As you gather with friends and family to celebrate the holidays and welcome 2015, raise a glass to an important anniversary for the fashion industry, marking an event that helped many brands and retailers grow and thrive over the past decade.
Ten years ago, the fashion industry was facing a time of great uncertainty.
The good news was that the Multi-Fiber Arrangement (MFA), the global textile and apparel quota system that had governed the industry’s trade since 1974, was scheduled to expire on December 31, 2004. Theoretically, fashion and apparel brands and retailers should have been able to manage their sourcing and supply chains without restrictions beginning January 1, 2005. This was incredibly important because even in 2004, the United States had more than 800 quotas on products manufactured in 44 countries.
The bad news, however, was that the U.S. government was attempting to put in place new quotas on major apparel imports from China, which would have kept the restrictive quotas on the industry’s top supplier. Many brands and retailers were nervous about what other restrictions might come their way, such as dumping cases or even efforts to reinstate the quotas entirely.
The industry was at a crossroads—and the outcome would determine the future success of fashion and apparel brands and retailers in the United States.
So, the United States Association of Importers of Textiles & Apparel (USA-ITA) took action to challenge the government and stand up for those brands and retailers. (Disclosure: I served as Vice President of International Trade & Government Relations for the organization at the time.)
At the time, textiles and apparel were subject to managed trade. The GATT—the predecessor to today’s World Trade Organization—approved the MFA in 1974 so the United States, Europe, and other developed countries could restrict competition from lower-priced developing countries.
The quota system was a tremendous barrier to business and trade for fashion and apparel brands and retailers. Companies spent time and money worrying about quota fill rates and looking for new sourcing opportunities in case consumer demand outpaced the quotas. Even with all the investment costs, your company had a huge competitive advantage if you were the first to locate a new factory.
In the 1990’s, however, the WTO’s Uruguay Round produced the Agreement on Textiles & Clothing (ATC), a ten-year phase out of the global quota system. On January 1, 2005, the industry would be free from the restrictive quotas.
Yet, as the date approached, U.S. textile manufacturers filed petitions with the Committee for the Implementation of Textile Agreements (CITA), urging them to place new safeguards on certain key textile and apparel imports from China even before the quotas expired. CITA accepted several petitions—which appeared to violate CITA’s own requirement that safeguards should be based on concrete evidence of disruption to the U.S. market, not merely a threat.
With plans to source in the new, quota-free world already in place, brands and retailers were anxious, to say the least, about the future of their companies if the quotas were reinstated.
So, USA-ITA sued the government.
On December 30, 2004, the Court of International Trade approved an injunction preventing CITA from taking action to implement these threat-based quotas, providing companies the opportunity to import products made in China. After several months, CITA imposed safeguards based on actual imports, and soon, the U.S. and China negotiated a three-year extension of some quota limits.
What happened to textile and apparel trade? While China did increase its share of U.S. imports, other countries did not suffer as projected. On the contrary, developing countries like Vietnam, Bangladesh, Indonesia, and Cambodia have increased their market share over the past ten years. Meanwhile, many apparel brands and retailers continue to look at sourcing opportunities in the Western Hemisphere, including the United States, due to speed-to-market, product availability, and quality.
Ten years after the quotas, our members source product from all over the world—not because they have to, but because the industry is truly global. Many of our members are not just importing product into the United States, but exporting products, too. Those companies that aren’t yet selling globally are discussing when and how, whether through brick-and-mortar stores in key markets or e-commerce.
Last year, USA-ITA rebranded as the United States Fashion Industry Association (USFIA) to reflect the evolution of the industry. However, although we have a new name, our mission to remove barriers to the free movement of textile, apparel, and fashion products remains the same, because our industry still faces many barriers such as high tariffs, trade agreements that don’t work for today’s global value chains, and complicated labeling and testing requirements, to name a few.
With the Trans-Pacific Partnership (TPP) and the Transatlantic Trade & Investment Partnership (TTIP), the industry is at another crossroads. These agreements present an opportunity for more growth and success for the industry, as long as we continue to make the case that protectionism and trade barriers don’t help the economy or the consumer.
This holiday season, we’re reflecting upon our success eliminating the quotas ten years ago—but we’re also taking time to rest and rejuvenate, because much work remains next year!
Julia K. Hughes is President of the United States Fashion Industry Association (USFIA).