By Devin Steele
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Burlington Industries Chairman Wilbur Ross addresses STA
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BELMONT, NC - The U.S. textile industry's "rigidity" and "obsession with differences" have caused Burlington Industries to take some unpopular stands, new Burlington owner Wilbur Ross told members of the Southern Textile Association recently.
Ross, whose firm W.L. Ross & Co. bought the financially troubled textile producer in November, explained why he supported the proposed Central American Free Trade Agreement (CAFTA) - which much of the industry opposes, as written - and stressed the importance of coming together as an industry in light of the growing China enigma.
"I hope you ... can agree to focus on a limited range of potentially achievable objectives rather than insisting on such doctrinaire and non-negotiable positions on so many issues that nothing happens and we are overwhelmed by the Asians, especially the Chinese," Ross said during STA's Winter Technical Seminar, which drew more than 200 members and guests. "The textile trade associations may have enough steam to defeat CAFTA, but that will by a Pyrrhic victory at best and still will not help protect the U.S. against China, India, Vietnam, Pakistan, etc. Net effect is that more U.S. mills will close."
The industry's beef with CAFTA is that cumulation and trade preference levels (TPLs) are included in the current version of the proposal. In the case of Burlington, Mexican cumulation is important because 10 percent of the company's sales and a somewhat higher percentage of its cash flow come from there, Ross said.
Mexico, of course, is exempted from U.S. tariffs because of NAFTA, he added.
"Why would it make sense to say that goods which are free of tariff imported directly should become subject to tariff because they are first transshipped for fabrication to another country which itself is not subject to tariffs?" Ross asked.
Instead of fighting against Mexican cumulation, the industry should be concentrating its efforts on making sure that they really do decrease the billions of dollars of goods that are illegally transshipped through Mexico and mislabeled, Ross said.
"Just accomplishing this objective would offset any incremental imports from Central America, up to twice the volume now being done by CAFTA countries before there would be any net loss of volume by U.S. mills, since they are unlikely to double their revenues near term," he said.
Ross acknowledged that some parts of CAFTA could have been changed somewhat to help the U.S. even more, but without the support of textile trade groups, the industry was not strong enough to change them, he said. These include 100 million yards of China-friendly TPL from Nicaragua, 37 million yards of Mexican bottoms and a lack of clear measures to enforce the generalized pledge of protection of borders against transshipments, he said.
"If trade associations will focus on those three modifications and will condition their support for CAFTA on the administration's formal commitment to complete and timely utilization of the China WTO accession agreement safeguards across all product categories and upon the Textile Revitalization Act drafted by the industry, Burlington could close ranks with the industry," Ross said. "In fact, we will commit $1 million toward the campaign that will be necessary to accomplish these objectives.
"We do not want to be the odd man out, but we cannot afford to have our direct economic interests ignored."
There is considerable potential for the domestic textile industry to obtain legislative relief - government-guaranteed loans, recoupment of severance and post-employment payments for displaced employees and improved procedures for processing safeguard cases, for instance - in return for supporting a modified CAFTA, he added.
After his speech, Ross said he was surprised that no one offered questions or comments. "I frankly had hoped to have more of a dialogue with people rather than what occurred," he told STN. "I really thought that there would be some interchange of ideas."
In an interview, Ross further addressed the rift between he and certain textile trade associations that was formed when he called a Washington meeting with retailers, importers and certain textile companies in December, a meeting that resulted in his announced support of CAFTA.
"What I don't understand is how people think they're going to overcome the problem of elimination of quotas by sticking their head in the sand and saying, 'well, the sky's not really falling,' " he said. "I haven't heard from ATMI (American Textile Manufactures Institute) or from AMTAC (American Manufacturing Trade Action Coalition) about a positive program, other than to say they want protection. Well, I don't think they're really going to get bullet-proof protection. So I think we have to get into a lot of self-help and try to make do the best we can with what's available.
"And I truly do not understand why the industry views the retailers as the enemy. We can't live without the retailers. Textiles is the only industry I'm aware of where the raw materials supplier tries to tell the end user what the end user wants and should have as opposed to trying to figure out what does the end user want and how do I accomplish it. It's a very strange mind set."
He later added: "I was amazed to hear some people from some of the trade associations saying that I was communing with the enemy, using those words. Well, I don't know where they think textiles are going to be sold if it isn't to apparel companies and retailers."
Ross said he was further puzzled that the industry, in his opinion, has taken such a hard-line position without offering any viable solutions.
"If CAFTA's not the solution to Asia, then what is the solution to Asia?" he asked. "What is the affirmative approach they are going to take? I don't see the industry doing a lot to prepare for Jan. 1, 2005. I really don't. I see the retailers and the apparel guys going all over the place, getting themselves ready. What the retailers want are strong hemispheric ties. They don't want to be totally captive to the Asians.
"But if we don't give them a realistic alternative, it will be just like what happened in Australia and Japan. Those two countries did not adjust when quotas went off and, for all practical purposes, the industry is gone in both countries."
