U.S. Textile and Apparel Industries and Rural America
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Cotton is the single most important textile fiber in the world,
accounting for nearly 80 percent of natural fiber use and more than
one-third of total fiber demand worldwide. Both U.S. and foreign
demand for cotton products by consumers has grown significantly
since the end of the 1990s, and textile mills around the world have
expanded their cotton consumption accordingly. Despite this global
boom, the U.S. textile industry's demand for cotton fell sharply.
Competition with imported products has reduced capacity in the U.S.
textile and apparel sectors, and the domestic textile industry no
longer consumes the majority of U.S.-produced cotton. Consequently,
analysis of the U.S. textile and apparel industries is vital to
understanding cotton production and prices.
This chapter discusses the trade issues, experience of the
textile and apparel industries, regional impacts, and related labor
market impacts since the mid-1990s. (See
Definition of U.S. Textile and Apparel Industry for details on
the industries included in this analysis.) As textile and apparel
trade liberalized over the last few years, production shifted to
countries with lower wages, and the United States imported more
apparel. As a result, many U.S. textile and apparel plants closed;
some firms went out of business; and others relocated production
overseas. The United States lost more than 900,000 textile and
apparel jobs from 1994 to 2005.
U.S. rural areas have been disproportionately affected by the
loss of textile and apparel jobs, particularly in the Southeast,
where textile and apparel plants are concentrated. On December 31,
2004, the last remaining import quotas on clothing and textile
products expired. The resulting freer trade will further increase
competition in the sector; probably, lower prices of these goods;
and further decrease U.S. employment in these industries. Trade
liberalization in textiles and apparel will produce gains and
losses, similar to other initiatives reducing trade restrictions,
but overall U.S. economic welfare is expected to increase.
Competitiveness and Apparel Production
Apparel production is labor-intensive, making wages a large
share of the cost of production. Thus, relative wages tend to
determine where clothing is produced. Over the last 200 years,
rising U.S. incomes first shifted clothing production from within
individual households to factories, and later concentrated it in
lower-income regions of the country. Then, during the 20th century,
clothing production migrated to foreign countries with wages lower
than those in the United States.
Competition in apparel production is not entirely wage-driven.
Highly skilled workers supported by good communication and
transportation infrastructure can often compete with workers in
countries with much lower wages and much less developed economies.
However, as education and investment have risen in developing
countries, wage differences have increasingly offset the
productivity-enhancing attributes of the domestic U.S. clothing
industry. Consequently, as import limits have been relaxed,
production has shifted to non-U.S. locations.
Textile production (e.g., yarn and fabric) is more
capital-intensive than clothing production, but to some extent is
concentrated in countries where clothing production is important.
Yarn and fabric are internationally traded, but coordination
between apparel and textile producers is often enhanced--and costs
reduced--when both are produced in the same country. Textile
producers, therefore, may find it beneficial to be located near
clothing producers, who are their customers.
The Multifiber Arrangement Phaseout
The
World Trade Organization's (WTO) Agreement on Textiles and
Clothing (ATC), which was part of the 1995 Uruguay Round
Agreements, mandated phaseout of import quotas sanctioned for
decades under agreements such as the 1974 Multifiber Arrangement
(MFA). The MFA was a system of bilateral quotas governing textile
and apparel exports by developing countries to the United States,
Canada, and the European Union. These quotas favored textile and
apparel industries in developed countries by limiting import
competition. The ATC called for a phased removal of bilateral
quotas over 10 years, allowing time for producers to prepare for a
more open international market. (See The World Bids Farewell to the Multifiber
Arrangement for additional information.)
The United States, Canada, and the countries in the European
Union were not obliged to remove substantial quotas in the
phaseout's initial stages. These countries were only obliged to
forgo the right to impose or maintain quotas for a given share of
their imports, for example, 16 percent of their imports in Phase 1
of liberalization (1995). This 16 percent could include products
where the quota was not an effective constraint, which was largely
the case. For example, the quota on Men's and Boys' Work Clothing
was eliminated in Phase 1, but since much of this quota had not
been used, there was no noticeable increase in imports after
1994.
