The textile and apparel industries have traditionally held a fundamental role in North Carolina's economy, providing thousands of jobs and revenue for local economies. In one sense, the industry is easy to define - the creation of fabric or cloth out of original fibers, using mechanical or chemical processes. Traditionally, most people think of textile products as feeding directly into apparel. Yet textiles & apparel is an expansive industry, with textile products showing up in a variety of places, from construction materials to air filters, from automotive fabrics to upholstered furniture. Specifically, the industry can be broken down in a number of different ways, including:
- By fiber type (including natural fibers like cotton and wool, and synthetic fibers like nylon)
- By fabric production process (including using yarn in knitting or weaving, or using nonwoven processes)
- By fabric finishing process (including unfinished fabrics, coated fabrics, and a variety of other treatments)
- By end product use (including apparel products, but also including medical products, construction products, automotive products, and a host of other end uses)
North Carolina's textile industry is at a crossroads. In order to maintain their leadership as a provider of textiles in the global economy, the industry is facing several key decisions in a new structurally changed economy and business environment. Although they enjoyed for decades the status as a leading manufacturing state, producing textile materials for international and domestic markets, increased competition, technological advancement, and the United States' shift to a service-based economy have all left an indelible impact on the industry. In this section we provide a snapshot of historical configurations and key trends - such as technological innovations, labor relations, and policy changes - which are mapping the future of the industry and how North Carolina firms navigate the rapidly changing terrain.
Textiles in North Carolina
Decline in North Carolina Textiles and Apparel Industries since 1996
This section highlights important industry developments over the last fifteen years in the state of North Carolina. We see how such factors as an overall decline of textiles and apparel and the development of an increasingly fragmented and dispersed industry have affected the state in key ways.
The overall decline of the industry is witnessed by the precipitous drop in factories and jobs that was brought on by structural changes in the global economy. In 1996, there were 2,153 textile and apparel plants in North Carolina employing 233,715 people. By 2006, there had been a 40% decline in the number of plants, to 1,282 plants, and a 65% decrease in employment to 80,232 workers (see Table 2a). The reasons for this decline are many, but four principal themes can be discerned:
- Emergence of "buyer-driven" lead firms (retail) in global apparel and textile value chains1
- Shifts in sourcing patterns of lead firms (retailers)
- Rise in the manufacturing capabilities of firms globally
- Global quota phase-out of the MFA (Multi-Fiber Arrangement) regime in 2005 has led to loss of trade protection formerly enjoyed by US textile and apparel companies and exposed them to the rigors of global competition1
As the second-largest textile state and the third-largest apparel state in the United States in terms of employment, North Carolina has been the hardest hit in terms of job losses and plant closings. Over a twelve month period ending in May 2006 the state lost close to 7,000 jobs, more than double from the next most comparable state in textiles, Alabama, with 2,800 job losses.2
Although we have seen a drastic decline in the textile industry, the apparel industry has fared much worse, experiencing a 70% decline in jobs and 55% of plants from 1996 to 2006. The textile industry by comparison has only lost 63% of jobs and 32% of plants from 1996. However, the textile industry (NAICS 313 and 314) is almost three times bigger than the apparel industry (NAICS 315) in North Carolina, and employs more than 59,000 workers, accounting for 10.7% of all manufacturing employment. Apparel jobs number just over 20,000 in comparison.
With the decline in the bulk numbers of factories operating in the state, one segment of the industry that is growing is North Carolina firms exporting intermediate goods that overseas firms are turning into final products. 14% of North Carolina exports fall within the textile and apparel industry. These exports include both finished goods that are being sold abroad and intermediate goods that firms' plants in other countries will work on. For example, the percentage of North Carolina exports made up of yarn & fabric products is on the rise, while the share of apparel products is on the decline. This change is partly explained by the rising skill levels of global suppliers who can do more and more finishing work, meaning that companies will export more fabric products that suppliers will then turn into apparel. This is shown through the form of foreign direct investment (FDI) into lower-wage and lower skill countries that are nonetheless moving into higher-valued activities within the industry. This is witnessed through these countries receiving the majority of both yarn and fabric exports from the United States. Instead of sending almost finished jeans to, for example, such countries as Honduras or Costa Rica where only final stitching is required, now companies are starting to send them unfinished denim.
