LA clothing makers worry about impact of Trans-Pacific Partnership
Congress gave President Obama sole authority to negotiate the Trans-Pacific Partnership last week. The 12-nation trade deal – known as the TPP - would create a free trade zone stretching from Japan to Chile that includes 40 percent of world’s economy. It has been a key legislative priority for Obama and very controversial, pitting Obama against liberal members of his own party and labor unions.
The deal has also created a rift in the apparel industry - between big, national companies and smaller ones here in Southern California.
Big companies like Nike, the Gap, and Hanes have been strong supporters of the TPP, as have industry groups like the U.S. Retail Federation and the U.S. Fashion Industry Association, which formed the TPP Apparel Coalition.
“We’re looking at it as an opportunity," said Julia K. Hughes, President of the United States Fashion Industry Association."Free trade agreements are important to our sector.”
After NAFTA went into effect in 1994, U.S. textile and apparel exports to Canada increased by 77 percent and to Mexico by more than 200 percent, according to the U.S. Department of Commerce.In 2006, CAFTA went into effect with Central American countries and the Dominican Republic, which helped make Honduras America’s biggest source of T-shirts, according to the consulting firm Kurt Salmon.
“Certainly NAFTA and CAFTA have been huge success stories and I think they have certainly proven positive throughout the industry,” said Hughes.
For the Hanes and Gaps of the world, that's certainly true; Those companies' profits have soared as they have been able to tap into new markets while making ever-cheaper clothes. However, for U.S. apparel workers, the era of free trade has been devastating.
Employment fell by 80 percent from 1990 to 2010, according to the U.S. Labor Department.
Many of the remaining manufacturers are here in the LA-area, but they haven’t fared much better; From 2002 to 2012, almost 60 percent of those jobs disappeared in California, according to the Los Angeles County Economic Development Corporation.
"The problem was the small, independent apparel manufacturers did not see big gains because they did not want to outsource their work, but it put them at a competitive disadvantage," said Steve Smith, a spokesman with the California Labor Federation.
A boutique manufacturer stays in Southern California
By focusing on the higher-end market and staying small, Karen Kane,a women’s apparel company headquartered in Vernon, has survived. Inside a sprawling 130,000 square-foot warehouse, a seamstress sows the final threads of a tank top, the kind of labor-intensive single needlework that most companies now outsource.
But the company’s CEO, Lonnie Kane, is no protectionist. He's in favor of free trade because he believes it benefits the overall economy, which in turn boosts his company.
“I was a big supporter of NAFTA,” said Kane.
Kane was hoping NAFTA would open up doors to Mexico, but it never panned out.
“Yes, to a degree it was disappointing," said Kane. "But this is business and you play the cards you’re dealt.”
Since the company makes nearly all of its goods domestically, Kane says the TPP won’t help. Who it will benefit are Asian manufacturers and importers. China – the number one exporter by far – isn’t in the agreement. But Vietnam, which accounts for 10% of U.S. apparel imports, is. Right now, companies there pay up to 32 percent tariffs on goods entering the U.S. Under the TPP, those goods could come to the U.S. duty-free, giving outsourcers an advantage over people like Kane.
“It could be adverse to me because they’re going to import goods cheaper, and it could be harder for me to compete against them,” said Kane.
'If they want the apparel industry gone, they’re working on it'
In a report last year,the non-partisan Congressional Research Service warned the TPP could increase competition for Western manufactures and reduce demand for U.S. textile exports because Asian apparel producers could export clothing to the United States duty-free.
Ilsa Metchek, the longtime head of the California Fashion Association, says she’s baffled by politicians in Washington who don’t seem to care about U.S. apparel jobs.
"What we do now is import 90 percent of what we ship that used to be made in the United States," said Metchek. "The footwear industry has completely left the country. If they want the apparel industry gone, they’re working on it.”
Metchek predicts Southern California’s apparel manufacturing will shrink an additional 20 percent if the TPP goes into effect, based on how many factories are left.
“My reaction is that it’s yet another treaty that ignores the 'Made in USA' profile of consumer products,” she said.
But Julia Hughes, her counterpart in Washington, says that’s much too pessimistic. “We don’t see it the same way I guess," said Hughes.
Hughes says free trade agreements can’t be blamed for the loss of apparel manufacturing jobs. Instead of sewing, American workers are doing more high-skilled work, like designing and marketing, and she says that’s a good thing for our economy overall.
“In my family, folks worked in the mills in New England making sweaters, but my father didn’t do that, and I don’t do that,” said Hughes.
Just about the only thing everyone agrees on is that they need to see the final details of the TPP to know exactly how things shake out.
"We know there are some 600 corporate advisors to the TPP, but there's nobody looking out for workers," said Steve Smith, a spokesman with the California Labor Federation.
A key question for the apparel industry is whether the agreement includes a yarn-forward provision, which requires material to come from a TPP country in order to be duty-free.
The textile industry has lobbied for a yarn-provision rule, which the California Fashion Association also supports. Big apparel makers and retailers are against it.
“Inflexible rules on apparel trade, like yarn-forward, don’t work because they are not compatible with how business operates in the 21st Century," Matt Shay, president and CEO of the National Retail Federation said in a statement.
Richard Wortman, a lawyer who represents textile importers and exporters, points out the draft of the TPP is secret.
“I think in the end the devil is going to be in the details," said Wortman. "We still don’t know what the details are going to be.”
And many of those details likely still have to be worked out. Obama got his fast-track authority from Congress. But now the really hard part: He has to hammer out a final deal with the 11 other countries in the TPP.