Home    Resource Store    Past Issues    Buyers' Guide    Career Center    Subscriptions    Advertising    E-Newsletter    Contact

http://www.expoproduccion.mx/Content/Exhibitors/24/
http://www.textileworld.com/partners/Shaffer_and_Max-Dyeing_and_Finishing_Plant_2014
http://www.spgprints.com
http://ahweb.adsale.com.hk/t.aspx?unt=2396-ZhejiangTex14_TextileWorld
http://www.textileservicesonline.com
http://ahweb.adsale.com.hk/t.aspx?unt=2354-STX15_TextileWorld
http://www.thiestextilmaschinen.com
http://www.textileworld.com/Textile_World_Innovation_Forum_2014/
July/August 2014 July/August 2014

View Issue  |

Subscribe Now  |

Events

AATCC Color Management Workshop
08/26/2014 - 08/27/2014

Intertextile Shanghai Home Textiles - Autumn Edition
08/27/2014 - 08/29/2014

Basics Of Exporting: Understanding U.S. Regulatory Requirements Webinar
08/28/2014 - 08/28/2014

- more events -

- submit your event -

Printer Friendly
Full Site
Fiber World

Fiber39 S Fast Track

Can U.S. fiber and fabric manufacturers look beyond their borders to South America for growth opportunities

Fiber's Fast Track Can U.S. fiber and fabric manufacturers look beyond their borders to South America for growth opportunities Current political activity holds both great threat and great promise for U.S. textiles, referring, of course, to the recently passed Bush administration request to Congress for Trade Promotion Authority (fast track or TPA) to negotiate NAFTA-like positions in the countries of South America, effectively creating a Western Hemisphere trading bloc. A recent Textile World article suggested the fiber and fabric industries transform into service industries, replacing the current product focus with emphasis on exporting/licensing/associations in available labor (See Industry Activity, TW, March 2002). This article will expand that proposition and refer specifically to trade-generated growth opportunities in South America for fiber and fabric manufacturers. 

