The Impact of the Wto on the Textile and Clothing Industry in the United States

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Kadeem Brown
MB306
Individual Writing Assignment

The Impact of the WTO on the Textile and Clothing Industry in the United States

Introduction
The textile and clothing industry is labor intensive and offers entry-level jobs for unskilled workers in developed as well as developing countries. In addition, relatively modern technology can be adopted in poor countries at relatively low costs. The textile and clothing industry also has high value segments where design, research and development (R&D) and marketing are important competitive factors. (1) The high end of the fashion industry uses human capital intensively in design and marketing. This also applies to market segments such as sportswear where both design and material technology are important. R&D is important in industrial textiles, where again, material technology is an important competitive factor. The textile, textile product, and clothing manufacturing industries include establishments that process fiber into fabric and fabric into clothing and other textile products. While most clothing manufacturers worldwide rely on people to cut and sew pieces of fabric together, United States manufacturing has become highly automated. (?) The clothing industry has moved mainly to other countries with cheap labor costs, thus that which remains in the United States must be extremely labor efficient to compete effectively with foreign manufacturers. (?)

History
Textiles and clothing are closely related both technologically and in terms of trade policy. Textiles provide the major input to the clothing industry. Protection of the textile and clothing sector has a long history in the United States, dating back to the 1950’s. Japan, Hong Kong, China, India and Pakistan agreed to voluntarily export restraints for cotton textile products to the United States. In 1962, a Long Term Agreement Regarding International Trade in Cotton Textiles (TLA) was signed under the auspices of the GATT. (1) The LTA was renegotiated several times until the Multi Fibre Agreement (MFA), which came into effect in 1974, replaced it. The MFA extended restrictions on trade to wool and man-made fibers in addition to cotton. The MFA violated the principles of the multilateral system in several ways. It violated the most favored nation principle, applied quantitative restrictions rather than tariffs, discriminated against developing countries, and was non transparent (1). The MFA was renegotiated four times, the last in 1991, and it expired in 1994. The expiration of the MFA did not, however, mean the end of quotas on textile and clothing exports from developing countries. The MFA was followed by the Agreement on Textiles and Clothing (ATC), which came into effect with the establishment of the WTO in 1995 (1). It was created to be a transition between the MFA and the full integration of textiles and clothing into the multilateral trading system. The integration was to take place in four steps over a ten year period. The main steps can be seen as two separate processes. The progressive integration of products into the GATT as the integrated products are no longer part of the ATC but fall under the GATT and the progressive increase of the quotas that remain under the ATC. In 2005, the ATC was ratified and quotas for textile and clothing were lifted. (1)

Current Textile and Clothing Industry in the United States

Statistics from the United States Department of Commerce and the Bureau of Labor Statistics 2010 list 13,109 textile companies and 9,850 plants. The gross sales for the cotton, fiber, textile, apparel in 2010 was 114.3 billion, having fallen from 121.6 billion in 2007. With the loss, it is still the largest manufacturing employer in the United States economy, providing jobs for nearly 1.4 million workers. Employment in the textile sector is made up as follows: 409,000 in textiles, 837,000 in apparels, 41,887 in man made fibers, 62,579 wool growers,...
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