The same was true of Phase 2 (1998) and, to a lesser extent,
Phase 3 (2002). As a result, the phaseout was effectively
concentrated in Phase 4. In fact, 80 percent of the effective
quotas--quotas that were limiting imports into the United
States--remained in place through 2004. Given this concentration of
quota removal in Phase 4, the full impact of the MFA's phaseout on
U.S. market prices is only now being experienced.
| MFA quota timetable |
| Phase |
Quotas removed on: |
| 1 |
December 31, 1994 |
| 2 |
December 31, 1997 |
| 3 |
December 31, 2001 |
| 4 |
December 31, 2004 |
See Textile and apparel industries by quota removal
phase 
for details on the phaseout
by industry.
Because the MFA quotas that limited clothing imports were
effectively reduced or eliminated, apparel and textile prices and
production have declined in the United States. The "integration" of
textile and clothing trade--out of the restrictive regime developed
under the MFA and back into standard WTO rules that apply to world
trade--has increased U.S. imports of these products. It also
reduced the prices charged for clothing and reduced the profits,
production, and numbers of workers employed by domestic producers.
To some extent, the special safeguards the WTO will permit for
China's exports will limit these changes, but the end of the MFA
has significantly increased the ability of countries like India,
Pakistan, and Bangladesh to export clothing to the United States.
(See
Textile and Apparel Trade After the Multifiber Arrangement for
more information on textile and apparel trade policy, including
safeguards.)
Textile and Apparel Employment Changes by Phase
The phased removal of quota restrictions affected trade and, as
a consequence, U.S. textile and apparel production. As imports
increased after 1994, U.S. production decreased, and U.S. textile
and apparel job loss accelerated. However, changes in industry
employment are complex. Job losses may also represent a number of
other factors, including increased productivity, changes in demand,
the 1994 ratification of the North American Free Trade Agreement,
and exchange rate movements.
The more rapid employment decline of industries not integrated
until Phase 4 highlights their greater vulnerability to import
penetration, despite continued quota protection through December
2004. U.S. textile and apparel employment is roughly half of what
it was in 1995, suggesting that future adjustments will be less
disruptive than would have been the case if trade integration under
WTO rules had occurred earlier.
However, the integration experience of more robust industries,
such as Carpets and Rugs and Fabric Finishers, in earlier phases
provides little insight into the possible magnitude of job loss in
Phase 4 industries after January 1, 2005 and its impact on affected
communities.
Most vunerable to job loss are U.S. counties deriving a large
share of employment from Phase 4 industries, such as Chattooga
County, Georgia, and Cherokee County, Alabama. (For a full list of
counties, see U.S. counties deriving more than 15 percent of
employment from Phase 4 industries .) As of August 2000, 57 counties derived
more than 15 percent of their private employment from Phase 4
industries. This dependency makes them more vulnerable to import
competition now that the quotas have expired. Twenty-six of these
counties are surrounded by other counties that have considerable
Phase 4 employment, suggesting a more limited ability to absorb
displaced workers in the local labor market. These 26 counties are
predominantly in North Carolina, South Carolina, Georgia, Alabama,
and Virginia.
In addition to import vulnerability, the geographic
concentration of Phase 4 industry employment suggests that if these
plants close, laid-off textile and apparel workers may have
difficulty finding new employment, in part, because there are
likely to be other plant closings in contiguous counties. The Trade
Adjustment Assistance program, which assists workers who have
become unemployed as a result of imports, provides a variety of
benefits including relocation allowances. However, relocation can
be difficult, especially for homeowners, and few take the
relocation benefit. (See
Federal Programs and Policies for more information on Federal
programs.) As a consequence, the adjustment to the Phase 4 quota
expiration may be more difficult than that of the first three
phases.
Textile and Apparel Job Loss in Nonmetro Areas
Textile and apparel jobs have been in decline for three decades.
Technological improvements and import competition have reduced the
U.S. workforce from 2.4 million in 1973 to 650,000 in 2005. The
decline in textile and apparel jobs accelerated following the
implementation of the North American Free Trade Agreement (NAFTA)
with Canada and Mexico in 1994. In late summer 2000, U.S.
manufacturing went into a downturn, and in March 2001, the economy
slipped into recession. Textile and apparel job loss accelerated
again, with over a 10 percent loss of jobs each year during
2001-03. Continued job loss is expected in the future, as the
Bureau of Labor Statistics projects that the textile and apparel
industries will have the most rapidly declining employment rates of
all industries over 2004-14.
