Unravelling the Myth of ‘Made in America’
Release time:2018-09-28

Not since NAFTA has US manufacturing been such a hot topic in national politics. On the eve of the 2016 presidential election, BoF examines the disadvantages and opportunities of producing clothing in America. 

NEW YORK, United States — The 2016 US presidential campaign has featured plenty of mudslinging, but precious little policy talk. That, of course, has a lot to do with the leading candidates. In particular, Republican nominee Donald Trump, whose demagogic, reality-television persona turned the three presidential debates into shouting matches forcing embattled Democratic nominee Hillary Clinton to endure a marathon of attacks and interruptions.
But despite the sad state of American politics, there are a handful of substantive issues that have come to define this election cycle, one being the loss and possible return of US manufacturing jobs in sectors from automobiles to apparel. In the 1960s, more than 95 percent of apparel bought in the US was made in the US. But increased free trade with China, starting in the 1980s, pushed that number down significantly. By 1993, just over half of the garments sold here were made here. In 2015, 97 percent of clothes sold in the US were imported, not just from China, but also from other offshore manufacturing centres like Bangladesh, Vietnam, India and Indonesia, according to the American Apparel & Footwear Association (AAFA), a Washington, DC-based trade organisation.
Now, after years of marketing messages proclaiming product quality and local job creation amongst the benefits of American-made goods, voters are asking: Doesn’t bringing large swaths of manufacturing activity back to the US make sense, for consumers, the economy and society at large?
Bringing apparel manufacturing back to America in a meaningful way is an impossible task for a variety of reasons.
Trump, whose own branded product lines are almost exclusively made overseas, says he is committed to reshoring, though his plans for achieving this are unclear. Meanwhile, at the start of this year’s campaign, Clinton, too, addressed reshoring, coming out against the Trans-Pacific Partnership (TPP) free trade pact, an agreement that she once supported. The deal, forged between 12 countries — including Vietnam, Japan, the United States and Malaysia — is meant to stimulate trade by reducing tariffs and other costs associated with imports and exports, which critics say will eliminate local jobs.

Political positions aside, what is actually feasible when it comes to manufacturing apparel and accessories in the US? And where do the opportunities, if any, truly lie?

“Bringing apparel manufacturing back to America in a meaningful way is an impossible task for a variety of reasons,” says Edward Hertzman, a consultant and founder of Sourcing Journal, a trade publication covering the apparel and textiles supply chain. “The price of labour, without a doubt, just knocks everything out. If a worker in the US makes $15 or $16 an hour, in one day they will earn more than someone in Bangladesh earns in a month.”

But the cost of labour isn’t the only hurdle. “We don’t have trained people that could do that job,” he continues. “We’re no longer a country built on manufacturing. Whatever manufacturing we do have, it’s not based around the garment industry.”

To be sure, American consumers, who generally love a deal, are not willing to give up low prices, as evidenced by the success of off-price retailers such as the TJX Companies, which generated nearly $31 billion in revenue in its 2015 fiscal year. In fact, the off-price segment in the US is expected to grow 6 to 8 percent from 2015 to 2020, while the overall apparel and home industry is expected to grow just 4 percent over the same period, according to a report by Moody’s.

“When pro-American manufacturing groups ask consumers, ‘Would you prefer to buy something made in America versus not Made in America?’ the answer will almost always be, ‘Yes,’” Hertzman says. “But when you tell them that the difference in price could be 5x — so that white t-shirt is not $10, it’s $60, they say, ‘No, I’ll go back to the $10 t-shirt.’”

What’s more, the US currently lacks the modern equipment and facilities to produce garments at mass scale. And many of the factories in operation today in America actually offer poorer working conditions to their counterparts abroad, evidenced by the steady stream of news reports on sweatshop busts everywhere from New York to Los Angeles revealing unlawful working environments.

A 2015 report by the Garment Worker Center, an LA-based workers rights organisation, documented the experiences of 175 garment workers in the city. (There are approximately 45,000.) The survey found that nearly 40 percent of workers saw rodents or cockroaches in their workplaces, with about half reporting that they had no access to clean restrooms.

