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Outsourcing Causes U.S. Manufacturing Decline and Job Losses But U.S. Apparel and Textile Sector Now Reaps the Benefits

Among the immutable laws of economics is this: Every benefit incurs a corresponding loss.

Outsourcing of American jobs and manufacturing to foreign countries resulted eventually in rising profitability for many U.S. companies in the $70 billion apparel and textile sector.

But the cost of these expense-cutting moves was a loss of U.S. jobs and about a 30 percent decline in domestic manufacturing output.

Although the apparel and textile sector suffered financially like other sectors through the recent recession, profits for many firms are now on the upturn.

Realistically, the trend can’t be called a boom, but given the feeble performance for the early years of the past decade, the black ink on the bottom line of apparel and textile industry balance sheets indicates that the sector has been reinvigorated.

Adding to the good news, economists have forecast a 2 to 2.5 growth in the U.S. economy for the coming year, which is a bullish sign for the apparel and textile sector which moves point for point upward with economic growth.

New consumer spending trends are also developing. Consumers previously struggling with heavy debt have recently been paying down their obligations, freeing up funds to buy clothing, along with other purchases. Buying patterns have also been shifting, focusing more now on the purchase of goods rather than services, benefiting — among other sectors — apparel and textiles.

General domestic manufacturing is now enjoying a comeback, according to recent reports. U.S. job growth, however, is slow, since foreign labor is so much cheaper than wages paid domestically.

Beyond the transference of jobs to foreign countries like China and Vietnam because of lower labor costs, U.S. manufacturing jobs have also been eliminated by the use of robotics and new technologies, which now mechanically do the factory work that was once done manually.

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Unfortunately for the U.S. labor market, these factory jobs are not expected to be coming back.

While U.S. manufacturing jobs have declined in number, the growth of China’s textile and apparel industry has accounted for increased employment for Chinese workers.

As a consequence of growth, citing the old economic law of costs coming with benefits, Chinese workers are now demanding higher wages. Inflation in China has also heated up along with the country’s growth and its national currency, the yuan, has increased in value.

Eventually, that will mean higher costs to U.S. importers and to consumers as well. But the U.S.-foreign apparel-textile price difference will not be as wide.

With China’s pricing advantage now shrinking, Vietnam, which is now a significant manufacturer of apparels and textiles, could become a major competitor with China for U.S. imports.

Meanwhile, Trans-Pacific Partners have scheduled talks for March to continue hammering out trade agreements. China is not yet a participant in the group, which includes Vietnam.

But trade agreements with countries like China and Vietnam, with their apparel and textile industries subsidized by their governments to the disadvantage of non-subsidized competitors like the U.S., is opposed by the textile industry here.
Keywords: Apparel, textiles, outsourcing, manufacturing, job loss, China, Vietnam, Trans-Pacific Partners, trade agreements, U.S. economic growth,

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