The Los Angeles denim industry, which produces globally sold top-quality denim products, needs regulatory and other backing from the government if it is to continue to grow.
At an expert panel entitled “The Future of U.S. Manufacturing and Opportunities in Los Angeles,” moderated by American Apparel & Footwear Association chief executive officer Kevin Burke at the L.A. Chamber of Commerce, the major topic was the vulnerability of L.A. manufacturers to tariff moves by trading partners.
The European Union raised the tariff on U.S.-made denim to 38 percent recently, dramatically impacting sales and driving some production to leave L.A. and the U.S. Negotiations are currently underway to implement a free trade agreement between the U.S. and E.U, but those have been jeopardized by a series of scandals caused by NSA leaker Edward Snowden.
Burke, summarizing topics covered at the conference, said, “We talked about trying to keep made in L.A. and made in California. There’s the issue of EU dumping and the impact on the denim business in L.A., the tariff increase, the negotiations that are underway. It’ll cause challenges in the market.”
There are big opportunities for the market to unite and talk about its regional importance, Burke said. With luck, they’ll be able to reorganize and talk advantage of other free trade agreements that can move L.A. goods into new markets.
Speaking on the tariff rise, Burke said, “It has nothing to do with denim and everything to do with the European community making a statement. We don’t want to get involved in a trade war.”
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Overall, the panel expressed a lot of interest in pursuing new growth opportunities to reduce dependence on the E.U. Makers also agreed on the need to unite to get legislators to push to resolve the trade issue and to promote L.A. goods.
“We have to get government to give money back from taxes to pay for more promotion,” said Burke.
The tariff rise effectively eliminated the profit margin for L.A. makers, according to Burke. The risk then, he said, is that companies will move outside the U.S. Even if the tariff eventually falls, it is almost impossible to get companies to move back once they leave.
There are also opportunities to attract overseas makers who want to cash in on L.A. cachet. Burke pointed out that L.A. firms have strong design capabilities, for example, where foreign firms might have more capital to bring to the table.
Over time, makers in L.A. can stay strong with a combination of agility and partnerships, the panel concluded. But none of it is possible without support from government, in the form of trade deals and promotions.