Globalization Hits Home Part 1

Globalization Hits Home
How Global Trade and NAFTA Hit a Vital Virginia Business
Related links:
• South of the Border, an Eager Work Force Waits for Jobs
• Hard-Working Mexican-Americans Flock to the Old Dominion
• Don't Blame NAFTA: Virginia Must Retrain
By Page Boinest Melton

The story of Virginia Apparel Corp. is short and sad. Sid Mason has told it so many times that he's condensed a lifetime dream into a few clipped sentences. Mason, who had always wanted his own business, bought a jeans plant in Rocky Mount in 1971 just as common work-pants were turning into a popular fashion staple. His production quickly grew from merely assembling jeans for clothing companies to buying fabrics, creating patterns and producing private-label jeans, plus skirts and shorts, for mail-order giants like Land's End and L.L. Bean.
But after 27 years, even as demand for Mason's products grew, the company's margins were squeezed to nearly nothing by a flood of cheaper-made clothing from foreign countries. The company that at one time employed up to 600 people at plants in Rocky Mount, Ferrum and Blackstone became a casualty of what Mason blames largely on trade policies. Son Tim Mason let go the last 150 employees in late 1998.
The company's rise and fall marks Virginia's spot on a global Darwinian dilemma. U.S. textile and apparel manufacturers see plenty of demand for products. Yet, profit margins are tighter than ever thanks to competition from foreign-made clothing which are produced at a fraction of the U.S. cost. Only the fittest companies survive by combining a U.S. presence with foreign production. "Some of our customers kept encouraging us to go South to Mexico and we explored it," says Mason. "But we figured if our people are going to lose their jobs, let's let it be because the industry deserted us - not because we deserted them."
Indeed, Mason and many others in Virginia's dying apparel industry are running smack into a brick wall - the rising globalization of the economy and the free trade policies that go along with it. The roaring success of high technology may be masking the impact, but the effect of free trade on U.S. companies is becoming a hot issue. Witness the riots and demonstrations during World Trade Organization (WTO) meetings in Seattle and Washington, DC, to bitter debates in Congress over permanent trade status for China.
Globalization is no simple issue. Supporters say free trade boosts U.S. exports of higher value-added products and services, and allows producing countries to take care of themselves. Detractors paint a stark picture where the biggest loser is the U.S. factory worker. A longtime U.S. textile worker feeding a household on less than $10 an hour loses his job to a Mexican or Caribbean earning far less - all so that companies can compete with a flood of Asian imports. Critics blame trade policies, like the 1994 implementation of the North American Free Trade Agreement (NAFTA), for piling on the already stressed textile and apparel industries.
The jobs at stake have been mainstays in Virginia and other Southern states for decades. Apparel work first shifted from Europe to America in the 19th century and from New England to the South in the early 1900s. Since the 1960s, it has been steadily moved from the southern part of the U.S. even farther South, to Mexico and the Caribbean. Its flight from the U.S. has only accelerated under NAFTA, which eased tariffs between the United States, Canada and Mexico. The Caribbean Basin Initiative means duty-free, quota-free goods can flow between the United States and the Caribbean and, like NAFTA, employers are likely to shift work to cheaper labor there.
Today, facing stiffer competition from Asian manufacturers, major textile and apparel makers - many with Virginia operations - are closing or downsizing U.S. plants. They are investing in their own Mexican operations or joining competitors in funding "textile cities," industrial parks of textile and apparel production. Fabric and garment pieces made in the United States are shipped to Mexico or the Caribbean for finishing.
The tireless quest: ever lower production costs, some of it captured through lower wages. Last year Virginia apparel workers, who cut and sew fabric into finished products, made $8.31 an hour, or $310 a week, while textile workers, who weave threads and fabrics, made $10.50 an hour, or $437 a week. That's compared with Mexico or the Caribbean, where hourly wages may be less than a dollar. "It's not as expensive to produce products outside of this country. We have so many costs here and they're increasing," says Mason.
