The momentum to onshore more apparel production to the Western Hemisphere received strong impetus on Monday with two significant commitments from key manufacturers.
There’s been a big push, particularly toward Central America, to expand production in the region as a commercial and political priority. The efforts are meant to strengthen the region itself and boost sourcing from its main source of raw materials–U.S. textile mills, as well as move manufacturing out of Asia, particularly China.
Vice President Kamala Harris announced significant multimillion-dollar investments by Parkdale Mills and six other companies Monday, as part of the administration’s “Call to Action” to the private sector to promote economic opportunity in the region, as her office works to address the root causes of migration.
Harris, who is overseeing diplomatic efforts with El Salvador, Guatemala, Honduras and Mexico, announced several private sector commitments to strengthen economic opportunities in the Northern Triangle. The textile and apparel co-production chain is one of the most essential supply chains for employment and economic development in both the United States and the Northern Triangle region, currently supporting more than 1 million jobs in the United States and the Central American region.
The Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) and its strong rules of origin are the primary reasons this co-production chain exists, which is seeing significant growth this year. For the year to date through October, the U.S. imports 2.3 million square meter equivalents under the duty-free pact from the region, a 33.7 percent increase for the same period in 2020, according to the Commerce Department’s Office of Textiles & Apparel.
North Carolina-headquartered Parkdale Mills, one of the largest manufacturers of spun yarn and cotton consumer products in the world, will make a multimillion-dollar investment in a new yarn spinning facility in Honduras and make an additional substantial investment to support existing operations in Hillsville, Va.
The investment will help customers shift 1 million pounds of yarn per week away from supply chains in Asia and China, and enhance U.S. and CAFTA-DR co-production resilience and increase regional product offerings.
The investment is intended to support roughly 500 employees at each location and increase indirect job growth in Honduras and in the United States, particularly in the U.S. cotton industry across 18 states. The investment also includes $24 million in new investments in solar energy, water recapture, and energy efficient HVAC systems.
Administration officials from the U.S. Trade Representative’s office and the Vice President’s office recently met with the U.S. textile industry to reaffirm the importance of rules of origin in nearshoring production chains, helping address labor and environmental challenges and mitigating supply chain risk.
“I would like to sincerely thank Vice President Harris for making this announcement and leading the effort with private industry to create more economic opportunities in northern Central America and the United States,” Anderson Warlick, chairman and CEO of Parkdale Mills, said. “Parkdale’s investments will support good paying jobs in the United States and in the Central American region, and significantly increase our extensive product offering and capacity, including the production of sustainable specialty yarns.”
“Parkdale sees an enormous opportunity for brands and retailers to re-shore and nearshore production supply chains and double the size of U.S.-CAFTA-DR trade because of the rules of origin in our trade agreement and a shift in sourcing by brands and retailers mitigating their supply chain sourcing risks,” Warlick added. “We are excited about what this opportunity means for jobs in the U.S. and the region for this critical production chain and couldn’t be more thrilled to be part of this effort. We look forward to working with the Vice President and her team on strengthening the textile and apparel production chains in the U.S. and region.”
Kim Glas, president and CEO of the National Council of Textile Organizations, said the domestic textile industry has invested billions of dollars in the U.S. and in the region as a result of the investment-based rules of origin in the CAFTA-DR agreement, which ensures the job benefits of the agreement are reserved for the parties to the agreement.
“Additional substantial announcements on further investment in textile and apparel production are expected soon,” Glas said. “As brands and retailers are seeking more environmentally sustainable, vertically integrated, transparent, and quick turnaround supply chains, our collective industries stand ready to work with companies that are seeking to mitigate sourcing strategies as Asian supply chains have faced enormous production constraints. Further verticalization in the industry, like Parkdale’s announcement today, allows broader product diversification and grows jobs across the textile and apparel production chain.”
Glas said the investment is a “win-win for American and Central American workers and our environment and a huge opportunity to further recalibrate supply chains out of China and Asia.”
“This valuable co-production chain between the U.S. and the CAFTA-DR region accounts for $12 billion in two-way trade and billions of dollars of investment,” she added. “Significant growth is occurring in our sector and is expected to continue as supply chains continue to recalibrate. We are delighted about…today’s announcement and appreciate the administration’s strong support.”
In a separate development, Gildan Activewear Inc. announced that, through one of its wholly owned subsidiaries, it has acquired 100 percent of the equity interests of Phoenix Sanford LLC, the parent company of Frontier Yarns, for a total cash consideration of approximately $168 million.
Frontier is a leading producer of 100 percent cotton, polyester, and cotton blend yarns primarily manufactured on open end and vortex spinning technology. The yarn operations of Frontier acquired by Gildan include four facilities located in North Carolina, employing approximately 800 employees. During 2021, approximately 40 percent of Frontier’s production was dedicated to yarn sold to Gildan for textile manufacturing in Central America and the Caribbean.
Gildan said the acquisition of Frontier Yarns will allow it to build on its global vertically integrated supply chain through further internalizing yarn production. In addition, it will support yarn availability for Gildan’s textile capacity expansion plans in Central America and the Caribbean.
“As a long-time trusted yarn supplier of Gildan, with a dedicated and experienced workforce, we are delighted to welcome Frontier into the Gildan family,” said Glenn J. Chamandy, president and CEO of Gildan. “In line with our business model of investing in global manufacturing, the acquisition of Frontier’s operations broadens and complements our existing yarn capabilities and provides additional yarn capacity to support long-term growth.”
Gildan is a manufacturer of basic apparel that markets its products in North America, Europe, Asia-Pacific and Latin America, under a diversified portfolio of company-owned brands, including Gildan, American Apparel, Comfort Colors, Gold Toe, Anvil and Peds. Gildan owns and operates vertically integrated, large-scale manufacturing facilities primarily located in Central America, the Caribbean, North America and Bangladesh.