California Apparel News

With the end of quotas on Chinese-made clothing more than two months away, apparel makers are trying to figure out whether this really means the beginning of free trade. Most are extremely doubtful.

“The quotas might go off, but duties will go up. Something has to give,” said Dean Wiener, chief operating officer of Stony Apparel, a Los Angeles maker of apparel for teens and children.

Originally, quotas on Chinese-made apparel were slated to expire at the end of 2004 under an agreement established when China joined the World Trade Organization in 2001.

But within weeks of quotas disappearing at the end of 2004, U.S. apparel makers and textile manufacturers were grousing that a flood of Chinese goods was destroying the local market. Imports of cotton trousers from China mushroomed from 908,000 dozen pairs in the first half of 2004 to 17.4 million dozen pairs during the first half of 2005. China’s good fortune was not only disrupting the U.S. market but edging out apparel manufacturing in less-developed countries in Africa, Latin America and Southeast Asia.

With a surge in Chinese imports, the Bush administration decided to impose safeguard measures, or temporary quotas, on 34 categories of textiles that ranged from cotton pants to sweaters and swimwear. Those quotas started Jan. 1, 2006, and end Dec. 31 of this year.

The end of quotas seems very cut and dried. But it isn’t that simple. There are a number of protectionist remedies the government can still take, such as imposing antidumping and countervailing duties. On Oct. 8, U.S. Rep. Charles Rangel, D–N.Y., chairman of the House Ways and Means Committee, started the ball rolling.

He sent a letter to the U.S. International Trade Commission asking for a textile- and apparel-monitoring program for the 34 categories of goods currently under quotas.

The commission is to provide the committee with reports on the volume, value and import market share of those categories. The ITC will report preliminary data every two weeks, and final statistics will be published once a month. The information will then help the committee decide whether a more extensive investigation is needed.

All this activity in Washington, D.C., leaves apparel makers wondering if they are going to see a repeat of 2005, when Chinese apparel came rushing in and import restrictions came later.

“While the monitoring program may not result in any protectionist actions, its existence does create apprehension that action may be taken in the near future,” said Kevin Burke, president and chief executive officer of the American Apparel& Footwear Association, a trade organization in Arlington, Va., whose members include major manufacturers such as Liz Claiborne, Kellwood Co. and VF Corp.

More of the same

Even before Rangel ordered textiles to be monitored, most California apparel makers weren’t planning to step up their Chinese production just yet.

“I don’t think we will be changing our mix that much,” said Michael Weisberg, chief executive of Second Generation Inc., a company in Vernon, Calif., that makes teen apparel under the BeBop and Fishbowl labels.

Currently, about 50 percent of his production is done in China, another 20 percent in Vietnam and 10 percent in India. The rest is done domestically for the family-run company, whose sales volume this year is expected to reach $40 million.

“If quota is gone, there will be something else, such as countervailing or antidumping duties. They can’t leave it a free-for-all,” he said.

However, Weisberg will change the kinds of fabric he uses in his Chinese-made apparel. For example, to save money on quota, the company has opted to use cotton/ramie blends instead of 100 percent cotton for some items. “We prefer cotton, but ramie had a lower quota price,” he said. At times, cotton quotas could cost as much as $1 more per garment than the ramie mix. That’s a big savings when selling to Second Generation’s customers, which include department stores such as Macy’s and Belk and specialty stores such as the Stage Stores.

Stony Apparel’s Dean Wiener is already doing about 53 percent of his production in China and 31 percent in Guatemala. But he is aware that China is not the bargain it used to be. “China is 12 percent more expensive than nine months ago. Everything has gone up. Freight. Dyeing costs. Cotton has gone up 32 percent in the last year. These are things that are really affecting us,” he said. “If costs skyrocket, I’m out of there.”

Wiener is also wondering how a new president in the White House will affect trade. John McCain, the Republican candidate, is known for his free-trade stance. But Democratic nominee Barack Obama has a more cautious attitude toward free trade and how it affects U.S. jobs. “If Obama gets in, it will change things,” he observed.

Over at Topson Downs Inc., a longtime Los Angeles apparel manufacturer, the production formula will probably hold even. “We are definitely going to look before we leap,” said John Poyer, president and chief executive of the company, whose principal label is Fire, a juniorswear line. About 75 percent of its business is private label for department stores and specialty stores.

With one-third of production done in China, the company could possibly expand there. But right now, it will stay the course and keep making apparel in other locations such as Bangladesh, India, Jordan, the Philippines, Vietnam and Mexico. “We are satisfied with what we have now,” Poyer said. “Diversity is a good thing in all aspects of life.”