California Apparel News

Before it was prohibited to import from Myanmar, U.S. apparel companies brought in as much as $409 million a year in clothing from that Southeast Asian country, which lies northwest of Thailand.

That amount dropped to zero after U.S. import  bans went into effect in 2003 to punish a military dictatorship charged with human rights and civil-liberties violations. But now with the United States naming a new ambassador to Myanmar (formerly Burma) for the first time in 22 years and financial investment being allowed there, apparel companies are eager to renew their sourcing ties with a country where the average garment worker makes a cut-rate wage of about $80 a month. That’s even lower than Bangladesh’s $120-a-month wage-with-benefit package.

“Clearly, there is tremendous interest to go in there,” said Rick Helfenbein, president of the U.S. arm of the $1 billion Hong Kong sourcing company Luen Thai, which sources in China, the Philippines and other Asian countries. “It is the next horizon.”

U.S. apparel importers, however, may have to wait a few more years before they start making T-shirts, hoodies and cotton pants in Southeast Asia’s poorest country, which was ruled by a military dictatorship for nearly five decades.

A new government that came to power in 2011 released political prisoners, held elections for a new Parliament and freed democracy advocate Aung San Suu Kyi from nearly 15 years of house arrest. She now has a seat in Parliament. She also was allowed to travel to Norway in June to deliver a speech for the Nobel Peace Prize she won in 1991 when under house arrest.

Yet the Obama administration believes more progress needs to be made in opening up the government before trade can resume between the United States and Myanmar.

With that in mind, Congress is poised to renew import restrictions that expire July 26 under the Burmese Freedom and Democracy Act of 2003. It is part of an overall bill that would extend third-country fabric provisions for the African Growth Opportunity Act, which gives duty-free status to apparel made from regional yarns in certain sub-Saharan African countries. In addition, the bill would make several technical fixes to the Dominican Republic–Central America Free Trade Agreement.

For that reason, many apparel trade groups are not stepping up to lobby against the bill and put an end to apparel-import bans from Myanmar. “Right now our members care more about the AGOA extension and the DR-CAFTA fixes,” said Nate Herman, vice president of international trade at the American Apparel & Footwear Association, the national association in Arlington, Va., that represents hundreds of U.S. apparel and footwear makers and importers.

Even though Congress is expected to extend import bans of goods from Myanmar, Secretary of State Hillary Clinton announced on April 4 that the United States would ease restrictions on investments and exporting finance services after reformist President Thein Sein disbanded the military dictatorship.

General Electric already has indicated it hopes to work with the Myanmar government to help rebuild the country’s infrastructure and electrical-supply system. Currently, electrical blackouts, energy shortages, and an unreliable phone system and Internet access make manufacturing difficult in this country of 55 million people.

Airline and hotel companies are eager to step in and help build a tourism industry that could become one of the major revenue generators for Myanmar.

“The infrastructure isn’t there yet. The training for workers isn’t there yet and the social responsibility isn’t there yet, but it is an exciting opportunity, and a lot of companies are looking at that option to be prepared,” said Julie Hughes, president of the U.S. Association of Importers of Textiles and Apparel, based in Washington, D.C.

Yet, some apparel companies fear that if U.S. import bans aren’t lifted soon, it will be too late for them to take advantage of this emerging market. Competition from other countries is brisk.

On April 24, Canada lifted its restrictions on imports from Myanmar and export investment in that country. On April 26, the European Union approved a one-year suspension of economic sanctions.

Japanese manufacturer and retailer Fast Retailing, whose Uniqlo casualwear stores populate the world, recently announced it may source in Myanmar.

U.S. officials are slower to renew full-on trade with Myanmar, whose  gross domestic product totals only $50 billion, one-seventh of neighboring Thailand, whose population is slightly larger, at 67 million.

“The executive branch and Congress are inclined to go slow,” said Luen Thai’s Helfenbein. “Apparel people don’t know which way to turn. They have to be green lighted, and by the time they get there, Europe will have taken up the good spots.”

He noted that apparel companies feel comfortable working in Myanmar because it is not difficult to get to—only about an hour’s flight from Bangkok, the capital of Thailand. Between 2000 and 2003, the United States purchased about 50 percent of all of Myanmar’s clothing exports.

There is still a small garment industry around Yangon, the country’s largest city, with about 200 factories. Approximately 20,000 people work in the apparel industry.

Last year, Myanmar exported about $770 million worth of garments to primarily Japan, which received $243 million in apparel. Other apparel exports went to South Korea and Europe, which had only a partial import ban in effect.

The Obama administration’s cautious attitude toward allowing imports from Myanmar is to assure that more political freedoms are instituted. “It is meant to be a carrot-and-stick approach with Burma,” said Brenda Jacobs, an international trade–policy expert and attorney at Sidley Austin in Washington, D.C.

If things progress, Congress could be back next year lifting the import restrictions and clearing the way for a new Asian sourcing spot.
“It could be the next Vietnam,” Helfenbein said.

In 2011, the United States imported $7.2 billion in textiles and apparel from Vietnam, making it the No. 2 country for sourcing U.S. clothing. China is No. 1, with $40.6 billion in textiles and apparel coming from that country last year.