Trends and Dynamics in the Textile Industry
Technical Textile Sector Growing
As global competition increases the biggest challenge that the U.S. textile industry faces is not necessarily this fierce competition but the rise of technology. In her well-regarded book The Travels of a T-Shirt in the Global Economy, Pietra Rivoli states that "while production, revenues, and exports are soaring, employment is shrinking because of rapid advances in technology and labor production."3 In the textile and apparel industries, there has been a combined 65% decrease in employment from 1996 to 2006, while productivity climbed at a steady, upward slope.
In order to face this challenge, one of the most important trends in the industry is the growing role of technical textiles and nanotechnology. Technical textiles are defined as textile materials and products manufactured primarily for their technical performance and functional properties, rather than their aesthetic or decorative characteristics. End uses include aerospace, industrial, marine, medical, military, safety and transport textiles, and geotextiles.4 Firms in this sector generally use nonwoven processes to manufacture or finish these products (NAICS 31323, 31332). Since 1996, both these sectors have shown growth in terms of employment and number of plants:
Table A. 1996-2006 Employment and Number of Plants in NC's Technical Textile sector
|NAICS||Number of Plants||Annual Average Employment|
|1996||2006||% change 1996-2006||1996||2006||% change 1996-2006|
| Nonwoven Fabric Mills
Fabric Coating Mills
Source: Employment Security Commission of North Carolina
In addition, ten of the top 40 largest nonwoven firms in the world have plants in North Carolina, as of 2005:4
- Kimberly Clark
- BBA Materials Group
- Colbond Arnhem
- Buckeye Technologies
- Textilgruppe Hof AG
- Jacob Holm Industries
Firms in North Carolina that can position themselves within these higher value-added segments of the industry may be able to protect themselves against increased foreign competition in lower value-added segments, and can often break into new markets. Textile firms operating in non-apparel markets such as automotive, medical and civil engineering products have posted significant growth, as evidenced by the expansion of capacity to their North Carolina plants by both Freudenberg, the world's largest nonwoven company, and Buckeye Technologies, the world's ninth-largest nonwoven firm.6 Nonwoven processes are more capital and research-intensive than traditional woven or knitted processes, and their products typically command much higher margins.
Despite the overall growth of this sector, it is still susceptible to overcapacity and ruinous price competition. For example, spunbond nonwovens for hygiene topsheets or hydroentangled fabrics for baby wipes used to be profitable niches, but due to global overinvestment of capacity and rising prices of raw materials like oil, this market has become commoditized and is now characterized by falling prices and low margins similar to traditional apparel-bound textiles.7
Increasing North Carolina Research into "Nanotextiles"
In addition to the trend in producing more technical-based products, the industry has seen an increased focus on nanotechnology research to create more technically advanced products. To date, most nanotechnology efforts in textiles to develop new technologies have focused on two main areas:
- Upgrade existing functions and performance of textile materials; and
- Develop intelligent textiles with completely new characteristics and functions.
There are already commercial products developed within the first area of research use, including the manufacture of composite fibers utilizing nanosize fillers, such as carbon nanotubes; and the development of upgraded chemical finishes with exceptional properties, including stain resistance, wrinkle resistance, resistance to static, hydrophilic properties and shrink-proof properties.
The second research area has a longer commercialization horizon with current research efforts including:
- Wearable solar cell and energy storage;
- Sensors and information storage of internal body function performance;
- Multiple and sophisticated protection and detection;
- Health-care and wound curing functions;
- Fabric self-cleaning and repairing functions.8
If realized, the long-term market potential of these new textile materials could amount to hundreds of billions of dollars.
A North Carolina textile firm currently at the forefront of this revolution is Nano-Tex LLC, which became majority-owned by North Carolina-based International Textile Group (ITG) when ITG acquired Burlington in 2004. Its nano-based chemical finishes are synthesized using nanoscale emulsification to yield a more thorough, even and precise application onto the fabric.9 Nano-Tex's products to date have been widely sold, and used in apparel of leading retailers such as L.L. Bean, Perry Ellis, and Gap. Its best-known treatment is an oil- and water-repellent finish in which liquids simply bead up and roll off the nano-finished fabric.
