Posted on 08/25/2003 5:13:49 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
The cutbacks came piece by piece, starting in 1994 for Miami textile manufacturers Alan and Steve Stark, whose Carmel Textiles was founded 25 years ago on $3,000 and the brimming confidence of youth.
Their orders began to drop off as customers sought cheaper suppliers offshore after implementation of the North American Free Trade Agreement in 1994. Four years later, the Stark brothers phased out dyeing operations in their Hialeah plant, which, at its peak, produced 6.5 million yards of cloth a year.
They kept the knitting operations as they pared employment from 200 workers to around 30. For the dyeing, they sent the finished fabric over to Arca Knitting, run by fellow manufacturer and fishing pal Jorge Canals.
But more customers turned to overseas producers. Big apparel names such as Nike went from obtaining more than half their products in the United States to just 10 percent to 15 percent today. Some U.S. factories go offshore, primarily to China. Others simply shutter for good.
Arca Knitting is feeling the pressure too. ''The decision to stay or go we look at every day,'' Canals said.
These local textile veterans echo the industry's concerns that cut-throat competition, particularly from China, is making it impossible for them to stay in business. Free-trade agreements open the way for companies to move offshore; lower tariffs guarantee entry of goods; and even China's artificially undervalued currency, which makes Chinese textile exports even cheaper, has taken its toll.
The growing concern over the shuttering of U.S. factories is sparking a growing public debate across the country and has become a campaign issue for Democratic presidential hopefuls.
''Here you compete one on one,'' Alan Stark said. ``Go compete against China. They pay 20 cents an hour. Here you've got to pay over $7 an hour in a factory and you've got to pay health insurance, retirement tax, unemployment tax.''
Six months ago, Carmel closed down all manufacturing, moving some of its machinery to Honduras to start a new knitting mill with American and Korean partners, and setting up shop in a two-room office in South Dade to offer production services. But there is no guarantee that even the lower-cost Honduran plan can compete.
''Right before NAFTA, our industry was very healthy,'' Stark said. ``Since then it's been in a gradual decline, but now it is very rapid.''
The malaise affecting the textile industry is part of a national trend. Some 18,400 Florida manufacturing workers were laid off in the past 12 months, 4.5 percent of nearly 400,000 such workers in the state. Florida's overall employment rose 1.2 percent in that period.
Some 250 textile mills around the country have closed down in the past five years, according to the American Textile Manufacturers Institute, and the rate is accelerating to about one a week. Since January 2001, almost 300,000 textile and apparel workers have lost their jobs -- nearly one in 10 of the 2.6 million American manufacturing workers who have been put out of work in that period.
This is a new trend for U.S. manufacturing, which was growing -- albeit slowly -- in the 1990s. Communities that lose factories not only lose well-paying jobs, but tax revenue and the multipliers from manufacturing.
''As free trade evolves, our industry devolves,'' Stark said.
In Hialeah, Canals is also looking over his shoulder at China even as he makes cost-cutting improvements to his knitting mill, founded by his parents in 1975, a decade after they arrived from Cuba.
Last year, Canals, 39, purchased property in what could qualify as a free zone in Nicaragua as a hedge against the rising global pressure on his bottom line.
The story of Arca Knitting was the American dream, Canals said. His parents bet everything on the venture, selling their home in North Carolina, moving to Miami to live with his grandparents so they could purchase four knitting machines. They operated the machines themselves and expanded the company in the face of stiff domestic competition from former textile giants such as Burlington Industries and Guilford Mills.
Canals joined the family company after attending Miami-Dade Community College.
The company used to sell domestically, but now Arca Knitting exports 95 percent of its production to assembly plants in the Caribbean Basin. Still, big customers are starting to order more from Asia. In the past several years, sales have exceeded $30 million, but Canals is expecting them to slip by as much as 30 percent in 2003.
''This is an industry that has always given people the opportunity to compete and grow. If you played by the rules, you had a good shot,'' Canals said. ``With globalization, there are no rules. It's a free-for-all.''
Competition from China and other Asian producers has driven down cotton knit prices from $3.20 a pound 10 years ago to $1.65 now. But China can sell even cheaper -- $1.30 a pound. ''The sales tax on many garments is more than the fabric costs,'' Canals said.
CUTTING-EDGE MILL
Canals, who pilots his own plane and can operate every machine in the mill, walked through the 220,000-square-foot factory recently, showing the precision knitting, dyeing and finishing equipment; the offices where technicians draw specifications to copy customer samples, calibrate dyes and test for quality control.
The mill can produce more than one million square yards a week. Hundreds of thousands of dollars were spent on electricity, natural gas and water installations: Even the dye runoff is treated so the water meets Miami-Dade County quality standards.
Three-fourths of the 135 employees have been there more than 20 years. All of them receive Blue Cross-Blue Shield health coverage with zero deductible, Canals said.
''I don't know if I could do this all over again,'' Canals said, referring to the time and money he has spent to install cutting-edge technology. Some of the machinery has been purchased at fire-sale prices from bankrupt textile mills. All the expansion and improvements have been financed with cash from Arca's operations.
CHINA'S ADVANCE
The advance of China is not only a problem for the wealthiest nation on Earth. Last year, as Chinese apparel exports to the United States surged by almost $1 billion in clothing categories freed of quotas, imports from the rest of the world's developing countries fell by nearly an equal amount.
A U.S. industry study predicted China will capture 75 percent of the domestic apparel market when quotas on apparel are lifted in 16 months.
Other developing countries, particularly in the Caribbean Basin and Latin America, which have special trade benefits from the United States, are fearful of being pushed aside by China.
But not everyone is worried.
OFFSHORE PRODUCTION
Richard Marcus, owner of American Woolens in Miami, is already exploring offshore production possibilities offered by the new trade agreement with Chile.
''To be competitive globally, you have to manufacture offshore,'' said Marcus, who sells blankets to airlines, hospitals and cruise ships. ``It is too expensive to manufacture in the United States.''
Domestic manufacturers are pitted against the interests of apparel importers and big retailers such as Wal-Mart -- which alone brings in billions of dollars worth of Chinese products to the United States each month. These sectors are heavily pushing the free trade agenda in Washington.
Laura Jones, executive director of the U.S. Association of Importers of Textiles and Apparel, blames the manufacturers.
''This one is a losing sector,'' Jones said. ``It had very, very bad management. The protection that they've gotten ruined them.''
''Do you know it is harder to bring a bra into this country than weapons of mass destruction?'' she said.
The Bush administration contends that there is no connection between manufacturing losses and burgeoning free-trade agreements, insisting that the problem is a cyclical slump for manufacturing.
Geoff Schofield, chairman of the American Fiber Manufacturers, disagrees. ''It is hard to believe this is a cyclical downturn when people are buying more and U.S. manufacturers are going out of business,'' Schofield said.
Stark sees current practices destroying America's culture of business building: being able to take $3,000, skills, hard work and go for it -- as he and his brother did in 1979.
''Carmel is an example of what America is all about,'' Stark said. ``To do this job, you've got to use all your resources; there's creativity, mechanics, chemistry, finances, even psychology involved.''
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