While jobs in all manufacturing industries have also declined,
textile and apparel jobs are of particular interest as these
industries are the most geographically concentrated and are
disproportionately located in Southeastern nonmetro counties. This
region also has the highest rate of rural poverty. In 2002,
one-third of all textile and apparel employment was located in
nonmetro U.S. counties. (See
Geographic Concentration of Textile and Apparel Industries for
a comparison of selected industries using Lorenz curves.)
In addition, there is concern about the difficulty that textile
and apparel workers encounter when they are laid off. Of all
employed U.S. workers in 2003, textile and apparel workers were, on
average, older, less likely to have a high school diploma, and less
likely to be a U.S. citizen. These characteristics might make it
difficult for laid-off textile and apparel workers to find new
jobs. See Demographic and job characteristics of textile and
apparel workers, 1997 and 2003 for
further details.
How Have Laid-Off Textile and Apparel Workers Fared?
During 1997-2003 in the United States, 297,000 textile and
apparel workers were displaced from their jobs, of whom 132,000 (44
percent) were nonmetro workers. Displaced workers are those who
lost their jobs because their plant or company closed or moved;
their employer had insufficient work; or their position or shift
was abolished. Moreover, displacement as measured includes only
workers who are 20 years old or older with 3 or more years of
tenure on their lost job. As a consequence, the number of workers
considered displaced is smaller than the number of jobs lost over
1997-2003.
The experience of nonmetro textile and apparel workers generally
paralleled that of metro textile and apparel workers. However, both
groups experienced more difficultly getting a new job than
displaced workers in the U.S. economy overall.
- Nonmetro areas bore a disproportionate share of textile and
apparel job loss--44.5 percent of all displaced textile and apparel
workers were nonmetro residents. This is more than double the
nonmetro share of the U.S. labor force (18 percent) and the
nonmetro share of all displaced workers (16 percent). It is also
more than the currently employed nonmetro textile and apparel
workers' share of all employed textile and apparel workers (30
percent). Displaced textile and apparel workers were overwhelmingly
located in the South--91 percent for nonmetro workers and 44
percent for metro workers.
Displaced textile and apparel workers, like employed textile and
apparel workers, were more likely to be female than all displaced
U.S. workers, and also were less likely to have a high school
diploma.
- Textile and apparel workers were more likely to drop out of the
labor force than other displaced workers. Consequently, a smaller
share was employed when surveyed, 61 percent, than employed
displaced workers from all industries, 69.5 percent. Of those who
found a new job, displaced textile and apparel workers had to look
longer, about 23 weeks, versus 16 weeks for all displaced. Most
displaced workers suffered earnings loss on their new job, with
three-fourths making less on their new job than on the job they
lost.
Since the demographic and job characteristics of current textile
and apparel workers is about the same as those of textile and
apparel workers displaced during 1997-2003 (see Characteristics of displaced workers, 1997-2003
, for further details), it is expected
that workers laid off in the future would have similar experiences
finding new employment. However, this expectation is contingent on
the state of the U.S. economy.
Possible Community Impacts
In addition to the effects on individual workers, there may also
be an impact on rural communities. Closures of textile and apparel
plants could significantly affect local tax bases. Also, many of
these places may already have relatively low incomes and tax bases,
so they may be hard-pressed to maintain public services, such as
spending on local education.
In addition, Federal policies to assist displaced workers (see
the
Worker Programs section of the
Federal Programs and Policies page) may result in the workers'
moving away to find another job. Although workers may benefit from
relocation, the communities where the plants closed may suffer.
Such communities may benefit from other government programs that
deal with general business development, infrastructure, and
housing. ERS research has shown that, in the Southern rural
counties where many of these textile and apparel plants are
located, Federal community resource programs (including
infrastructure, housing, and business assistance) tend to provide
fewer dollars, per capita, than rural areas receive elsewhere, and
significantly fewer dollars than urban areas receive. The effects
of this disparity are particularly notable in the socioeconomically
distressed, crescent-shaped region in the South where Blacks make
up a relatively high percentage of the residents. (See Federal Funds in the Black Belt 
for further details.)
For More Information
Multifiber Arrangement
Textile and Apparel Trade
Trade Adjustment
U.S. Textile and Apparel Industries
Rural America