significantly reduce U.S. apparel imports from the NAFTA region. Specifically, annual U.S. apparel imports from Mexico and Canada will sharply decrease by $1,610 million (down 45.3%) and $916 million (down 154.2%) respectively compared to the base year level in 2015 (H2 is supported). However, ending the NAFTA would do little to curb the total U.S. apparel imports, largely because U.S. companies will simply switch to importing more apparel from other suppliers such as China and Vietnam.

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Third, ending NAFTA will further undercut textile and apparel manufacturing in the United States rather than bring back “Made in the USA.” Specifically, annual U.S. textile and apparel manufacturing will decline by $1,923 million (down 12.8%) and $308 million (down 3.0%) respectively compared to the base year level in 2015 (H3 is supported). Weaker demand from the NAFTA region is the primary reason why U.S. T&A manufacturing will suffer a decline.

These findings have several important implications. On the one hand, the results suggest that the U.S. T&A will be a big loser if the NAFTA no longer exists. Particularly, ending the agreement will put the regional T&A supply chain in jeopardy and make the U.S. textile industry lose its single largest export market—Mexico. On the other hand, findings of the study confirm that in an almost perfectly competitive market like apparel, raising tariff rate is bound to result in trade diversion. With so many alternative suppliers out there, understandably, ending the NAFTA will NOT increase demand for T&A “Made in the USA,” nor create more manufacturing jobs in the sector. Rather, Asian textile and apparel suppliers will take away market shares from Mexico and ironically benefit most from NAFTA’s dismantlement.

*Note: The study is based on the computable general equilibrium (CGE) model developed by the Global Trade Analysis Project (GTAP). Data of the analysis came from the latest GTAP9 database, which includes trade and production data of 57 sectors in 140 countries in 2015 as the base year. For the purpose of the study, we assume that if NAFTA no longer exists, the tariff rate applied for T&A traded between NAFTA members will increase from zero to the normal duty rate (i.e. the Most-Favored-Nation duty rate) in respective countries.

by Sheng Lu

Sourcing Trends of U.S. Fashion Companies: Discussion Questions from FASH455

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The following questions are proposed by students in FASH455 (Spring 2017) based on the 2016 U.S. Fashion Industry Benchmarking Study. Please feel free to join the online discussion (please mention the question # in your comment).

#1 With many bricks and mortar stores closing and profits decreasing in many of these stores, why do you think that 92% of respondents are optimistic or somewhat optimistic about the fashion industry over the next five years? Do you believe that there is a technological advance or a change in organizational structure that is coming in the future that is keeping them hopeful?

#2 U.S. fashion companies today have a very diversified sourcing base. For example, overall 52% of respondents report sourcing from more than ten different countries. However, it seems quite challenging to ensure all the factories they are sourcing from are up to the company’s standards. Do you think with increased pressure to become more sustainable as well as have ethical working conditions across their supply chain, U.S. fashion companies will source from fewer countries in the future?

#3 According to the survey, controlling sourcing and production cost remains one of the top business challenges for U.S. fashion companies. Does it imply that it is unrealistic to expect companies to make commitments to sustainability and social responsibility at the sacrifice of their profit?

#4 U.S. apparel imports from Vietnam has been growing rapidly in recent years. Why do you think Vietnam has been able to expand as a garment exporter so quickly, outperforming most of its Asian competitors?

#5 As optimism continues to create new demand for human talent, more specifically for fashion designers, buyers and merchandisers, sourcing specialists, and social compliance specialists how can the fashion department at the University of Delaware further prepare us to excel at these positions? Any specific suggestions?

#6 What other sourcing and trade topics do you think the benchmarking study could include?