Over the past few years, Oerlikon’s Textile Division has permanently grown. Voigtländer is a
fourth-generation textile industry employee. His ancestors were weavers and cloth masters. As a
14-year-old schoolboy, he had a summer job with his father; and at 19, he had a traineeship in the
textile machinery industry and first came into contact with Neumag. He studied mechanical
engineering and process engineering, earned a doctorate and began working for Neumag in 1994. Two
years later, he became an authorized officer, and four years later was promoted to a management
position. He began as a development engineer, and eventually built up the engineering department.
From 2000 on, nonwovens were part of this division.

Dr. Carsten Voigtländer

TW
: Your background means the nonwovens activities at Neumag are your own baby?

Voigtländer: Yes, I have represented everything in front of the Administrative
Board so that it came into being. I have carried out all acquisitions and, of course, it’s part of
my job now to handle consolidation. As it’s well-known, Neumag was taken over by Saurer and then by
the Oerlikon Group. I have been in management since 1998, first with Neumag and with Saurer as of
2000, and as CEO of Oerlikon Textile since 2006.



TW
: What convinced you to accept this job?

Voigtländer: This is an interesting question. I find forming things appealing, and
Oerlikon Textile operates in different textile markets – there are many chances to develop further
projects.

TW
: What is your personal challenge?

Voigtländer: The challenge is the fact that the complete textile production moved
to Asia. It is a real challenge as a European enterprise to withstand worldwide competition with
production sites in Europe and Asia. The various business fields and the production in Europe and
Asia are a multifaceted task and require an enormous personal engagement. The shareholders want to
make money, employees want a decent job, customers want outstanding machinery for little money, and
suppliers have to be paid. The attractive part of this story is to form with all these parts one
unique, sound entity.

Complete Supplier

TW:
What was the idea behind establishing the group as it is presented today
(See Table 1)? Is it to be a complete supplier primarily?

Voigtländer: Yes, the basic idea is to cover the textile value-added chain. We
cover natural and man-made fibers – either the classic spinning mill with natural fibers or
polymerization and filament production for man-made fibers. Then we have fabric forming with wovens
or knitwear in a multi-stage process, or the direct production of the fabric in a one-step process
to manufacture nonwovens. Barmag stands for man-made fibers, Schlafhorst for cotton and Neumag for
nonwovens. Barmag and Schlafhorst are in yarn formation; and Saurer works in niches such as
twisting and embroidery. We are particularly proud of our fifth area, the component business.

TW
: Have you ever considered completing your product portfolio with a manufacturer of weaving
or knitting machines?

Voigtländer: Of course, it is conceivable to become active in this area. However,
there are areas that are closer to us – for example, fiber preparation or hydroentanglement. But,
if there is an opportunity, in finishing, for example, we might get involved.

TW:
What were the difficulties in establishing the group as it exists today?

Voigtländer: It was the task to unite 10 business units and reduce them to five.
Different cultures had to be brought under one hat. It’s a rethinking in the people’s head. Today
we are selling complete lines and not components of lines only. This organization was favored by
the fact that we achieved a terrific result last year. It is also important that we have maintained
the strong brands like Barmag, Neumag, Schlafhorst and Saurer.

The Oerlikon Neumag nonwovens center

The New Owners

TW:
Have the new Administrative Board or top management had any impact on your work?

Voigtländer: Before the new major shareholders invested, they spent a day with us
in the Textile Division to see what we do. After the management council meeting, a strong
commitment to the group’s structure was communicated to the entire management group. It also was
made clear to us that one thinks not in short terms, but very strategically in long terms.

TW
: These are strong words.

Voigtländer: Right, and this also was heard positively by the employees. We
achieved about 50 percent of the turnover of about 2.7 billion Swiss francs last year in the
textile division. This shows clearly its importance. We have about 8,000 employees out of 19,000
for the group.

TW
: Over and over, there are rumors concerning takeovers. How do you comment on that?

Voigtländer: Oh well, these are rumors. Such rumors arise again and again in times
of change. There is nothing more to say about it. And as I said, the new owners invest in our group
because they want to earn money with it.

Clear And Simple Structures

TW
: How does one manage such a large group?


