U.S. Textiles Expand, Trade Questions Loom

By James M. Borneman, Editor In Chief

The recent report from the Tempe, Ariz.-based Institute for Supply Management® (ISM®) presents good news on textiles, U.S. manufacturing and a growing economy.

“Economic activity in the manufacturing sector expanded in August, and the overall economy grew for the 112th consecutive month,” said the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report stated: “The August Purchasing Managers’ Index, or PMI®, registered 61.3 percent, an increase of 3.2 percentage points from July.”

“This indicates strong growth in manufacturing for the 24th consecutive month, led by continued expansion in all subindexes that make up the PMI,” said Timothy R. Fiore, CPSM, C.P.M., chair of the ISM.

“The PMI reached its highest level since May 2004, when it registered 61.4 percent.” A reading above 50 percent points to an expanding manufacturing economy.

In addition, 16 out of 18 manufacturing industries surveyed showed positive growth, and of the 16, two categories — apparel, leather & allied industries; and textile mills — led the charge behind only computer and electronic products. The only laggards were wood products and primary metals.

On the downside, apparel, leather & allied industries, and textile mills also led the way in reporting increased prices for raw materials in August.

It’s reassuring there is data to backup the gut feeling many textile executives have been expressing. However, there is some looming uncertainty in regard to international trade. Notably, with the North American Free Trade agreement (NAFTA), the trilateral trade agreement that links Canada, the United States and Mexico into a unified trading block, as well as the confrontation with China over trade policies.

There is no lack of opinion on these matters. The president’s blunt approach to taking issue with NAFTA and China trade policy is serious, but will it be effective?

As of TW’s press time, a framework agreement between the United States and Mexico has been made, and with Canada stepping back from the table, it would appear to some that Mexico achieved an advantage that makes a Canadian agreement challenging.

NAFTA has, since prior to its inception, enjoyed a divisive range of opinion regarding fairness and effectiveness. And the president’s approach of imposing tariffs to achieve reductions or outright elimination of tariffs and non-tariff trade barriers is a difficult process of negotiation for many to swallow.

Is a trilateral agreement necessary, or should the United States have bilateral agreements? — a view asserted by the president. Bilateral agreements — one between the United States and Mexico, as well as one between the United States and Canada, definitely has pro and cons and can address problem areas directly.

However, opinions vary. Recent headlines said the following: “[Consumer Technology Association] Says New NAFTA Agreement Must Include Three Countries And Focus On Key Issues;” “Hoffa: U.S.-Mexico Agreement Is First Step Towards Better North American Trade;” “U.S. And Canadian Manufacturers: We Must Have A Trilateral Agreement;” and “VF Testifies In Support Of NAFTA.”

So the drama continues. Will U.S. Trade Representative Robert Lighthizer and his team achieve the the desired free trade result? Only time will tell.

September/October 2018