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James L. Lemons, Ph.D., Technical Editor

Vietnam Deal Can Provide Leverage

James L. Lemons, Ph.D., Technical Editor

W illis C. Moore, chairman of the American Textile Manufacturers Institute (ATMI), recently addressed the 95th annual meeting of the Southern Textile Association in Savannah, Ga. Moore gave specific details of the recently negotiated trade agreements with Vietnam.

While Department of Commerce (DOC) Under Secretary for International Trade Grant Aldonas was assuring the textile industry that the US Trade Representative’s office would “hold the line,” the deal was cut to allow Vietnamese textile imports to rise to $1.65 billion this year — almost double last year’s import levels.

Moore said he couldn’t believe this deal was signed, even after evidence emerged that some imports labeled as Vietnamese were actually transshipped from China. He indicated ATMI had requested the negotiations be forestalled until the extent of the transshipments were determined.

According to Moore, this entire deal is an embarrassment to members of the Bush administration. He feels now is the time for the industry to leverage this to get government action on a number of critical issues. He contends the industry must speak with a single voice and pick the battles that can be won.

For example, the DOC took almost 16 months to publish the rules governing the textile safeguard provisions, which China accepted as part of its agreement to join the World Trade Organization. These provisions were to allow US textile manufacturers the right to petition for quotas if they could show imports were causing “market disruption.” According to ATMI, China’s share of the textile import market has increased from 7 percent to 21 percent since 2001. Moore contends ample proof exists that the market has been disrupted, and it is time for the government to “stand and deliver.”

Moore also indicated it is time to push the administration to live up to its commitments concerning the reduction of illegal transshipments. He pointed out that the Vietnamese Trade Agreement was finalized based on recent trade levels. In fact, spot checks by the US Customs Service indicated a large volume of Vietnamese imports may be transshipments from China.

The House Appropriations Committee on Homeland Security just approved a bill to provide an additional $9.5 million to Customs to hire 70 additional personnel to enforce trade regulations. Moore feels the timing is right for the industry to demand an explanation as to why the administration has not lived up to its promises of tougher enforcement and to help get this additional funding for Customs into the 2004-05 budget.

Prices Stable Despite Rising Inventories

Retailers are increasing discounts to clear excess Spring inventories. In fact, most retailers report apparel inventories have grown by more than 8 percent during the first quarter, while sales were up less than 3 percent for the same period.

The problem has spread to almost all segments of manufacturing, as orders fell by 2.4 percent last month, according to the DOC.

A number of yarn manufacturers are operating plants at well below capacity, and took an extended Memorial Day holiday in an effort to work down their inventories. As one major spinning executive said, “Our knitting business is off, but our weaving business has simply disappeared since May.”

A plant manager commented, “We are doing business for customers we wouldn’t have looked at a year ago — not big orders, but you put enough of them together and at least you keep running.”

Despite sluggish demand, yarn prices remain relatively steady, reflecting what is happening in the general economy as measured by the Flat Rate Consumer Price Index reading for May.

However, the Labor Department also reported the Producer Price Index actually fell 0.3 percent in May. This has some economists concerned about the possibility of deflation, which would represent a serious threat to the already weak economy.

Yarn manufacturers report margins are still thin. However, they are being helped by the lower prices for cotton and polyester.

As one major fiber producer joked, “We could get more for a pound of fill dirt than a pound of polyester.”

July 2003

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