Voigtländer
: On the one hand, we have very clear and simple structures – that’s why we have the five
business units. We have a matrix organization that includes a CFO who works for all business units
and a technology manager who cares about synergies in the development area. The employees who
report directly to me, the managers of the five business units, form the management team. This team
meets every four to six weeks. The one thing that shouldn’t be forgotten is commitment to the
company. We have many long-term employees who contribute their share to our success.

Oerlikon Neumag





TW
: Can you comment on the focusing of the single business units? Let’s start with Oerlikon
Neumag.

Voigtländer: The focus is clear – we want to be a complete supplier to the
nonwovens industry. With the acquisition of more or less all technologies, we can practically offer
almost every possible combination of technologies. This strategy has stood for five years, and we
have put together all the components at this time. It is motivation and confirmation for us at the
same time that our competitors pursue the same strategy today. In the future, another consolidation
still follows in the machinery manufacturing for nonwovens. This consolidation already has partly
started or has already been made.

In the carpet sector, Neumag is the market leader with a 70- to 80-percent market share. Our
new machinery in the bulk continuous filament area enjoyed great success at the last ITMA and
already is highly accepted by the customers.

Oerlikon Barmag

TW
: Let’s discuss Barmag. You have eliminated the recycling area of the portfolio?

Voigtländer: This is correct. We concentrate on the textile business. The most
important areas are POY,  FDY and fibrillated tapes. We have introduced a new winder that has
already sold 1,000 units. This is the future of Barmag – we want to put a similar product on the
market also for FDY. We are strong in Asia and offer total solutions. Ten years ago, enterprises
like Barmag and Neumag delivered the components to the engineering companies, today we do
everything ourselves. The interface between engineering and mechanical engineering has been dropped
out.

In the mid-range segment, Oerlikon Schlafhorst offers ring- and rotor-spinning machinery
produced predominantly in China.

Oerlikon Schlafhorst, Saurer

TW
: Tell me about Oerlikon Schlafhorst, Oerlikon Saurer and Oerlikon Textile Components.

Voigtländer: At Oerlikon Schlafhorst, we have the complete textile chain to a
large extent. First of all, in cooperation with Trützschler GmbH & Co. KG, we offer a
combination that works excellently. This cooperation mixes fiber preparation from Trützschler, and
all follow-up production stages come from Oerlikon. We offer products in the middle segment in the
area of ring and rotor spinning, which we predominantly produce in China. Our competitors don’t
supply either one or the other component; therefore, we are also very strong in the area of staple
fibers. We already have sold a complete fiber line in Dubai and a whole production line in
Uzbekistan with Trützschler. Many customers are happy today if they can buy a complete line and
don’t have to search for individual components.

Oerlikon Saurer is an unchallenged world market leader in shuttle embroidery. We are at the
forefront of laser cutting and sequin application. Melco, a supplier of single-head embroidery
machines, also is doing well; the decisive step was the move into international markets. We expect
growth in Asia and also in Europe to further increase.

Twisting at Volkmann and Allma is mainly for technical applications such as yarns, tire cord
and other industrial applications. We are world market leaders also in this area. With Volkmann, we
record successes in the carpet sector, but also in the cotton industry. In the whole Saurer
division we are working in niches only, but in almost all the niches, we are market leaders.

The growth at Oerlikon Textile Components has doubled within the past few years. With
acquisitions, it extends not only to the natural fiber area, but also to man-made fibers. We have
turnover of about 300 million Swiss francs in the area of components today. With a high in-house
manufacturing depth, this area is very much a stabilizing factor for us. However, every single
business unit has a spare parts business of its own. Customers also can order parts using the
Internet today. With our own SECOS system via the Internet, we generate about 100 million Swiss
francs.

Research And Development

TW
: What does research and development mean for Oerlikon?

Voigtländer: This is virtually essential. Research and development are the core of
our activity; more than 600 employees are active here. If we thought only about costs and not about
new developments, we would not have any chance in the marketplace. We are a certain size and want
to set trends and be the first that comes onto the market with innovations. Of course, we talk
about cost reduction: However, this is only one side of the coin; new products with the right costs
are in the foreground. The most important projects are the ones through which we bring a new
revolutionary technology to the market. Every business unit is autonomous and has its own research
and development because those employees work directly with the customers and incorporate the latest
requirements into research and development. We have more than 4,000 active patents, with 330 new
registrations last year. Our development budget amounts to more than 100 million Swiss francs per
year.

