China Restrained but Undaunted

Despite political threats and fresh quotas, China is poised to strengthen its lead as the top U.S. supplier of textiles and apparel.

Even with that stability, the restraints in China are pushing business elsewhere or at least giving other apparel-producing countries some breathing room.

"It's a great thing for India," said Haugen. "It buys them a little more time to get their infrastructure [such as roads and ports] pulled together. It's not terrific now, but it will certainly get better."

Bangladesh, Indonesia and Vietnam are also likely beneficiaries of restraints on China, said Haugen.

Given that the import agreement with China just went into effect on Jan. 1 and the long lead times for apparel production, it remains unclear exactly how much production will shift and where it will end up.

"From a sourcing perspective for us, everything is sort of status quo," said Joe McConnell, vice president of strategic sourcing at Kellwood Co. "We're looking at the costs and the opportunities, and I think that's what the next few months are going to be about."

When making those sourcing decisions, McConnell said Kellwood would look at the availability of novelty, basic and specialty fabrics in the region and their proximity to the factory, what type of needlework the factory offers, lead and delivery times and, of course, cost.

For now, he said Kellwood would continue to increase production in China and also look into shifting production to Sri Lanka, Indonesia and Thailand.

As U.S. brands look around the world and reconsider where to produce their goods and how much it will cost, the varying trade restrictions on each country, such as the standard duties placed on foreign goods, become important points of difference.

"As we move forward with the proliferation of so many trade agreements and preferences by the United States, that will further skew how people are responding [to restraints on China]," said Thomas Travis, chairman of Sandler & Travis Trade Advisory Services.

Trade pacts, such as the North American Free Trade Agreement or preference programs such as the African Growth & Opportunity Act, giving special treatment to goods from countries in sub-Saharan Africa, reduce the burden of duties on imports.

The power of trade pacts can be seen in the example of Jordan, which entered into a free-trade agreement with the U.S. in 2001 and has qualified industrial zones that let it take advantage of a trade deal between the U.S. and Israel. Jordanian apparel exports to the U.S. topped $1 billion last year, up from about $12 million in 1999. Liz Claiborne, for one, began manufacturing there about five years ago and last year did $70 million worth of business in the country.

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