Nanotechnology is not confined to the United States, with 53 other countries also investing huge amounts of research in this area. They mainly include countries in Europe, Oceania, Canada and Asia. Japan has been especially active, investing even more than the United States according to some estimates. China, India, South Korea, Taiwan, and Singapore are also involved.10
While import competition has been blamed for much of the job losses in the industry, domestic factors, including local competition, industry consolidation and productivity gains from improved machinery and manufacturing processes, have had a similar impact on textile and apparel employment. In order to understand the new trajectory of the global reach of the textile industry we locate in this section the challenges North Carolina firms face by highlighting the role of domestic firm decisions, transnational agreements, and the future potential for a growth of North Carolina firms via the export of technically-advanced products.
U.S. and North Carolina textile firms used to base their success on a fundamental strategy of modernization by labor-saving technology, gain superior cost efficiencies as a result, charge lower prices and earn a small profit while inducing losses by competitors, buy up weakened domestic competitors, and then modernize their plants in similar fashion. For some companies, such as Pillowtex, their demise was partially self-inflicted as a result of their overly aggressive acquisition strategies. Pillowtex generated enormous debt obligations to complete its acquisition of Fieldcrest-Cannon in 1997, which ultimately robbed it of its cost competitiveness. The challenge now is for North Carolina firms to avoid those mistakes and gain better access to financing that will allow them to fund any number of product innovation, capital investment or offshoring strategies.
The passage of such transnational agreements as the North American Free Trade Agreement (NAFTA) and the ending of the MFA accords has caused numerous impacts to firms in North Carolina. The passage of NAFTA accelerated the rise of maquiladora firms in Mexico and Central America doing assembly and other labor-intensive work for US apparel companies, as well as a captive export market for US textile firms to send their fabrics and yarns. The emergence of East and South Asia as textile powerhouses has directly affected US textile and apparel firms as retailers and branded marketers turned to these new, cheaper sources instead of US firms. Open trade has led to global competition, but it also has had benefits for US firms, such as cheaper raw material prices. For example, huge investments by Japanese, Korean, Taiwanese, and European fiber manufacturers increased global capacity and led to lower prices for man-made materials, such as polyester, rayon and nylon.
MFA Quota Phase-Out in 2005 Affecting Apparel Sector Most Severely
The Multi-Fiber Agreement (MFA) of 1974 set limits on different categories of apparel and textile imports to the United States, the European Union, Canada, and Norway through a series of bilateral agreements between trade partners. As part of the transition to the World Trade Organization and the Uruguay Round on multilateral trade negotiations in 1994, MFA was replaced with the Agreement on Textiles and Clothing Act which served to phase out quotas on textiles and apparel over a ten year period, ultimately ending on January 1, 2005.
The 2005 phase-out of MFA quotas has further reduced the viability of US apparel firms, with the elimination of many trade protections. Many large apparel companies, such as Sara Lee, have already announced job cuts and the consolidation of operations in order to compete with the onslaught of imports. This was verified by the behavior of large US retailers and clothing brands, which placed many more orders and inquiries in 2004 than in previous years in preparation for quota elimination in 2005.10
According to the Fair Labor Association, there have been significant shifts in the geographic composition of imports into the United States following the quota phase-out. In 2004, China was responsible for 20.3% of all U.S. imports of textiles and apparel products. By 2006, China's share had jumped to 30.4% - more than the next seven countries combined.11 Furthermore, Chinese exports to Europe grew by an astounding 500% once the MFA quotas were phased out.
Due to these changes the United States and the European Union called upon the WTO accession agreement allowing them to restrict the rate of growth on imports to 7.5% per year until 2008. This legislation has been one of the most important events to happen in the textile and apparel industries in recent years.
Sara Lee's decision to close and relocate production is one example of the impact of new global production capabilities spurred by legislative policy has a local impact. Sara Lee Corporation, North Carolina's second largest employer and the largest U.S. underwear maker, announced cuts of 4,175 clothing jobs in 2004 in order to compete with cheaper products from China and other low wage countries. Their business decision involved included the closure of five plants in Puerto Rico, Honduras, Mexico and the United States, and the elimination of 350 jobs in North Carolina.12 In 2006, Sara Lee spun out its apparel division as Hanesbrands. Hanesbrands has continued to make major changes to its supply chains. On June 27, 2007, Hanesbrands announced that it would cut 5,300 jobs at factories in the Americas, including North Carolina.13 In an era of free trade, lean retailing and instant communications, retail buyers and importers can easily switch from one country to another, eroding the sustainability of low-wage comparative advantages by countries.