Market Situation

TW
: How successful was the past year for Oerlikon Textile?

Voigtländer: 2007 was the best year in the company’s history. Turnover amounted to
2.7 billion Swiss francs. We are now experiencing a downturn after the upswing of the recent years
in all markets. In the first quarter of 2008, we had an incoming order drop of about 35 percent.
There are machinery manufacturers with incoming order drops of up to 90 percent. This leads to
violent drops in turnover. But everybody has known for decades that the textile industry always
works in cycles. The crash is simply very extreme this time.

TW
: Why do you think this happened in such a big way this time? Is it the financial crisis in
the United States?

Voigtländer: Well, this is connected to that fact only a little bit. You can’t put
the blame on this situation only – that would be too simple. If one has a look at Asia, great
overcapacities were built up in China within the last few years. Gross national product growth was
gigantic, with 11.4-percent growth in 2007. The government wants to slow down the growth to 8
percent now and is doing it. We see clear difficulties at the financing of our customers’ projects.
We then have high oil and cotton prices; this means our customers no longer earn so much money. The
losses were appropriately large. And what are you doing if you have losses? One does not invest any
more. And this has an extreme effect on investment goods. It is not that no money is there – the
projects are just delayed.

Of course, another problem is the exchange rate with the US dollar. Then, we have a
tremendous social reversal in China underway: Environmental protection and factories acts have been
established. Chinese workers are entitled to a contract of employment and to have a vacation now,
too. All these measures and circumstances enormously increase the expenses of our customers.
Through this, production becomes less attractive; the exports decline and make the problems even
bigger.

The boom in Turkey with rotor spinning is over, too. We see extreme investment restraint also
in India. This means that all three large markets – China, India and Turkey – have slowed. The sum
of all influences simply hits everybody. Of course, there are niches here and there, but nothing
that strong.

TW
: And how long do you think this situation will last?

Voigtländer: We are rather sure that we will have similar low volumes in 2009.
However, we assume that it will get better as of 2010, but of course, everything is now looking
into the crystal ball. There are still some companies that invest counter-cyclically, and this
always results in some changes somewhere. Such a downturn, however, is a chance for strong
enterprises. On the one hand, another consolidation of the market is occurring; and on the other
hand, the suppliers of cheap machinery have great problems – for example, in China. Customers don’t
want cheap machinery anymore. They want to produce the best product. We are convinced that certain
suppliers that produce, pardon the expression, bad machinery, will be in big trouble. And now, we
are at the start again: In difficult times you watch even more carefully expenses, flexibility and
quality. In this direction exactly, Oerlikon has moved for years, and we think that we can improve
our performance further in turnover and market share.

Megatrends





TW:
And in the near future, how do you see the development of textile machinery production?

Voigtländer: It is certain that the textile world market will further increase.
The population increases, and, thus, also the need for textiles. And, if one has a look at
countries like China and India, the domestic need is massive.




TW
: What is at the forefront of development?

Voigtländer: At first, flexibility and energy savings. Of course, one must not
forget the development of the costs. We hope to stay on the level with costs, but to increase
quality and productivity and reduce energy consumption.




TW
: Do you see the same chances in the future for all business units in the group?

Voigtländer: Of course, the markets are different, and so are the chances. Some
develop faster, and others must gain market share. Let’s take natural and man-made fibers: Cotton,
for example, is in competition with food; therefore, acreages are restricted. Food will always be
the first priority; clothing is next. Therefore, we do not expect cotton acreage to climb. The need
for clothing is here, so the need for man-made fibers will further grow. That’s why we are further
active in the group in both natural and man-made fibers. Apart from that, the direct production of
one textile substrate, nonwovens, will further develop strongly. The future belongs to nonwovens.

TW
: If you compare the requirements of the market with those of five years ago, where do you
see the greatest differences?