But perhaps more importantly, about 80 percent of those surveyed said they did not receive health and safety training prior to beginning work, and nearly half said there was no access to first aid in the workplace. Half of the workers reported that the factories where they worked had poor ventilation, a third said they had no access to clean drinking water. There were also reports of physical or verbal violence (21 percent) and sexual assault (6 percent). “The factories in America are not always up to compliance,” Hertzman says. “Some of the worst conditions I’ve seen are in domestic factories.”

While stories of revived factories in the south — where experts say regulations tend to be followed more closely than on the coasts — have helped to renew hope that local production is possible, these facilities are currently full of old machines. “We don’t have the factories built,” Hertzman says. “There’s not a huge base to choose from.” Upgrades would require millions of dollars in investment, without the guarantee that there would even be enough workers to employ.

Immigrants to the US are more likely to hold manufacturing jobs than US-born workers, according to a 2015 analysis of US Census Bureau statistics by the Pew Research Center. Although the foreign-born population continues to increase — 42.4 million, or 13.3 percent, of the total US population of 318.9 million in 2014 — there is also another harsh reality to consider: the declining social status of once-respectable blue-collar manufacturing jobs.

While many workers laid off from their factory jobs in the 1990s and 2000s would be grateful to have their jobs back, the same cannot be said of their children. Only 7 percent of millennials are interested in working in construction, retail or manufacturing, according to a 2015 survey by the Hartford, a financial services group. Strikingly, arts and entertainment attracted the most interest, with 40 percent of those surveyed saying that they would like to work in a creative field. Other areas that tracked well were education (36 percent) and tech (36 percent).

But the opportunity for manufacturing in the United States may well lie where creativity and technology meet. While producing clothes in mass volumes — at the fast-fashion prices to which consumers are habituated — might be impossible, producing mid-priced and high-end clothes in the US is not only possible, but can, in some cases, be advantageous.

Brands as varied as Theory, American Apparel and Shinola have made a point of manufacturing at least some — if not all — of their goods in the United States, investing time and money on training workers in order to produce high-quality garments and accessories.

In many cases, they’re seeking tighter quality control or the ability to shorten turnaround times and smoothen supply-chain logistics. But it also says something about a company’s values: producing goods here can equal new-job creation, which signals a commitment to being a true American brand.

If you really consider the cost of the markdown and the cost of the stockout, then absolutely being on onshore and made in the USA makes sense.
Manufacturing in the US can also be attractive to start-up brands. “Made in America is relevant when a brand is starting up and it can’t make the minimum,” Hertzman says, referring to factory minimum order requirements. Emerging New York-based designers often launch collections by producing almost all of their goods in New York City or Los Angeles garment centres, pricing their items accordingly.

But as their minimum orders increase, many of these same young designers shift their manufacturing to Europe, especially Italy, where there are more skilled workers and high-tech factories to choose from. Those that sell at a contemporary price point often look to Asia once their business is off the ground.

Customisation is one area where Made in the USA makes sense for more established brands. Sportswear giant Nike, for example, says it might be able to add 10,000 new US-based jobs — many linked to customised products — if the TPP is passed. On-demand production — which is required for customised product programs like NikeiD or New Balance’s NB1 Customise — often works better when it’s done closer to the consumer (the US being the world’s largest retail market) allowing for a quicker turnaround and delivery times.

“America, or the Americas, may become more important as customisation comes into play,” Hertzman says. “I could see parts being parts being manufactured overseas, but workshops here in the Americas quickly putting the pieces together. It’s much more of a craft, much more artisan-based.” Outside of apparel, Walmart, for example, sources parts for its bikes overseas but assembles them in the United States.

“In apparel, there are a lot of [brands] looking to localise production,” adds supply chain expert John Thorbeck, chairman of Change Capital, LLC. “Proximity and being more responsive to customers is certainly a part of it, but it also means you work on less inventory and less working capital. Those are three very compelling reasons. This isn’t necessarily a price-driven decision. It works for many levels of retail.”

