| American Apparel and Footwear Association
February 26, 2007
The Honorable Sander M. Levin, Chair
Ways and Means Trade Subcommittee
U.S. House of Representatives
Washington, DC
Dear Chairman Levin:
Thank you for providing us this
opportunity to submit this statement in relation to the hearing cited above.
The American Apparel &
Footwear Association (AAFA) is the national trade association representing the
apparel and footwear industries, and their suppliers. Our members produce and
market apparel and footwear throughout the United States and the world,
including China. In short, our members make everywhere and sell everywhere.
I would like to take this
opportunity to briefly describe the importance of China to the U.S. apparel and
footwear industries and how our relationship with China benefits U.S. apparel
and footwear firms, U.S. workers, U.S. consumers and, in turn, the U.S. economy.
I will also discuss our concerns and hopes for this relationship in the future,
particularly as it relates to the focus of this hearing – i.e. Intellectual
Property Rights (IPR) and subsidies.
Our Industry – Then & Now
But first, a little background on
our industries. Our industries have historically been among the most protected
industries in the United States – subject to decades of stiff protection in the
form of high tariffs and restrictive quotas (for apparel). Even today, U.S. apparel and footwear imports from China are still subject to high tariffs and, in the case of
apparel, quotas.
Yet, this incredible protection
failed to do the very thing it was supposed to do, protect the U.S. apparel and footwear manufacturing base. Today, more than 98 percent of all footwear
and more than 90 percent of all apparel sold in the United States is imported. For
comparison, in 1980, only one-half of all footwear and less than one-third of
all apparel sold in the United States was imported.
Today, less than 630,000 people
work in the manufacturing of apparel, textiles and shoes in the United States – a loss of over 1.6 million jobs, or almost three-quarters of the entire manufacturing
workforce since 1974. Almost 1 million of those jobs have been lost in the
last decade alone.
Despite this seemingly bleak
picture, the U.S. apparel and footwear market is booming. Americans like their
clothes, and their shoes, and it shows. U.S. consumers spent a record $350
billion on apparel and
footwear last year, or an average
of $1,800 for every man, woman and child in the United States. Even as energy
prices skyrocketed last year, retail sales at clothing and footwear stores were
6.1 percent higher than in 2005. The bottom line is that despite whatever
economic pressures face us, Americans still buy new things to wear. Americans,
however, are picky about their shoes and clothes, they continually want an
ever-wider variety of higher-quality shoes and clothes at lower prices – and
our industry has had to respond.
U.S. footwear and apparel firms
have responded to these challenges by transforming themselves from
manufacturers into brands. Today’s U.S. apparel and footwear “brands” are more
lean and more competitive than ever – their goal is to provide the American consumer
with what they want – the best brands at the best prices, while still making a
profit.
And the result of this is that U.S. apparel and footwear firms are thriving, with many achieving profits last year – profits that
go directly back into the U.S. economy and ensure a competitive industry.
Further, while the industry has
lost over one million manufacturing jobs in the last decade, the industry has
produced hundreds of thousands of good-paying new jobs for U.S. workers – not in manufacturing, but in such varied professions as design, research and
development, marketing, distribution, sourcing, warehousing, management,
administration and sales. Further, the industry directly supports another 1.5
million plus jobs at retail establishments throughout the United States.
The industry’s transformation has
directly benefited U.S. consumers – particularly hardworking lower- and
middle-income American families – by lowering prices on one of the most basic
staples every man, woman and child needs. As a result of the industry’s
transformation, apparel and footwear retail prices have declined some 10
percent since 1998, despite a 20 percent increase in overall retail prices
during the same period – saving American families countless billions of dollars
every year – money they pump back into the U.S. economy.
Thanks to these lower prices,
American families today spend a smaller percentage of their income on shoes and
clothes, a necessity for every American, and instead spend more elsewhere. According
to the U.S. Department of Commerce’s Bureau of Economic Analysis, the
percentage of the average American family’s Personal Consumption Expenditures
(PCE) spent on clothes and shoes has dropped by almost one-half since 1977 –
from 6.6 percent of total PCE in 1977 to less than 3.9 percent today. With
consumer spending driving over 2/3 of our Gross Domestic Product (GDP), the
decline in U.S. apparel and footwear prices has helped fuel the overall
economy.
China’s Relationship with the
U.S. Apparel & Footwear Industry
The U.S. apparel and footwear
industry could not have succeeded in transforming into the success that it has
become today without the existence of China. Working for the most part with
foreign-owned and privately-held factories in China, U.S. apparel and footwear
firms have been able to give American consumers what they want – an ever-wider
variety of higher-quality shoes and clothes at lower prices.