China and India: Both Competitors and Potential Markets Opportunities
The economic growth of newly industrialized countries like China and India presents both opportunities as well as dangers. North Carolina textile and apparel firms will need to have either global multi-plant capabilities or alliances in these growing markets in order to stay competitive versus powerful local firms in these markets. Future success will depend not only on manufacturing prowess, but also on being able to differentiate one's products or services, build brand recognition, and develop a global network of business alliances.
Furthermore, China is still weaker in nonwovens than the United States and Europe, though it has dramatically increased its nonwoven capacity and production in recent years. In 2003, for example, it added more nonwoven capacity than that in the whole of Japan. In the same year, it doubled its spunbond capacity to 450,000 tons, increased its spunlace capacity to 100,000 tons, increased airlaid capacity to 82,000 tons and added 200,000 more tons to its existing needlepunch capacity. However, the majority of new equipment has been Chinese-made nonwoven machinery, which is still regarded as being inferior to more technologically advanced European-made machinery. Western quality standards could be hard to achieve as a result. This bodes well for North Carolina nonwoven firms who still have significant market penetration opportunities in China.14
Thus, it is important that nonwoven firms view China and other large and dynamic developing economies not as competitive threats, but as potential market opportunities. This may be due to the enhanced competitiveness of technical textiles, since they are more capital intensive and less reliant on low-wage comparative advantages. Many nonwoven firms have moved or set up plants in China15, for example:
- Freudenberg has established a joint venture, Freudenberg & Vilene Filter (Changchun) Co Ltd, with Japan Vilene, and Chinese partners, supplying China's booming automotive industry
- DuPont has a facility in Beijing, China, supplying spunlace materials for absorbent and personal care applications, also producing Tyvek in Shenzhen, China
- Gary Gereffi, "The organization of buyer-driven global commodity chains: how United States retailers shape overseas production networks," in Gary Gereffi and Miguel Korzeniewicz, eds., Commodity Chains and Global Capitalism, Westport, CT: Praeger, 1994. pp. 95-122.
- National Council of Textile Organizations (NCTO), "Plant Closings and Job Losses," Website. Last accessed August 13, 2007. [http://www.ncto.org/ustextiles/joblosses.asp]
- Pietra Rivoli, The Travels of a T-Shirt in the Global Economy, Hoboken, NJ: John Wiley & Sons, Inc., 2005.
- Textiles Intelligence, "Glossary," Website. Last accessed August 13, 2007. [http://www.textilesintelligence.com/glo/]
- "The International Top 40," Nonwovens Industry, September 2005. pp. 32-103.
- "The International Top 40," Nonwovens Industry, September 2004. pp. 36-114.
- Patrick Conway, Robert Connolly, Alfred Field and Douglas Longman, "The North Carolina Textiles Project: An Initial Report," Journal of Textile and Apparel, Technology and Management, Vol. 3, Issue 3, Fall 2003. Last accessed August 13, 2007. [http://www.unc.edu/~pconway/Textiles/nctp_tatm_rev.pdf]
- Lei Qian and Juan P. Hinestroza, "Application of Nanotechnology for high performance textiles," Journal of Textile and Apparel, Technology and Management, Vol. 4, Issue 1, Summer 2004. Last accessed August 13, 2007. [http://www.utexas.edu/centers/nfic/fc/files/nanodev.pdf]
- United States International Trade Commission (USITC), "USITC DataWeb," Last accessed August 13, 2007. [http://dataweb.usitc.gov]
- "Buying Spree," Textile Asia (Hong Kong), June 2004.
- "Clothing Jobs to Go," Textile Asia (Hong Kong), July 2004.
- Ieva M. Augstums, "Hanesbrands To Cut 5,300 Jobs," Associated Press, June 27, 2007. Last accessed August 13, 2007. [http://www.usatoday.com/money/economy/2007-06-27-1687784370_x.htm]
- "International Top 40..." (2005) (fn.4)
INDUSTRY SECTION LAST UPDATED: August 28, 2007