However, for Made-in-America brands to compete with the likes of Spanish fast fashion giant Zara — both on price and efficiency — automation will be key. “It’s not simply about bringing back cut-and-sew jobs from Asia,” says Thorbeck, who argues that the rising wages overseas have also helped to level the playing field. “Factories that are built for speed and flexibility will also have an automation and robotics component.”

In 2015, Nike announced a partnership with Flextronics International, a “sketch to scale” company that employs 200,000 professionals across 30 countries with a mission of tightening supply chains and logistics through new approaches to design, engineering and manufacturing across multiple industries, generating $25.5 billion in revenue in its 2016 fiscal year.

Some of these innovations will come from sewing robots, such as those made by Atlanta-based SoftWear Automation Inc., which uses a computer-vision system to track stitching at the needle and coordinate movement of the fabric so that the robots to do not distorted it. Using “sewbots,” as they’re called, can reduce production costs and shorten lead times, making a compelling argument for local production. Of course, this also means hiring workers with different skills and training than those employed in traditional manufacturing jobs.

To be sure, the dream of making goods in America at a mass scale may not entirely be dead, if the drivers are linked to genuine economic efficiency and common sense, not nostalgia for a bygone era. “Making decisions based on total profitability as opposed to just cost of goods sold is the first step,” Thorbeck says. “The impact of lower wages or lower raw material costs have less and less influence on the total profitability of a line. If you really consider the highest costs in the supply chain — the cost of the markdown and the cost of the stockout — then absolutely being on onshore and made in the USA makes sense.”

But on the eve of the US presidential election, it seems the practical reasons for reshoring have taken a backseat to the visceral, immediate issue at hand: lack of jobs for those who have made manufacturing their life’s work.

Pennsylvania, a state that typically votes Democratic despite its ageing (and socially conservative) population in national elections, remains a veritable war zone for Clinton and Trump because of the high concentration of manufacturing workers living there.

While the leaders of the major labour unions have outwardly endorsed Clinton, the rank and file has quietly turned to Trump. Unsurprisingly, the TPP is top of mind.

Every country involved with the TPP has until February 2018 to ratify the pact, and while President Barack Obama has expressed hope that he will be able to pass the deal after the November 8 election, in what is typically known as a “lame duck” period, what was once a sure thing is now not so sure.

Critics of trade deals such as the TPP and NAFTA suggest that making it easier and cheaper to make products overseas has stripped the United States of manufacturing jobs; jobs that blue-collar workers desperately need.

The Economic Policy Institute, a nonpartisan think tank financially backed by the country’s major labour unions, released a report in 2010 estimating that “US trade deficits with Mexico, totalling $97.2 billion, had displaced 682,900 US jobs” since the implementation of NAFTA in 1994. Since 2000, the US has lost 5 million manufacturing jobs, according to the Bureau of Labour Statistics.

On the other hand, the US Chamber of Commerce said in 2015 that trade with Canada and Mexico supports nearly 14 million US jobs, and nearly 5 million are made possible by the increase in trade generated by the North American Free Trade Agreement (NAFTA) — signed in 1994 — over the last 20 years. During that time, US trade with Mexico and Canada has almost quadrupled to $1.3 trillion, and the two countries buy more than a third of US merchandise exports.

“NAFTA has been a boon to the competitiveness of US manufacturers, which added more than 800,000 jobs in the four years after NAFTA entered into force,” reads the report. “Canadians and Mexicans purchased $487 billion of US manufactured goods in 2014, generating nearly $40,000 in export revenue for every American factory worker.”

Supporters of trade agreements believe that cheaper-to-make products means cheaper products for consumers, which will in turn stimulate spending and create other sorts of employment opportunities along the way. Nike, which lobbied hard in support of the TPP, said the agreement would help to create 10,000 jobs in manufacturing and engineering in the United States over the next 10 years.

“We expect that will actually create more like 40,000 jobs when you look at suppliers, other manufacturers who will be involved, and partners, engineers, construction jobs," Nike’s chief Mark Parker told CNBC in 2015. "So we think that this footprint will actually grow to a much larger number."