I was most surprised to see that Gildan was buying and closing socks manufacturers in the US. They are a big shirt supplier in our promotional marketing field.
A Great Debate Over the Price Of a
Pair of Honduran Socks
By Cindy
Skrzycki
Tuesday, February 5, 2008; D02
The humble
cotton sock has become the center of an international trade
dispute.
The United
States decided on Jan. 18 that millions of pairs of duty-free socks imported
from Honduras
may be hit with a tariff. The ruling made the hosiery a symbol of the choices
that politicians, workers and even towns face in a global
economy.
Honduran
imports jumped to more than 27 million dozen pairs last year from 10 million in
2005, after the Central
American Free Trade Agreement passed. American workers have lost jobs as a
result, the kind of issue Democratic presidential candidates use to criticize
trade agreements. Still, feelings are mixed.
"This
safeguard is not free," said Brenda
Jacobs of Sidley
Austin, a D.C. law firm representing clothing importers who are
trying to keep costs down. "The question is: Which U.S. industry is going to get
socked with increased duties on its exports to Honduras?" That's because, under
the treaty, the United States would have to pay compensation for a
tariff.
The fight
began when Bush administration officials were trying to secure votes to pass the
trade agreement with five Central American countries and the Dominican
Republic. To win the support of Rep.
Robert B. Aderholt, a Republican from Alabama
with sock mills in his district, officials promised to monitor Honduran imports
and impose a "textile safeguard measure" if warranted.
The flood
of imports, which pushed Honduras ahead of China
and just behind Pakistan,
led to last month's announcement by the U.S. Committee for the Implementation of Textile
Agreements. The interagency group, which supervises such accords at
the Commerce
Department, can impose up to a 13.5 percent tariff on an
estimated $109 million worth of Honduran cotton sock shipments through the end
of the year.
The
Honduran government responded to the tariff threat in a Jan. 18 statement that
said the agreement hasn't been in place long enough to make an argument for
domestic safeguards. It also said the domestic industry hadn't formally asked
for protection and that a tariff would "negatively" affect other American
textile producers -- namely yarn mills supplying the increased production in
Honduras.
As a
condition of the 2005 agreement, Honduran socks come in duty-free as long as
they are made of American yarns, a provision that doesn't apply to Asian
countries.
Supporters
of a tariff, including NC Sock
Co. in Hickory, N.C., and Wigwam
Mills in Sheboygan,
Wis.,
fear they won't be able to withstand a continuing surge of imports from
Honduras.
George Ruppe,
president of Ruppe Hosiery in
Kings Mountain, N.C.,
told the committee that he has cut capacity and employees to cope with imports
even though the company has some of the latest knitting equipment.
Added
Dennis Martin, president of NC
Sock, "there are few changes we can make to adapt our operations and stay in
business."
James Schollaert,
a lobbyist in Arlington
for American sock manufacturers that favor the tariff, placed much of the blame
on Montreal-based
Gildan Activewear, which is
making socks in Honduras and exporting them to the United States.
Schollaert
said Gildan, with a sales office in Barbados,
enjoys tax advantages that American manufacturers don't have. The company is
"flush with cash" to buy domestic mills or expand in Honduras, as it plans to do
if the preferences are not disturbed, he said.
Gildan, North
America's largest T-shirt maker, has bought and closed American hosiery
mills over the past two years. It purchased Kentucky Derby Hosiery of Mount Airy,
N.C., in 2006 and closed all but one of its U.S. facilities.
Gildan
recently acquired V.I. Prewett &
Son in Fort Payne, Ala., acquiring a direct pipeline to mass
retailers like Wal-Mart.
Gildan
lobbyist Ron Sorini, of Sorini, Samet & Associates of the
District, said the trade dispute is being portrayed as a battle against his
client, especially by big competitors that support safeguards as a way to blunt
competition.
Lobbying
has won converts. Sorini, who was the textile negotiator in the U.S. Trade Representative's office, said
many more domestic sockmakers now oppose government action than did two years
ago.
Some
manufacturers have sent parts of their sock production to Honduras while at
least one, Kelly Hosiery in Fort
Payne, is now Kelly Hosiery de
Honduras because it moved its factory.
Top
executives who led the fight for quotas against Chinese sock imports a few years
ago now are free traders.
Jonathan Shugart,
president of W.Y. Shugart &
Sons in Fort Payne, said his small mill changed its business model.
The company now knits children's socks in the United States, sends them to
Honduras for labor-intensive finishing and packaging, and brings them back
duty-free.
"It's still
a plus to the U.S. manufacturing sector," he said in an
interview.
William H. Jordan,
the mayor of Fort Payne, the self-proclaimed Sock Capital of the World, shows
the complexity of the issue. He first supported the tariff idea. After Gildan
explained that it would be harder to operate the Prewett Hosiery in his town with the
import tax, he backed off.
In a Dec.
19 letter to the committee, he said, "my position on the safeguard has been
somewhat clouded" by the split in the local industry. "I want what is best for
the people of Fort Payne because many families' livelihoods are touched by this
situation."
He urged
the committee to "review and investigate the issues as thoroughly as possible.
Much depends on it."
Cindy Skrzycki is a regulatory
columnist for Bloomberg News. She can be contacted atcskrzycki@bloomberg.net.