Today, this relationship is
stronger than ever. U.S. footwear and apparel firms imported over $30 billion
worth of footwear and apparel from China. U.S. imports from China account for over 85 percent of all shoes and over 25 percent of clothes sold in the United States.
Opening the Chinese Market to U.S. Apparel and Footwear Brands
There Has Been Progress, but
More Must be Done
U.S. footwear and apparel firms,
however, recognize that 95 percent of the world’s population lives outside the United States. Some of their fastest growing markets are no longer in the United States or Europe, but in China, or India or Brazil. U.S. apparel and footwear firms are now
truly global – they buy and sell clothes and shoes all over the world. That is
why AAFA’s motto is – “We Dress the World.”
That is why our industry was one
of the biggest supporters of China entering the World Trade Organization (WTO),
not just because of our relationship with China as a supplier to the U.S. market, but because we wanted to use WTO rules to open China – with the world’s largest middle
class of 200 million people and growing – to U.S. brands. Since China’s WTO accession, our industry has worked closely with the U.S. government and the rest of the U.S. business community to ensure that China lives up to its commitment in opening up its
distribution and retail sectors. Thanks to our efforts, China has largely lived up to those commitments, opening the doors to U.S. brands to sell into the
vast Chinese market. While U.S. brands have had some
success in China because of these efforts, restrictions still exist in these
sectors. We hope the Chinese fully live up to their commitments in these
areas.
Intellectual Property Rights
(IPR)
Moreover, we have been deeply
disappointed with the progress made to date on China’s efforts to improve its
Intellectual Property Rights (IPR) enforcement. U.S. footwear and apparel
brands have been subject to rampant counterfeiting in China, stalling our efforts to break into this important market.
This problem even affects us in
our home market – the United States. Every year, clothes and shoes top the
list of counterfeit items seized by U.S. Customs. We estimate that these
seizures represent only a small fraction of the total amount of counterfeit
shoes and clothes entering the U.S. market.
China must do more on IPR
enforcement. While we continue to support the dialogue between the U.S. and Chinese governments on this subject, the Chinese must move beyond talk and take
action. Otherwise, the U.S. government must take action.
Subsidies
We applaud the Bush
administration in initiating a case against China in the World Trade
Organization (WTO) again China’s continued use of WTO-Prohibited Subsidies.
Such subsidies can truly distort trade in certain products and industries.
Further, the arbitrary nature of such subsidies, where China has provided and then removed such subsidies without notice, creates immense
uncertainty for our industry.
Next Steps – the U.S. Apparel and Footwear Industry View
As we noted, China still has a long way to go in meeting its international obligations – as both a major economic
power and as a major market for U.S. brands and U.S. products. We fully
support the current administration’s efforts to address these many issues
through dialogue. As we also noted, however, our industry would support
further actions in specific instances where dialogue continues to produce less
than desired results.
I would, however, caution those
who would propose certain “remedies” for the purpose of resolving many of these
issues. First, many of the proposed “solutions” clearly violate U.S. obligations under international trade rules. While many might not be concerned about
this, this violation is of critical concern to our industry. As I mentioned
previously, U.S. apparel and footwear firms make and sell everywhere around the
world, including selling clothes and shoes made in China into major markets
like Europe, Brazil and India. Any action taken by the United States against China that violates international trade rules would not only be closely
watched by these countries but quickly replicated, closing these important
markets to U.S. brands
Second, many of these proposed
“remedies” would impose significant penalties, in the form of punitive duties
or other restrictions, on some or all U.S. imports from China. As I have already stated, virtually all clothes and shoes sold in the United States are imported, with a significant portion being imported from China. Similar situations exist for a multitude of other consumer products. If such “remedies” are
imposed, those remedies would
amount to huge new tax on hardworking American families – at a time when many
of these families could least afford it.
Finally, such actions could
actually hurt the very U.S. manufacturing base these measures are supposedly
trying to protect. Regrettably, recent history has repeatedly demonstrated
this fact – our members’ products – U.S.-made apparel and footwear – figured
prominently on foreign country retaliation lists in both the WTO dispute over
Foreign Sales Corporations (FSC) and in the WTO dispute over the Byrd Amendment.
These punitive measures severely crippled what remains of the U.S. apparel and footwear manufacturing industries as it essentially closed their primary export
market for U.S.-made footwear and apparel – Europe.
The U.S. apparel and footwear industry
recognizes that many important issues exist in the U.S.-China relationship –
issues that directly affect U.S. apparel and footwear firms. However, as in
the case of our industry, the relationship between the United States and China is one that is critically important to and very intertwined with the U.S. economy. Therefore, I urge policymakers to carefully consider all aspects of this vital
and complicated relationship before setting new policy.
Thank you for your time and
consideration in this matter.
Sincerely,
Kevin M. Burke
President & CEO
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