China, Wal-Mart, textiles and cotton: While one has a need to employ a lot of people and the other demands low prices, the third is decimated.
To Cheraw Yarn Mills CEO Malloy Evans, the decimation of the U.S. textile industry can be laid on the doorstep of China and discounters. Not to mention the loss of jobs and “a lower quality of life” in the United States, says the head of the 87-year-old yarn manufacturer in Cheraw, S.C.
In a speech to cotton growers and ginners at the annual meetings of Southern-Southeastern, Evans listed China's “improper and illegal advantages” in trade, described their effect as the “China threat” and posed the question, “Wal-Mart: Friend or Foe?”
The Cheraw, S.C., textile executive advocates educating citizens and legislators as to the “China Threat.”
“China has at least two improper and illegal advantages,” said Evans. The first is “currency manipulation.” Chinese currency has a 40 percent advantage over the dollar. The second is subsidies to the tune of 37 percent.
“Imagine there were two gas stations in town,” Evans explains. “At one the owner paid 60 cents for gas; at the other, the owner paid $1. This illustrates the impact of a 40-percent advantage.”
He points out that neither the World Trade Organization, U.S. trade law or the International Monetary Fund has been asked to step in by the Bush administration to correct the manipulation of the currency to gain export advantage.
The slide in the U.S. textile industry coincided with the devaluation of the Asian currency. The popular press dubbed it the Asian flu. It's been a sickness the textile industry hasn't been able to shake.
Asian currency has declined 28 percent since 1995. Imports from Asian countries to the U.S. during that same time period have increased 154 percent, Evans says.
With a population of more than 1 billion, China's primary goal is employment. The hourly wage is 40 cents an hour, versus the U.S. average textile wage of $12.92.
The third tactic: “China is a communist country,” Evans says. “They will manipulate and misrepresent. They have few, if any, safety, health and environmental laws.”
Under this scenario, China has increased its textile exports to the U.S. more than every other country combined. He emphasizes “every other country.”
While China exports $160 billion to the U.S, the U.S. exports only $25 billion in products to China.
Quotas on textiles currently keep the flow in check at 20 percent of apparel and textiles, but a look at sectors that don't have quota protection may reveal what's coming. China accounts for 80 percent of all bicycles imported into the U.S. and 67 percent of the toys, and 95 percent of all Christmas decorations.
“How bad can it get?” Evans asks.
When textile quotas are phased out in 2005 — a scant 11 months away, Evans points out — China could account for 71 percent of all apparel and textile imports into the U.S.
According to one estimate, 1,300 textile plants will close by 2006, leaving only about 96,000 jobs in the U.S.
“The playing field is not level,” Evans says, “and neither political party has been sensitive. Our government has the legal tools to fight this.”
Losing out to China in this realm also hurts the U.S. economy, with the loss of manufacturing jobs resulting in fewer service jobs, higher taxes, lower property values, higher water bills and service fees and fewer businesses. Medical care deteriorates because people don't have medical insurance and schools suffer.
Linking the problem with China to inexpensive textiles and apparels in the U.S., Evans poses the question, “Wal-Mart: Friend or Foe?” It's a rhetorical one for Evans as he lists the positives and negatives of the world's largest company.
Under the positives' heading, Evans says Wal-Mart offers low prices to consumers. The slogan is, “Low Prices. Always.”
Under the negative column, he lists at least five items: Wields extreme power over suppliers; gives little back to the community; offers low-paying jobs; has very little American loyalty; and destroys small, local businesses.”
Evans says the company has “deteriorated greatly” in its “Buy American” philosophy since founder Sam Walton's death.
As the world's largest company, Wal-Mart has sales of more than $200 billion annually. “That's more than Target, Sears, Safeway, J.C. Penney, K-Mart and Kroger combined,” Evans says. Wal-Mart handles about 10 percent of all apparel sales in the U.S. Seven-and-a-half cents of every dollar spent goes to Wal-Mart.
The bottomline, Evans says, is that Wal-Mart has doubled its imports from China in the last 5 years.
If it were a country, Wal-Mart would be China's eighth largest trading partner. Wal-Mart imports represent 10 percent of all Chinese imports, Evans says.
Once suppliers are up to 35 percent of their business with Wal-Mart, the giant firm is in control of their destiny.
Evans lists the average median salary for the Wal-Mart worker at $12,000. The company employs 1.4 million people and has a turnover rate of 44 percent per year.
Cheraw Mills, as well as other mills, supports the Chinese Safeguard Initiatives.
They also are busy educating citizens and legislatures to the “China Threat.” The South Carolina firm has developed a presentation that explains the un-level playing field. Evans advocates “writing letters to Washington, voting for candidates that will stop giving away American jobs and ask for American-made products.
“What is left of the American textile industry can compete if the playing field is level, Evans says. But China's illegal and unfair “currency manipulation and subsidies must be eliminated.”
The impact of China and discounters has been a decrease in the consumption of cotton domestically. In 1997, U.S. textile mills used more than 11 million bales; the number was down to 7.3 million bales in 2003. Now, it's down to 6.2 million bales, Evans says.
“In the last 12 months, U.S. cotton consumption has dropped 11 percent,” Evans says. “In the last 12 months, China cotton yarn production has increased 11 percent.”
The textile industry must continue to educate legislators and citizens to the threat posed by Chinese currency manipulation and subsidies, and, by extension, discounters in the U.S.
U.S. cotton producers relying on exports for two-thirds of their market creates “volatility” from year to year, Evans says.