Voigtländer: The cost spiral always moves down further, and the requirements
increase at the same time. Every year, prices drop about 2 percent. This means we have to drop
permanently on the expenditure side in development and purchase to compensate for these prices.
Cost management is of outstanding importance. We say textile management is cost management. Whoever
does not have its costs under control will not survive. The market will further change. At the end
of the day, only big groups will survive and some highly specialized niche suppliers, whether these
are Europeans or Asians. There are already Asian enterprises that have bought companies in Europe –
in the machine tool area, for example. In conclusion, just a few companies will be left to play an
important role in the textile machinery market, and we will certainly be one of them.

July/August 2008

The Hotel Le Meridien will host the conference. The hotel offers 265 ocean- and
mountain-fronted rooms and suites, all with a private balcony or patio.

The next global summit of the entire textile industry will be on the beautiful island of
Mauritius at the Hotel Le Meridien.

ITMF Conference

The general theme of the conference will be “Challenges for a Greener and More Sustainable
Textile Industry.” In this new environment, the conference will provide the opportunity to analyze
global developments in the textile and clothing industry in terms of investment, activity and
trade. The presentations and discussions during the various sessions of the conference will enable
the delegates to better understand the new era for a global textile and clothing sector at the
crossroads. The Mauritius Export Association (MEXA) is the conference’s host association.

Chamarel, or the Seven Coloured Earth, is a famous site on the island of
Mauritius.

Favorable Strategic Position

The Republic of Mauritius is an island nation off the coast of the African continent in the
southwest Indian Ocean, some 900 kilometers east of Madagascar. Mauritius includes the islands of
St. Brandon, Rodrigues and the Agalega Islands, and has been in the spotlight for centuries thanks
to its strategic position. First came the Portuguese, then the Dutch, and after that the French and
eventually the British, who stayed for more than 150 years. Mauritius obtained its independence in
1968, and the country became a republic within the Commonwealth in 1992.

 

Mauritius offers a great deal to the world of textiles: the island is a beautiful place and
a true melting pot for different cultures. The people are used to dealing with different cultures,
and most speak at least two languages, English and French in addition to Creole. The textile
industry is known for its quality work, reliability and punctuality. The companies and their
proprietors pay a lot of attention to their employees and have a great sense of social and
corporate responsibility, supported by modern labor laws. Education is top priority. Every child
goes to school up to the age of 16, school is free of charge for everybody, and there is even free
transportation available for the schoolchildren if necessary.

Dr. The Hon. Rajesh Jeetah, minister of industry, small and medium enterprises, commerce
& cooperatives (left) and Salim Ismail, chairman and CEO, textile activities, Groupe
Socota

Stable Democracy

Mauritius is a stable democracy with regular free elections and a positive human rights
record. The country is a parliamentary democracy with a president as the chief of state. The
president is elected for a five-year term by the Mauritian parliament, the National Assembly, with
its 62 members. The government is headed by the prime minister and a Council of Ministers, elected
on a five-year basis. The most recent general elections took place on July 3, 2005. Dr. The Hon.
Rajesh Jeetah, minister of industry, small and medium enterprises, commerce & cooperatives, has
a textile background and wrote his thesis in textile technology at the University of Manchester,
England. It is ideal for the local textile industry to have a man at the top of the ministry who
speaks the same language.

The island, with its textile industries, is competing strongly with other markets. The main
reasons given by Jeetah to invest in Mauritius and not elsewhere include political stability with a
growing gross domestic product (GDP) over the past 25 years. “Mauritius enjoys a reputation of a
multicultural environment with a multitude of languages,” Jeetah said. “We understand the world,
and through our history, we have the same cultural background as most of the Western countries. I
am convinced that ‘Made in Mauritius’ will be a premium label shortly. Our goal is to play in the
top 10 league of the most preferred locations for business. This is possible because we provide
non-bureaucratic business conditions.”

According to statistics, 35,000 global companies have either their headquarters or
subsidiaries in Mauritius, with assets valued at $35 billion.

MEXA Director Danielle Wong (left) and Enterprise Mauritius Chairman L. Amédée
Darga

Important Textile Industry

According to Jeetah, textiles and clothing are the biggest industry sectors on the island.
Sugar still plays a significant role; however, textiles are far more important. More than 55,000
people work in the textile industry, and not only in garment manufacturing. The turnover of the
Mauritian textile industry is more than 1 billion euros. Today, the production of woven and knitted
fabrics is increasing, due to an ongoing verticalization of the textile industry in this country.