It is important to state at the outset that this is not a paean to the virtues of free trade with Latin America. That prospect suffers the same ills as free trade with any other free economy. It is, however, a plea to the fiber and textile industries to view their businesses differently, and expend political and business capital in pursuit of a new way to grow.In a recent presentation to the National Textile Center, Dr. Thomas Malone, president and COO, MillikenandCompany, stated, We have failed to effectively communicate our importance, our vulnerability and what we have to do to survive None of us can do it alone. Further, Malone quoted Fernando Silva of Kurt Salmon Associates as saying, If we as a collective industry dont tell our story, we are going out of business. Isnt it time to tell our story This begs the question, what story What's The StoryIt appears that no matter how hard the industry lobbies and how right its cause may be, change has been achieved only at the margins. To argue about Southeast Asian nations devaluing currencies and heaping import pressure on an almost obliterated apparel-manufacturing industry is to argue matters over which the industry has little or no control. Quite obviously, textiles and apparel are the trading currency in the argument of world trade and employment. Extremely low wages in developing nations are not condoned, but one cannot change the facts of their being. Textiles and apparel are labor-sensitive; the United States is a capital-intensive knowledge economy, and it seems almost quixotic to attempt to stem the floodwaters of increased world low-labor-cost competition. Traditional textiles are not alone. Recently, there have been large increases in the amount of nonwoven roll goods entering this country. It is logical to project that the offshore roll-goods manufacturer will evolve into a finished-article manufacturer and retain the value added in his native country. It happened in Korea in fibers and fabrics, and in India with software development. It is only a matter of time before another U.S. industry succumbs to the siren call of cheap foreign labor. This is not the story for the U.S. fiber industry. It is, or should be, a story of the latest technologies; sensitivity to employees; the ability to measure and satisfy markets; access to reasonable, stable capital; and business objectives focused on growth.Textiles and apparel must change the nature of the debate. In the short term, it is important to rebel against easing the quotas and source-nation requirements granted to Andean, Caribbean and Sub-Saharan nations. Rather than continue to fight the details of the fast track legislation, however, would it not be better to accept it for what it is, a bad deal, and address issues leading potentially to industry leadership in a different area of the worldHistory suggests that Congress is unlikely to change this type of trade legislation. If we cant beat em, can we try to join em and shape the debate on our terms, rather than frequently appearing reactive and negative  BackgroundThe Senate, by a 64-to-34 vote, as reported by William L. Watts on CBS Market Watch, July 27, 2002, approved a compromise trade bill that includes expanded White House authority to negotiate international trade deals, following closely on the heels of the House of Representatives, which passed the measure by a mostly party-line vote of 215 to 212. The for vote included 190 Republicans and 25 Democrats. According to sources, in addition to providing the president with the authority to negotiate international trade agreements that Congress can vote up or down but not amend, TPA expands trade benefits for the Andean Community of nations: Bolivia; Colombia; Ecuador; and Peru. It also provides certain trade benefits for Caribbean and Sub-Saharan nations. Watts reported the bill includes expanded trade adjustment assistance provisions for workers displaced [by] imports or, in some cases, decisions by their employers to move factories overseas. The House vote followed a compromise by House and Senate negotiators on differences between the December 2001 House bill and a bill that passed the Senate in March 2002.  Setting The Stage In South AmericaThe economies of South America are the obvious targets of the current drive to arm the administration with TPA. Given the evolution of industrial nations supplying capital-sensitive goods to labor-intensive nations, balanced by developing nations supplying labor-intensive goods to the industrialized nations, the United States definitely needs to improve trade relations with its nearest neighbors. It appears that other areas of the world, particularly the European Union (EU) and the nations of Southeast Asia, are regionalizing their trade voices in anticipation of full implementation of World Trade Organization (WTO) policies in 2005. The North American Free Trade Agreement (NAFTA) has created a small model of the results achievable with a regional trade approach. Opening new dialogues with South America seems to be a logical next step to creating a major trading force in the West, which continues to be the largest market for all the merchandise apparel and textiles included that the world wants to export.According to the Fiber Economics Bureau (FEB), the textile industries of the thirteen nations in South America consumed approximately 5 billion pounds of fibers in 2001. Consumption between 1991 and 2001 grew an average 2.1 percent annually, while the continents population grew from 304 million in 1993 to 345 million, a 1.6-percent per-annum gain. Per-capita fiber consumption for the entire continent was measured at 15.2 pounds in 1999, rising to 15.5 pounds in 2001. Unfortunately for fibers and textiles, consumption patterns are quite uneven and do not conveniently conform to trading area geography. For example, the Andean Community beneficiary of the special provisions of the latest TPA legislation represents more than 32 percent of the South American population. However, only one Andean nation, Peru with 6.3 percent of South Americas total fiber usage appears on the radar screen of users/processors of fibers, in fourth place. Current Washington policy focuses on the Andean Community. It appears growth prospects might be better in other countries of the region, such as Brazil, Argentina and Chile Mercosur (also known as the Common Market of the South) nations with particular emphasis on Brazil, which is one of the more stable economies and currently consumes approximately 65 percent of the fiber used in the area. Table 1 shows year 2001 fiber consumption details for several nations of South America. 
 The data suggest that North American manufacturers should consider associating with producers in Mercosur countries, exchange technologies, use the relatively lower-cost labor of South America to reduce underlying costs and, in the short term, return finished garments and made-up items to the North. Longer term, however, the strategy changes to one of satisfying South American local demand. More important than the 2001 statistics are the 534 million South American residents projected for the year 2050, according to the 2001 World Population Data Sheet published by the Population Reference Bureau, Washington. South Americas rate of growth remains low, at slightly more than 1 percent annually, but the absolute numbers are staggering, approaching the population of North America, including Mexico, which in 2050 will house 600 million people. Individual country rates vary among prognosticators, but the total is agreed on by most. Imagine the opportunities if U.S. and South American fiber and fabric producers could enjoy a regional market growth of population and per-capita fiber use. Increasing South American fiber usage to 20 pounds per person could mean a virtual doubling of fiber and fabric consumption by the year 2050. Production capacity is not available to process this quantity, and South American economies have not encouraged foreign investment. Is there an opportunity to use the broader provisions of TPA including the inherent technological and capital development advantages of our U.S. heritage in South America to grow the local economies and open new doors for fiber and fabric manufacturers A ProposalAccording to the FEB, apparent per-capita U.S. fiber consumption has exceeded 80 pounds per person for the past several years. While a substantial portion of this consumption is imported garments, approximately 60 to 65 percent comes from domestic mill consumption. The import situation is not matched in South America, so mill fiber consumption is a good measure of textile consumption. South American citizens consume relatively small quantities of fiber, a logical extension of the slow development of a spending, consuming middle class. In the short term, endemic government instabilities are not likely to change this situation, and recent history suggests that even a new government will not change the underlying economy. Forces for change must be external, such as trade, which in both theoretical and pragmatic economic terms is a rising tide that lifts all boats. If textiles and apparel, which need access to relatively unskilled labor, cannot see a way to invest in and develop South America as a textile market, who can As noted in a recent Wall Street Journal editorial, [t]he U.S. has no choice but to lead the world on trade so it might be better politics to make the case for free trade. Other countries could have the choice of impoverishing their own citizens with protectionism, but the U.S. example would be powerful. Population increases coupled with increased standards of living yield a substantial opportunity for increased fiber and fabric consumption. Active support of the Congressional move to TPA offers the textile industry a strategic platform from which to enter the 21st century. The United States has the technology, the end market and the capital formation infrastructure. Does it have the will to actively expand beyond its own national borders 


September 2002 



Advertisement