Textile and Apparel Trade Issues

Publication Date: January 2007

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Manufacturing and industry

Type:

Abstract:

Textile and apparel production and international trade have been important elements of economic activity and growth since the Industrial Revolution. Major reasons are (1) textiles and apparel are basic items of consumption in all countries, and (2) textile and apparel manufacture -- particularly apparel -- is labor-intensive, requiring relatively little fixed capital for entrepreneurs to establish production facilities. Thus, these industries are major generators of jobs in many countries.

Because of its importance to the U.S. economy and to many U.S. trade partners, textile and apparel trade has been a major issue in trade relations with a number of countries and regions. Other industrialized countries have faced similar issues, and in attempts to resolve conflicts between the interests of exporters and importers, a number of agreements (multilateral and bilateral) were signed over the years generally restricting the quantities of textiles and apparel traded. A major recent event was the completion on January 1, 2005, of the phaseout of such quotas, as mandated by the Uruguay Round of trade negotiations in the 1990s.

In the last several decades, textile and apparel manufacture has been shifting to developing countries as a whole, with textiles and apparel accounting for large portions of their exports to industrially developed countries. Lower wages in developing countries together with the labor-intensiveness of apparel production tend to give those countries a cost advantage in apparel manufacture and a locational advantage for their textile production. Also, there have been large shifts in many individual countries' shares of world textile and apparel trade since the mid-1990s. The basic worldwide shifts have affected and continue to negatively affect the U.S. textile and apparel industries. While there have been a few intermittent increases, overall U.S. output of textiles and apparel, and associated employment, in the mid 2000s are below peaks set in the last three or four decades, and are projected to decline further.

Most trade participants, analysts, and observers expected that the quota phaseout would result in increased exports of textiles and apparel by developing countries as a whole. However, it became widely believed and feared -- now seemingly justified -- that China will be a major beneficiary at the expense of most other developing countries, although India and Pakistan are expected to benefit appreciably as well. The United States and the European Union have imposed limitations on the initial surge in imports from China, as permitted by the rules governing China's accession to the World Trade Organization.

Notwithstanding the potential difficulty for some U.S. textile and apparel industry segments, Congress has eased trade terms on apparel from Andean, Caribbean, and sub-Saharan nations -- in moves to boost economic growth in poorer regions. However, the preferences are contingent in many cases on requirements that beneficiary country industries use U.S.-made materials in producing apparel. In addition, the United States has concluded free trade agreements with a number of countries, mainly in this hemisphere, that probably will have negative consequences for U.S. textile and apparel producers. This report will be updated as events warrant.