The United States is home to the world’s largest garment consuming country. Yet it has virtually no viable domestic garment making industry.
This is a remarkable state of affairs. The United States invented the clothing ready-to-wear industry. At the end of World War II, the U.S. was home to the world’s largest domestic garment making industry, yet today U.S. domestic production accounts for less than 3% of retail sales. No other country in the world imports 97+% of its garments.
Industries decline over time, but this collapse can be described only as a singularity. It were as if, some unique plague swept the country affecting no one but sewing-machine operators who were almost entirely wiped-out.
How did this occur? How can it be more cost effective to import garments from 10,000 miles away than to truck them from a factory located 20 miles from the customer?
Even more remarkable is our willingness to accept this situation, as if the collapse of the U.S. garment making industry was the result of some irreversible act of G-d.
The voices on the left tell us that the U.S. garment making industry was destroyed by cheap garment imports from poor countries where workers were paid slave wages, forced to work in substandard conditions.
The voices on the right are equally adamant that the fault lies with rapacious labor unions who forced domestic factories into bankruptcy.
There is a measure of truth in both explanations. However, it is a small measure indeed.
Consider this: The 27 countries of the EU is collectively the worlds largest garment consumer. The EU is also a region where wages are at least comparable to U.S. wages; where working conditions are far better than those in Los Angeles and New York City Chinatown district; and where Unions are far more powerful than those in the U.S.
Despite the high wages, good working conditions and strong organized labor movement, the garment industries in the EU countries not only survive, but Intra-EU imports accounts for 47% of all EU garment imports (not even including consumption of domestic production), Compare that with 3% for the U.S.
Consider this: The EU region is now the world’s fastest growing garment supplier to the U.S.. As of year-to-date June 2012, the EU market share of garment imports to the U.S. increased 9.9%. Over 50% of those imports came from a single country Italy, who has now surpassed such relatively low labor cost suppliers as Egypt, Jordan, Haiti and the Dominican Republic.
How can the EU garment industry prosper while the U.S. garment industry collapses? How did this ridiculous situation arise? More importantly what can the U.S. Government do to restore its domestic garment industry?
I have thought about this problem, for some time. As I see it, two key factors may not only explain the problem, but also provide a practical solution:
1. EU exporters have one disadvantage. Unlike the countries listed above the EU does not enjoy duty free access to the U.S. market.
2. EU exporters have one advantage. They enjoy duty free access for a wide range of materials produced by other countries in the EU.
Here is my solution:
The United States should enter into a free trade agreement (FTA) with the United States, to offer free trade access to the United States for garments produced in the United States.
I am quite serious.
Currently U.S. domestic garment producers are not afforded the same benefits as suppliers located in countries with free trade agreements with the United States. I am suggesting that the U.S. Government might want to level the playing field.
U.S. garment related FTAs have specific country of origin rules.
Ideally the U.S. government might offer the U.S. the same liberal country-of-origin rules as they give to Israel, Jordan, Egypt and the AGOA countries of Sub-Saharan Africa: Duty free access for all garments regardless of the origin of the fabric. This would be generous indeed. However, the U.S. Congress and Administration may argue that the United States is not as strategically important to the United States as Israel, Jordan and Egypt nor as worthy of special humanitarian consideration as the countries of Sub-Saharan Africa. There is also some consideration that the U.S. domestic textile industry may complain.
If indeed the U.S. Government concludes that the United States is not entitled to the same generosity as it gives to other countries, the U.S. government may offer the U.S. the less liberal country of origin rules as they give to Mexico, Canada and the six DR-CAFTA countries Honduras, El Salvador, Guatemala, Nicaragua, Dominican Republic and Costa Rica: Duty Free access based on the yarn-forward rule + duty free access for garments produced from third country fabrics which are not available from U.S. textile mills.
Since the U.S. domestic textile producers, actually produce a relatively limited range of textiles, the domestic garment makers would have access to a wide range of duty-free materials. This would make the domestic garment industry more competitive.
This is a question of U.S. Government priorities. How important is the United States to the U.S. Government? To what degree should U.S. interests be considered in U.S. trade policy? These are important questions, but frankly ones that we should never have had a need to ask.
