Statement of
Smyth McKissick
Alice Manufacturing Company, Inc.
Easley, South Carolina
“China’s Impact on the U.S. Textile Manufacturing Base”
U.S.-China Economic and Security Review Commission
Columbia, South Carolina
January 30, 2004
Mr. Chairman, members of the Commission.
My name is Smyth McKissick. I am the CEO of Alice Manufacturing, a relatively small, privately held textile company with four plants located here in South Carolina. We currently produce a variety of woven fabrics and home furnishings ultimately used for home furnishings, apparel, industrial goods, and pocketing and linings, among other things. These products are ultimately used by our customers for home furnishings, apparel, industrial goods, and pocketing and linings, among other things.
Alice Manufacturing was established in 1910. Four generations of McKissicks have guided this proud company through good times and bad, including numerous recessions, World War II and the Great Depression. Both my grandfather and father served as President of the American Textile Manufacturers Institute, and I have served for a number of years on the Board of Directors of that association.
Over the years, Alice Manufacturing has consistently made prudent and necessary investments in new equipment in order to remain highly productive and competitive in the global trading environment we now face. We have described our modernization program as “aggressive” because to be passive in our business means you get left behind. We are typical of the entire U.S. textile industry, which has taken steps to make sure it is the most modern, productive textile industry in the world.
But make no mistake about it – the threat we face today from unrelenting and massive surges of unfairly traded imported textile products, particularly from China, makes the Great Depression pale by comparison. The crisis we face today will determine whether Alice Manufacturing, along with much of what remains of the American textile industry, even survives.
Alice Manufacturing views Chinese trade practices as the major threat to world stability in textile and apparel trade. It’s not simply a question of their low wages – in fact, if wages were the only factor, China’s 40 cents/hour wages would put it at a competitive disadvantage vis-a-vis Bangladesh, which only pays its textile workers 25 cents per hour. Nor is it the fact that China does not face the same labor law, tax, environmental or safety and health requirements that we face. While we wish that China and our other competitors had to abide by these same requirements, we know that is not going to happen anytime soon.
Instead, we are threatened today because of the unfair and illegal trade practices which the Chinese government has instituted to help their textile industry and ensure continued employment for their textile and apparel workers.
Let me give you some facts and figures. In 2002, because China had just joined the WTO, China was allowed to benefit from the elimination of a number of quotas on textile and apparel products. Other WTO member countries got to do the same. It was a case of China versus the rest of the world, including U.S. textile companies.
What happened? In 18 months time, the Chinese share of total U.S. imports in these categories went from 9 percent to 53 percent. And this trend has continued to the point that we estimate China’s share of imports in these categories will be between 65 and 75 percent by June of this year.
How did China do this? China did this because it dropped its prices by an average of 55%!
No one else could compete with a 55 percent price cut. Not the Philippines, not Bangladesh, not even Mexico, with zero duties. And many American textile companies have been wiped out.
Here are some more facts. Over just the last twelve months, China has increased its exports of textiles to the United States by 85%, the biggest increase by any country in history. Over the same period of time, the U.S. textile industry has closed 53 plants, and 49,000 U.S. textile workers have lost their jobs. And that is only a fraction of what is to come if this government does not do something fast.
In eleven months, all remaining quotas on Chinese textile and apparel exports will be removed. A recent study by the American Textile Manufacturers Institute (ATMI) showed that, if China merely repeats its pattern of behavior from 2002, the entire U.S. textile industry will virtually be wiped out.
This study projects that, very quickly, over the course of two or three years, 630,000 hard-working American textile and apparel jobs will be eliminated if this occurs. This industry, one of the largest manufacturing employers in the United States, will be destroyed, and all those good jobs will be gone forever.
