By Jim Phillips, Yarn Market Editor
The U.S. yarn industry currently enjoys the best competitive position it has had in many years. With its increased efficiencies, excellent customer service and a stellar record for fulfillment, spinning executives and industry observers are confident that, given a level playing field, the domestic industry can compete favorably with almost anyone.
“One of the key elements, of course, is for our government to make sure that our industry is not handicapped by the concept of free trade that is free for everyone but us,” said one industry insider.
TPP Update
In the arena of free trade, concern remains over the Trans-Pacific Partnership (TPP), a proposed free trade agreement (FTA) among the United States, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.
Of particular interest to the U.S. industry is the desire of Vietnam, the world’s second-largest apparel manufacturer, to enter the agreement without a yarn-forward rule of origin, or, at the least, with a modified version of the rule.
“The yarn-forward rule of origin has been the standard textile rule in FTAs for the past 25 years and the rule that the Obama Administration has tabled in the TPP negotiations,” states a policy document from NCTO. “The rule requires that the yarns, fabrics and the final garment be produced within the FTA countries in order to get benefits under the FTA.”
NCTO continues: “To date, the U.S. government has proposed one major flexibility to the TPP rule of origin, a short supply list; however, it is possible that other flexibilities will eventually be raised for consideration. Alternatively, the government of Vietnam is pushing for a ‘weak rule of origin’ or ‘single transformation rule’ — a rule that merely requires that the cut and sew aspect of the production process be performed in a TPP country.” Ultimately that would mean that China, which is not a part of the proposed agreement, would be able to supply Vietnam with yarns and fabrics without having to meet the requirements or standards set forth for other TPP participants.
Said one yarn broker: “If Vietnam is allowed to enter the TPP without a yarn-forward rule, it would be devastating for the U.S. industry. It would give China almost unlimited access to the U.S. market — without China having to abide by any of the provisions of the TPP.”
The trade agreement was scheduled to be finalized in February in Singapore. However, enough disagreement remained among potential members that the negotiations adjourned with little progress. At this point, it looks unlikely any additional movement will occur before the mid-term U.S. elections, sources say.
Innovation And Speed
TPP aside, the U.S. yarn industry is enjoying a period of sustained prosperity. And spinners and experts point to several factors as primary contributors. For example, U.S. capacity is, at the moment, roughly equal to demand. However, over the past few years, demand has outstripped supply significantly on several occasions. Also, increasing costs in Asia are making U.S. prices more competitive.
But, as many spinners point out, a major factor in the resurgence of the industry has been innovation. “It’s important that we keep looking at the market to find where we can differentiate ourselves to create a competitive edge,” said one specialty spinner. “We try to fulfill unmet needs and make yarns that no one else either can or will. We are able to maintain good margins because our customers cannot get similar products from anyone else.”
A significant advantage exists for U.S. manufacturers in both quality and delivery. “To be successful in today’s climate requires a total commitment to quality and a total commitment to service,” said one spinner. “Yarn manufacturers have to be able to process and turn around orders faster than ever before. Quality and speed to market — those are the only two real differentiators these days unless you have a truly unique product.”
Added a specialty ring spinner: “Lead time is often the most important thing — more important in some instances than price. “We are rarely going to win on price, but we can compete favorably when lead times are critical.”
May/June 2014
