The closing of the Pillowtex plant in North Carolina is only the latest in a long series of textile and apparel factory shutdowns. Since 1973, the combined textile and apparel industry in North Carolina has lost 230,000 jobs, or 60 percent of its job base. Nationally, textile and apparel mills and plants have handed out more than 1.5 million pink slips in the past 30 years.
Automation is part of the reason for the job cuts. Like all of U.S. manufacturing, factory floors today are brimming with machinery and technology. This has dramatically increased the productivity of factory workers but has reduced the number of workers needed to produce the same, or greater, output. Each textile and apparel worker today produces one-third more than a decade ago.
A strong argument can also be made that the North American Free Trade Agreement and the Uruguay Round of the General Agreement on Tariffs and Trade, signed in 1993 and 1994 respectively, have accelerated the job cuts. From 1973 to 1993, 5,000 textile and apparel jobs were lost, on average, in North Carolina each year. Since 1993, the annual losses have swelled to 15,000.
These job losses are, of course, troubling, and they have caused many people, especially in North Carolina, to question the wisdom of the trade agreements signed in the 1990s. Why, they ask, would our country’s leaders agree to trade deals that have resulted in the loss of so many jobs?
The question is a very valid one, and it can be answered in the following way. International trade agreements involve costs and benefits for the American economy. Costs include the loss of jobs to countries that can manufacture certain products more cheaply than in the United States. This is the case for many textile and apparel products that use relatively lower-cost foreign labor.
But what are often ignored are the benefits of freer world trade. These benefits come in two categories.
First are the additional products U.S. companies can sell in foreign countries due to lower trade barriers. Electronic, farm, and chemical products are a few of the industries where American firms have a cost advantage over foreign producers. In fact, U.S. factories increased production by 46 percent in the seven years following NAFTA and GATT and declined only during the recession years of 2000 and 2001.
Second are the lower prices American consumers will pay for some products by having greater access to lower-cost foreign imports. This can provide substantial savings to American families and free-up money for spending on other domestically made products and services.
A good example of the second benefit is apparel prices. Before NAFTA and GATT, apparel prices in the United States were rising about 4 percent per year, compared to 6 percent for all products and services. But since NAFTA and GATT, retail apparel prices have fallen an average of 1 percent annually, compared to an increase of 2.4 percent annually for all products and services.
I estimate American consumers of clothing are saving a minimum of $19 billion annually as a result of the lower apparel prices after the institution of NAFTA and GATT. This is enough to pay every former textile and apparel worker in the United States displaced since 1993 an annual amount of $25,000.
Trade agreements such as NAFTA and GATT represent a change in the economic “rules of the game” that create benefits and costs. Certainly many textile and apparel workers in North Carolina and other states have been on the losing end. But equally as clear is that consumers of clothing products have benefited. Perhaps a method of shifting some of the consumer benefits to the displaced workers is the “win-win” solution.