Opinions over trade policies are as varied as the treaties themselves. Labor leaders say broader trade will cost even more jobs: 150,000 jobs estimated lost in textiles alone with permanent trade status for China. Manufacturers believe U.S. companies always will have a future producing specialty items, with the nearby U.S. market counting on higher-end products that demand the expertise of skilled American workers. Industry boosters believe domestic employment might shift from production to staffing warehouses and managing supplies traveling to and from foreign operations. And free-traders have a message for those nostalgic for the textile and apparel industries: get over it. "We have a tight labor market right now and we should be employing people in the industries we are best at," said Aaron Schavey, a Heritage Foundation trade policy analyst.
Apparel workers who lose their jobs can expect to get better jobs paying one-third more, Schavey says, adding that nationally, close to 90 percent of laid-off apparel and textile workers find new jobs. "Protect the textile and apparel industry and you hurt the U.S. economy," he says, suggesting that laid-off workers look for jobs in growing industries like computers and technology.
That free trade message, however, doesn't fly in Virginia communities hustling to recover from significant job losses in recent years. The state's textile and apparel employment hit its peak 27 years ago and has been dropping ever since: from 46,600 textile and 40,500 apparel jobs in 1973 to 27,900 textile and 12,900 apparel jobs in the first quarter of 2000.
The roll call of lost jobs is concentrated in Southside although it reaches into every corner of Virginia. Heaviest hit are cities such as Danville and Martinsville but apparel job losses also have touched the Northern Neck, Shenandoah Valley and Central Virginia. Virginia remains the nation's fifth-largest textile employment state, probably because capital-intensive plants represent more of a long-term investment for textile companies.
As for the apparel industry, no other major Virginia industry lost a larger portion of jobs than apparel's 61 percent employment decline since 1973. Apparel companies, by contrast, are less capital-intensive, less dependent on expensive technology and a lot easier to move. Not so their workers. Retrained workers could find jobs in other fields, but not necessarily in the same communities where they live and have extensive personal ties. High-tech jobs are dribbling, not flooding to Southside and many communities there don't have the attributes high-tech companies look for.
When the jobs go, employees usually know where their positions will end up, from Levi Strauss' decision last year to close its Warsaw plant and shift production to foreign operations to Crest Uniform's decision to close its Salem fabric-cutting plant while shifting some production to Mexico. When Bassett-Walker scaled back its U.S. production last year, closing plants in Chatham, Hillsville and Stuart, there was more work for Mexico; likewise Burlington Industries, which closed seven domestic plants including one in Hillsville, while investing $300 million in new Mexican operations.
For some companies, 2000 marked the end of all U.S. production: Cross Creek Apparel closed the last of its domestic sewing operations, including a Hillsville plant, while Donnkenny clothing manufacturer shut down U.S. manufacturing by closing plants in Floyd and Independence, two years after closing Christiansburg and Lee County operations. And the casualties are not limited to textile and apparel production: AMF Reece says it will stop making industrial sewing machines in the Richmond area this year and shift production to its plant in the Czech Republic.
The closures and layoffs seem cruelest in what Virginia Employment Commission economist Tim Kestner calls "company towns" - places where textile or apparel plants are a major part of the community's economy and image. Martinsville drew national attention when Tultex Corp., battered by management and production problems that went well beyond NAFTA, declared bankruptcy and plunged the community into double-digit unemployment last December. With earlier closings at DuPont, Pluma and Ashmore Sportswear plants, the Tultex layoffs drove the area's total number of out-of-work textile and apparel employees to more than 4,000.
Companies with capital-intensive operations - like the 118-year-old Dan River Inc., which invests heavily in high-tech equipment and employee training - have been slower to move South. But that could change as trade pressures favor lower-cost producers. Dan River plans to close its nearly 500-employee Schoolfield plant next year. In a joint venture with a Mexican partner, Grupo Industrial Zaga, Dan River will shift 275 Schoolfield looms to a weaving plant north of Mexico City. A second joint venture includes a Mexican apparel plant that will make sportswear products to compete with Asian imports. "We're doing what we need to do to remain competitive and to continue to generate value to our shareholders," said Denise Laussade, Dan River vice president for finance. The decision, marking Dan River's first investment in Mexico, was a difficult one for the company but Dan River hopes to find jobs for most if not all of the laid-off Schoolfield workers, she says.