And the damage won’t be limited to the U.S. The World Bank estimates that, because China will get the same quota-free access to all other countries, it will take over as much as one-half of the world’s trade in apparel. That is over $200 billion in trade. In fact, according to Business Week, increased Chinese production will displace upwards of 30 million textile and apparel jobs in other countries around the world, many of them in developing and least developed countries. This will be one of the biggest short-term shifts of wealth in history. And it will be devastating to dozens of countries in Africa, Central America, the Caribbean and Asia, countries whose economies depend on apparel exports to the United States and Europe.
Yet there is no apparent U.S. government response to or concern over the enormously destabilizing effect that a China takeover of this sector will cause. The only thing we have heard out of the government thus far is a comment from Ambassador Zoellick, suggesting that the African countries should try making shoes instead. China already has an 82% share of the import market for shoes, which doesn’t leave much room for anyone else to break in. China also has more than an eighty percent share of the market for small appliances, lighting, bicycles and toys. Just what on earth are these other countries supposed to try and make?
Now, truth be told, none of this is entirely China’s fault. China is doing what is in its own best interests. China is acting aggressively on behalf of its own national interests and its people. China is sticking up for it’s own textile industry.
So we have to ask:
I also understand that the U.S. government has a rule on the books that makes it impossible for my company to ask for a trade action against Chinese subsidies because China is a non-market economy. That’s ridiculous. How can OUR government allow things like that to happen?
The U.S. market is what China is after. We have all the leverage, but the U.S. is doing nothing while our jobs and our wealth just drains away.
This commission was authorized as part of the Floyd Spence Defense Authorization Act, a law named after the late Congressman from South Carolina who understood the link between our nation’s military security and the need for a strong defense industrial base in textiles. In light of this fact, I want to address the serious implications this situation has for our national security.
The Defense Supply Center – Philadelphia estimates that over 8,000 different textile items are purchased annually for use by the Armed Forces, and this figure actually rises to over 30,000 line items when individual sizes are factored into the item mix. We supply the American warfighter with everything from uniforms to high tech protective clothing. We supply defense contractors with industrial fabrics that are vital to the operation of key pieces of military equipment.
We supply such combat essential items as combat and flight uniforms, helmets, flak jackets, gear for extreme weather operations, chemical defense suits, parachutes, aircraft fuel cells, sandbags, tents and shelters, sheets, blankets and hospital supplies, as well as airplane panels (made of Nomex & Kevlar), ammunition, bags/pouches, fabric for bullet-proof vests and helmets, chemical protective suits, communication lines (optical fiberglass), extreme weather protective fabrics, interfacing and lining in apparel and shoes, parachutes and parachute harnesses, personal flotation devices, pontoon bridges, rafts, ropes and cables, ship composites, stealth fighter plane graphite fibers and wet suits, to name just a few of the thousands of items.
We are, in the words of one former Secretary of Defense, second only to steel in importance to the Armed Forces of the United States.
But if this industry, this key supplier to the U.S. Department of Defense, is allowed to wither away because of unfairly traded imports from China and other countries, where will our Armed Forces go for these 30,000 line items? Will our soldiers have to wait on China to agree to meet our military’s specifications not just for quantity but for quality? Will our soldiers then have to wait for China to produce the items needed? Will they then have to wait for them to be shipped on the proverbial slow boat from China? And what if our military receives the items it needs but they do not meet the rigid specifications we have established – do we send them back and start over again?
Finally, and most importantly, what do we do when China does not agree with a particular U.S. foreign policy or defense policy, and decides to cut off the pipeline? We saw what happened when OPEC did that to us in 1973-74 with respect to oil. Do we want to be faced with an embargo on potentially thousands of different textile items? Do we want our military’s supply needs to be held hostage to the whims of the government of China, whose principles of government differ so greatly from our own?
In conclusion, our workers see the future and they know that their jobs will be gone if the U.S. government doesn’t start taking their side. They see China taking away job after job and job because it is not playing fairly, and they see our government looking the other way. This understandably makes them very angry. This government is letting them down, it is letting their families down and it is letting their communities down. I hope you send the message to the folks in Washington that this is a dangerous game to play and the day may come, sooner than they expect, when they will be held accountable.