The textile industry is very important for Mauritian GDP. Textiles are one of the
cornerstones of the country. The population, numbering 1.2 million, represents a domestic market
worth $143 million. The industry’s employees produce $1.5 billion in export revenues. In 2006,
textiles represented 49 percent of all manufactured exports. These days, all sectors of the textile
industry have the same level of importance. The 20 largest textile companies are producing 100
percent for export. Fifty medium-sized enterprises have a 50:50 domestic/export turnover ratio, and
the 125 small businesses produce only for the domestic market.

The most important export markets for the Mauritian textile industry reflect the
multilingual country, with its English and French languages. Great Britain, 34 percent; France,
19.5 percent; the United States, 13 percent; and Italy, 5.4 percent, are at the top of the list,
followed by South Africa. Mauritius was not directly hurt by the global financial problems, but, of
course, each and every country is affected. Prices on the world markets will drop if the purchasing
power of the people is falling. That is the reason for diversification – to balance the risks in a
better way. For example, exports to South Africa rose by 300 percent in the last 18 months,
representing a value of $100 million. The next target is India, to sell “Made in Mauritius”
lingerie and swimwear to Indian women.

Salim Ismail

Salim Ismail is considered to be the inventor of the idea to bring the ITMF conference to
Mauritius. He is chevalier of the French Legion of Honour, and from 2002 to 2005 was the vice
president of the African Industrial Association (AIA). He is a member of the ITMF Advisory Board
and chairman of the Organizing Committee of the ITMF Annual Conference 2008 in Mauritius. Ismail
joined his family’s company, Groupe Socota, in 1964, entering its main subsidiary in Madagascar: La
Cotonnière d’Antsirabe COTONA. In 1967, he was appointed director of the spinning department,
became technical director in 1969 and CEO in 1980. In 1989, he took over as chairman and CEO, with
responsibility for all textile activities of Groupe Socota.

MEXA: Supporting

The Mauritian Export Industry

The basic role of MEXA is to promote and support the industry of Mauritius, providing all
kinds of logistics and data related to the industry sectors. “In earlier days, MEXA was only
supporting textiles,” said Director Danielle Wong. “Today, MEXA is also lobbying for its industries
in government bodies. The aim of MEXA is to be the preferred export association of Mauritian
industry.”

MEXA is a private body with no financial support from the government; members pay an annual
fee to run the association. “We are an important and influential organization and are very
well-incorporated in this country,” Wong said.

To become a member of MEXA, a company’s export quota must reach at least 85 percent. The
main export destination countries for the member companies today are Great Britain, France and the
United States, reflecting old threads from the past.

At the moment, the Mauritian rupee is the big problem. In the last six months, the currency
has appreciated 15 percent against the US dollar.

Mauritius is a small country, and was not hurt that much by the international financial
crisis, according to Wong. “The rupee is a very interesting currency: For a three-month
fixed-deposit, the current interest rate is 7 percent, which is pretty high,” she said. “So we have
a lot of currency speculation in this country, and we have to observe the market very carefully.
However, the textile industry shows a different picture: It has been very much affected. Exports
have dropped sharply since September 2007. Early in January, the exchange rate with the US dollar
was 28 rupees; now it is only 25.”

Enterprise Mauritius

Enterprise Mauritius is a public company, composed of private companies and the government,
to support the export industry and related services with the exceptions of finance and tourism.

Enterprise Mauritius is led by Chairman L. Amédée Darga. The association has a public
commitment to promote export businesses and related services, except financial and tourism
industries, and competitiveness and provision of information to global players; and to support
manufacturing sites and development of new product lines, sectors and subsectors. Enterprise
Mauritius was founded in 2004, and began its activities in mid-2005. The association’s philosophy
reflects a market-oriented approach to support the related industry, which represents 25 percent of
the national GDP, and make it more competitive.

Darga is a member of the National Innovations Committee, and a former member of the
parliament and minister.

