The U.S. International Trade Commission, in its latest report on “The Economic Effects of Significant U.S. Import Restraints,” estimates that U.S. economic welfare, as defined by total public and private consumption, would increase by about $2.6 billion annually by 2015 if the U.S. unilaterally ended, or liberalized, all significant restraints.
Exports would expand by $9 billion and imports by $11.5 billion. These changes would result from removing import barriers in high-tariff manufacturing sectors, including textiles and apparel.
As in the previous six reports, the first of which was issued 20 years ago, the ITC — an independent federal agency with broad investigative responsibilities on trade matters — identified sectors with significant import restraints on the basis of high tariff rates, restrictive tariff-rate quotas and other restrictive import policies, such as preferential rules of origin. Among manufactured goods, the most restrictive restraints are in the apparel, footwear and leather sectors.
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The ITC estimates that while liberalization reduces output and employment in directly affected sectors, it benefits sectors that use those products and the economy as a whole by lowering the price of imported goods and increasing U.S. productivity, causing gross domestic product to rise. While employment in liberalized sectors typically falls, this is offset by employment gains in other sectors, according to ITC data. Exports rise throughout the economy because of lower prices for domestic goods in liberalized sectors and higher productivity elsewhere. Imports also rise overall, driven by lower import prices and greater purchasing power, the report said.
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The ITC estimates that liberalizing import restraints in textiles and apparel would increase economic welfare by $514 million. However, as the domestic industry has been contending for years, the report states that liberalization would reduce output and employment in this sector by 9 to 10 percent, which would magnify the already substantial declines projected to occur without liberalization. Import liberalization would also eliminate exports of U.S. goods that are stimulated by preferential rules of origin. This change would lead to large declines in exports of U.S. products such as thread, yarn, fabric and cut fabric.
Certain U.S. imports of textiles and apparel are eligible for duty free treatment under free trade agreements and preferential trade agreements. The value of U.S. textile and apparel imports that entered duty free under FTAs or PTAs in 2010 was $20.4 billion, or 20.1 percent of total imports of such goods, with 56 percent originating from North American Free Trade Agreement and Central American Free Trade Agreement countries.
The U.S. remains the world’s largest importer of textiles and apparel, accounting for about 25 percent of global imports by value in 2010. The U.S. recession between 2007 and 2009 exacerbated the contraction in the U.S. textile and apparel sector that has been under way since the late Eighties. Output of textiles and apparel fell 35.3 percent during 2007-09 to $62.7 billion before rebounding modestly by 5.9 percent to $66.4 billion in 2010. Output of apparel was especially hard hit, falling 47.9 percent, with a 1.3 percent recovery in 2010. Employment in the textiles and apparel sector also declined dramatically, falling 27 percent in 2007-10, for a loss of 146,500 jobs. As textile and apparel manufacturers have increasingly outsourced production to low-cost foreign factories, the number of U.S. textile and apparel plants has declined, with a corresponding decrease in the number of textile and apparel workers. In 2009, there were 3,463 apparel textile mills, down from 3,828 in 2007; 7,810 home furnishings and industrial textile mills, down from 8,130 in 2007, and 8,339 apparel factories, down from 9,492 in 2007.
Despite this sharp contraction, industry representatives project the rate of decline in the U.S. textile and apparel industry will slow through 2015. In part, this is because domestic products no longer compete directly with imports. The limited remaining domestic production of fabric and clothing is primarily for U.S. government defense contracts for high-end and niche markets willing to pay a premium price for higher quality product and fast-turnaround orders.
In 2010, 85.6 percent of the total value of all apparel sold in the U.S. was imported, up from 74.7 percent in 2007. Between 2007 and 2010, U.S. imports of textiles and apparel from China increased 16 percent to $40.5 billion, while imports from Vietnam rose 37 percent to $6.1 billion.