Despite the spate of bad news, VEC's Kestner believes there is life still in the state's textile and apparel industries. The industries may not be contributing as much to the state's economy as in the past, he says, but it's important to look beyond the statistics. While NAFTA has contributed to job losses, Kestner notes that increasing exports to Canada have provided some balance. And even as jobs were declining, plant productivity in textiles increased slightly, largely because of advances in technology.
Industry insiders bristle at the suggestion that the apparel and textile industries are dead. Instead, they say, companies are evolving into leaner operations that count on foreign production but also need easy access to the lucrative U.S. market. "It isn't the apparel industry of your grandparents' times, but you will always have a viable apparel industry in this country if for no other reason than it gives you proximity to this market," says Jack Morgan, spokesman for the Virginia-based American Apparel Manufacturers Association. Employment numbers are grim, he agrees, but the shift in production is inevitable, given recent free-trade policies.
Sid Mason's advice to an apparel maker today? "Find some other product," he says, echoing what others say may help secure Virginia's remaining textile and apparel operations. Products like sweatshirts and sweatpants - staples of producers like Tultex - can be made anywhere in the world. The future is in higher-end products that command more skilled workers and can be shipped quickly to U.S. retailers.
Kestner agrees. "We have long since passed the sock-manufacturing-mass-retail-type clothes." On the apparel side, the future may favor higher-end clothing such as well-made dresses and suits for men and women. In textiles, domestic production might excel in weaves used in the computer industry, or in expensive rugs, upholstery and other high-end fabrics. "We're looking for things we think will be long-term, viable, competitive product lines," says Dan River's Laussade. Dan River derives two-thirds of its business revenue from home fashions, such as sheets and comforters - logical products for the company because of the quick turnaround time demanded by U.S. retailers. "We continue to seek out relationships with customers we provide some certain niche product to."
No matter what the textile and apparel industries look like in 10 years, plenty of Virginians have seen enough to convince them that it's time to move on. Much of Southside Virginia's identity seems indelibly tied to the textile and apparel industries, but local leaders looking for a broader image are stepping up efforts to attract new jobs and prepare workers for different fields. "What we are trying to do is diversify: If there is a downswing in one industry, we won't be as affected as we have been in the past," says Jack Messer, executive director of the Southside Economic Development Partnership. The 3-year-old partnership for the region stretching from Martinsville to Halifax touts the area's workforce and low cost of living, while targeting businesses ranging from call centers and Internet technology to wood products, plastics production and food industry companies.
Franklin County got the wakeup call after Virginia Apparel Corp., Pluma, Bassett-Walker and JPS Converter all closed local plants inside of a year. Businesses and community groups created a consortium to help residents deal with the practical and emotional toll of those lost jobs. "You are emotionally moved when you hear what it means from someone who has lost a job after being with a company 20-30 years, and obstacles they have gone through," says Francie Cumby, who coordinates the consortium's retraining and work force efforts with local colleges. "The economy is changing and we wanted to help people displaced from employment due to no fault of their own."
One of the consortium's success stories is Sharon Law, who says NAFTA helped her make the move from a factory to the classroom. Law had a textile job since she was old enough to work, but when Pluma went out of business last year - one of a half-dozen textile companies she has worked for in more than 30 years - she looked for a new career. Today the 54-year-old mother of two has a 4.0 average and is working on a computer programming degree.
Making the switch was a tough call, but Law decided she had had enough job hopping. "Most of the jobs went overseas. When NAFTA passed, they just went faster," she said. Law hopes to find work in her new field when she graduates next year. She would like to work in Franklin County, if county developers can find a company to provide the jobs. "It was hard and I didn't know if I could do it," said Law of going back to school at her age. "But I think I'll like an office environment."
Broader trade policies - like many decisions made in Washington - are enacted with a national and even global perspective in mind. Yet the consequences of those votes are felt most keenly in states and local communities. Textile and apparel manufacturers still in business are transforming industrial-era manufacturing into high-tech, high-end operations. The Old Dominion drew part of its wealth in the last century from the textile and apparel industries. But today, it finds itself under increasing pressure for more education, worker training and aggressive economic development to secure a future for Sharon Law and thousands of laid-off workers like her in Virginia's "company towns."