Changing Structure

In the late 1990s, particularly 1997, manufacturers from Hong Kong came to Mauritius and
invested a lot of money to produce quota-free garments. This development allowed the local textile
industry to improve its infrastructure and become more competitive. Eventually, the Hong Kong
manufacturers left Mauritius, moving their production facilities to China. This was a big challenge
for the local textile industry.

Up until the last seven to eight years, Mauritius was basically a sewing country. This has
changed a lot more recently. Spinning is catching up in the production processes, and knitting is
the primary technology for fabric formation. Weaving is still not very common. The spinning sector
is big enough to fulfill all requirements of the local market. The factories produce more than 90
percent of all required yarns, mainly cotton. There is a strong need for more man-made fibers; this
is another project for the near future, especially with respect to technical textiles. Today, the
industry is still mostly in the up-market segment of garment manufacturing. However, because of the
ongoing verticalization of the industry, some big companies have spinning, knitting, finishing and
garment-manufacturing divisions.

Excellent Opportunities

It’s very easy to invest in Mauritius. The infrastructure is favorable to foreign
investments, there is enough energy and water, ever-so-important bilingual people, and the free
flow of financial transactions. “We are not producing commodities,” Darga said, “We manufacture
high-value competitive products. Enterprise Mauritius has high expectations for the future. To meet
these requirements, it is necessary to diversify the textile products in apparel, high-quality
lingerie, swim- and seawear and technical textiles. Mauritius is not a low-cost country; however,
it has a high level of productivity with excellent products, backed up by sophisticated business
services.”

“The opportunities are excellent,” Jeetah said. “We are in the process of rebranding
Mauritius; and, with the existing free economic zone, it’s much easier to work here. Compared to
competitor markets, the Mauritian textile industry is very flexible. Producers also accept small
orders. The main products today are T-shirts; shirts; trousers; shorts; pullovers; and, more and
more, lingerie and swimwear. The market is also actively studying the technical textiles sector.
Thanks to the structure of the industry with its capacity for small and medium production lots,
technical textiles will be an important area in the future.”



July/August 2008

NCTO Chairman D. Harding Stowe, R.L. Stowe Mills Inc., characterized the meeting as
“generally upbeat,” as industry executives discussed a wide range of issues and some of the
problems that lie ahead. Certainly, the most serious challenge is how to deal with the impact of
the elimination at year’s end of the safeguard quotas on 31 categories of textile and apparel
imports from China. On the plus side, NCTO officials see the textile economic assistance subsidies
contained in the new Five-Year Farm Bill as something that should improve the competitiveness of at
least some segments of the industry. They also are pleased that recently negotiated free trade
agreements (FTAs) appear to have established a pattern for effective rules of origin that require
the use of US yarn and fabric in products that receive preferential trade treatment, and they see
some signs that Congress and the Bush administration are facing up to the realities of free trade
versus fair trade.

NCTO officials were pleased with some progress in combating what they see as a wide range of
unfair trade practices by China. As a result of pressure from textile manufacturers and other
industries, the Bush administration took some key steps toward combating illegal trade practices.
It reversed a 20-year practice whereby the US government refused to allow anti-subsidy cases to be
filed against non-market economies, something textile manufacturers have been advocating for years.
Two other key developments were approval of a countervailing duty case against Chinese paper
products and initiation of a countervailing duty against steel imports. Both of these cases present
the possibility of similar actions against apparel imports. And the administration has been
successful with intellectual property violation cases brought before the World Trade Organization
(WTO).

At NCTO’s annual meeting, R. Matthew Priest, deputy assistant secretary for textiles and
apparel at the Department of Commerce, reported on the Bush administration’s trade initiatives.

Competitiveness Program

The $307-billion Five-Year Farm Bill had become everything but a “farm bill” by the time it
reached the full House and Senate. It was loaded with a number of pet projects for members of
Congress, including a textile competitiveness program, that made it so politically popular that
Congress succeeded in overriding a veto by President George W. Bush.


Under the textile economic assistance program, mills will receive payments of 4 cents per
pound for every bale of cotton they open during the first four years of the program and 3 cents per
pound in the final year. It is estimated that these payments could amount to $75 million or more a
year. The payments will have to be invested in plant and equipment modernization to help make US
manufacturers competitive.

