Team Western Hemisphere

When I first started sourcing production outside of the USA in 1985, I needed to learn of factory locations and which countries supported apparel manufacturing within a politically stable environment. At that time, you may recall, civil wars continued in both El Salvador and Nicaragua. The US government wanted to promote the Caribbean Basin Initiative (CBI), and the abundant source of low-cost labor attracted me southward. In the late 1980s, I attended a series of conventions held in Miami known as the Miami Conference on the Caribbean. David Rockefeller, chairman of the Caribbean Central American Action committee, was the main driver of this event, along with his bank. Using his long-term influence in the US and Latin America, he bolstered attendance of major businesses and virtually every non-communist government in the West.

These participants consisted of a range of characters including country presidents, government officials, bankers, apparel manufacturers, shipping companies and various foreign chambers of commerce meeting to network for the purpose of promoting trade in the Western Hemisphere. Vice President George H.W. Bush spoke and was so effective with his foreign service background, I actually voted for him in his first run for the White House. A major strategy had been adopted and was about to begin implementation. There was to be a hemispheric free trade zone. We, of the Americas, were to band together to compete effectively against Eastern Europe and the Far East.

The Dominican Republic, Haiti, Jamaica and the Central American countries were to benefit from more liberal trade with duty waivers under the CBI. Things were moving along fine until 1993 when NAFTA was adopted and Mexico became the beneficiary of no duty charges, giving them a 17 to 29 percent cost advantage over the other CBI nations. Those of us not in Mexico struggled against this cost variance until the year 2000, when the “Parity” bill or Caribbean Basin Trade Partnership Act was passed into law, giving us the ability to cut USA fabric in the CBI nations and pay no duty, thus having “parity’” with Mexico. As a member of the American Apparel Footwear Association (AAFA), I lobbied congress for passage of this law and had the historic experience of being present in the senate gallery when the final vote was tallied.

We producers in Latin America didn’t enjoy the advantage too long - we needed to start worrying about the sleeping giant, China, and the end of quotas that China would now enjoy under the World Trade Organization treaty that took effect on January 1, 2005.

Wouldn’t you think it’s difficult enough being competitive in the manufacture of garments without considering international trade law advantages handed to other countries? Well, last year, China over-shipped their 7.5 percent growth allowance by exporting up to 1500 percent more in some cases, so quota restrictions were enforced. While traveling in China in May of 2005 with our AAPN (American Apparel Producers Network) trade mission, I was interviewed repeatedly by Chinese national television and newspapers and asked to comment on the over shipments. As if they needed confirmation of their excesses.

The prices in China aren’t the cheapest in the Eastern Hemisphere but they offer convenient one-stop shopping for apparel buyers. The lead times are still long. including shipping time. All fabrics are not available, especially those fabrics most common to our industry in uniforms and career apparel. Our customers still need quick turn fulfillment as even very large inventories cannot prevent stock outages. and we must uniform our customer’s employees or they can’t show up to work.

So production in this Western Hemisphere is still very viable and attractive. Over the last twenty years, the better factories in Latin America have installed modern equipment, trained employees for better efficiency and became proficient at quick turn to serve the US market. Trim and machinery suppliers have moved closer to the production floors, thus reducing costs and re-supply time. Even some US mills have established offshore warehouses for just-in-time delivery support.

But other US mills have been closing, including Avondale and Dan River. In order for Latin America to remain a viable supplier and to complete the supply chain, we need textile mills. Burlington has a presence in Mexico, as do local textile mills. There are a few knit and fewer woven suppliers between the Dominican Republic and Central America.

Now enter DR-CAFTA (The Dominican Republic-Central America Free Trade Agreement.). The Dominican Republic and Costa Rica have not ratified the treaty but the DR is expected to do so by August. Nicaragua has received Trade Preference Levels which will enable them to import non-USA goods, cut and sew and then import duty and quota free into the US. Fabric produced within the treaty countries will be able to be used among the various countries duty and quota free for shipment into the USA. For example, knit produced in Honduras can be shipped into the DR to be made into garments. We are seeing the further manifestation of the strategic plan of the hemispheric free trade strategy. It has just taken some time. But that’s how politics and international economics work.

My son Jeffrey and I attended the summit meeting just held in Managua, Nicaragua, from June 5th - 9th. This meeting was sponsored in large part by the AAPN and the AAFA, organizations in which Greco Apparel is a member. This was a dynamic, educational conference attended by 218 participants from the industry including brand name manufacturers, retailers, equipment and trim suppliers, major fabric mills, transportation providers, industry consultants and contract factories plus some I have surely missed naming.

John Stasburger, vice president, managing director of VF Americas Sourcing, spoke of his company’s strategy of transforming the supply chain to fuel growth. VF sees the world in three main regions: China/SE Asia; South Asia/Bangladesh, India and Pakistan; and NAFTA-DR-CAFTA (or the Western Hemisphere). From Latin America, VF is sourcing 90 million units per year with 65 percent coming in the form of full package purchases.

John shared comments form sourcing managers about the advantages of sourcing in the West. Geography is on our side, use it. Short cycle time. Flexible factories to make what’s in demand. But the execution of the product needs to be consistent. The weakest link here is that initial pricing and sample making take too long compared to the Far East. We need to improve here. Asians are experienced in working from a sketch while Americans require or have required more detailed input of samples and specifications. Americans need to improve performance at the micro level and be sure to fill sizes as ordered, not just ship the total quantities. We need to go from “no problem,” to reliable fulfillment of purchase orders that equal a “contract” on which we need to be perform.

Alfonso Hernandez of the Argus Group, seminar host and our current president of the AAPN, referenced a ‘three-legged stool’ strategy with maximum value added, orderly growth of diversified products and speed to market. These core competencies need to be developed: product development, technical competence, financial strength, infrastructure, communications, quality assurance and reliable delivery.

There were also a number of panel discussions, and at one of them, I heard John Bekane of Cone Mills speak. John announced that Cone had recently closed a deal to build a denim mill in Nicaragua at a cost of $100 million that would be completed in about one year. This major investment and commitment to the region is a solid testament to the viability of our apparel manufacturing capability in the Western Hemisphere. Commitment of major textile mills is the anchor needed to keep the supply chain alive. There is no small investment that a mill can make due to the capital intensive nature of that industry. During the conference there were rumors and confirmations of additional pending deals for Taiwanese, Brazilian and other countries’ textile businesses having already performed due diligence and prepared to establish mills in Central American and the Dominican Republic.

The strategic vision enumerated more than twenty years ago is continuing to evolve and manifest. Companies and their leaders are being challenged to grow and change to keep pace with demands of the market place and to compete with world class standards. I am pleased to collaborate with our industry colleagues to meet the challenges of global competition and to participate in the exciting economic opportunities available today.

Joseph Greco is president of Greco Apparel. Visit them on the web at www.grecoapparel.com