Currency Issue

NCTO has been actively pursuing government policies to help offset what they see as a huge
competitiveness advantage resulting from China’s refusal to permit its currency to float against
the dollar and other currencies. Among other measures, it has been backing the Ryan-Hunter Fair
Currency Act, which incorporates both anti-dumping and countervailing duty remedies to address
currency misalignment. Although Congress has not acted on the bill, and it likely will not this
year in view of opposition from President Bush, the NCTO leadership believes they have built a
solid base of support for the next Congress. They say they helped supply one-quarter of the
co-sponsors of the current bill in the House.

In a pointed presentation, Dr. Peter Morici, a professor of international business at the
University of Maryland and a highly regarded authority on international trade, demonstrated how
China’s refusal to let its currency appreciate is upsetting world trade and how it is contributing
to the soaring US-China trade deficit and wiping out manufacturing jobs. Morici summed up the
problem by saying, “When trade barriers are removed, the benefits of free trade are upset by
currency manipulation.” Noting that the WTO is supposed to foster reciprocal trade, he said it is
difficult to achieve that goal unless everyone abides by the same rules. “If we really had free
trade with China,” he said, “the textile industry would be OK.

“When we removed trade barriers, as we did in the case of China, we have an imbalance in
trade, and exchange rates are supposed to adjust when barriers are removed. When that does not
happen, you get an avalanche of imports, which is just what is happening today.”

While Morici believes the Chinese currency issue presents a major problem for US
manufacturing industries, he warned that he does not see any quick fixes, although he believes a
countervailing duty law that recognizes currency manipulation as an unfair trade practice would be
helpful. He does not foresee any major turnaround, because powerful multi-national companies are
influencing US policies, and since they have a stake in doing business with China, they are not
likely to do anything that might upset the Chinese. In order to force a change in US trade
policies, Morici said, import-impacted industries such as textiles and apparel need to “get tough
with elected officials.”

In that regard, Stowe said the organization is making a major effort to beef up its political
action committee in the midst of what he called “an historic election.” He urged members to “not
only consider what these elections mean to each of us individually but also what this means for our
businesses and the workers we employ.”

Sen. Elizabeth Dole, R-N.C., addressed meeting attendees.

Customs Enforcement

NCTO Vice President Mike Hubbard gave an upbeat report on the association’s customs fraud
reporting operation initiated this past year in cooperation with US Customs and Border Protection.
An online system enables textile companies to report what appear to be customs violations they
encounter in the marketplace and pass the information on to Customs through NCTO. Hubbard said a
number of shipments have been held up in the past year, and $600,000 in back duties have been
assessed. “We knew there was cheating going on, and this system has enabled companies to make
confidential reports that can help streamline Customs enforcement,” Hubbard said.

He reported that a Government Procurement Committee is working on ways to streamline textile
and apparel purchases by the military and to strengthen and expand the so-called Berry Amendment
that requires the military to buy American whenever products are available from the domestic
industry. NCTO is working with members of Congress to expand the Berry Amendment principle to
Department of Homeland Security agencies.

Looking Ahead

In order to address ongoing issues – particularly with the removal of the safeguard quotas on
China’s imports – NCTO’s Trade & Economic Policy Committee under the chairmanship of Allen E.
Gant Jr., Glen Raven Inc., will deal with a number of approaches to improving the textile trade
picture. These include finding ways for textile manufacturers to have standing in countervailing
duty cases involving apparel, because textile manufacturers are impacted by unfair trade practices
in apparel trade. NCTO is promoting the idea of worldwide “801” trade agreements where duties on
imported garments would be levied only on the value added in the exporting country if they use US
yarn or fabric, and the organization will continue to press for FTAs that have rules of origin
favorable to US manufacturers.

The organization also is spurring a stepped-up effort to gain approval of the Ryan-Hunter
currency reform bill in the next Congress as one way to deal with unfair trade from China.

“We want to make sure we have the tools we need to promote fair trade and to seek out
opportunities to expand business,” Gant told

Textile World
. “We believe there are opportunities out there, and we will be working on ways to take
advantage of them.”

July/August 2008