Can US Fashion Sourcing Give Up China?

Quitting China might be easier said than done, tariffs or no tariffs and Uyghur Forced Labor Prevention Act or no Uyghur Forced Labor Prevention Act.

Despite all chatter to the contrary, fashion companies are still dragging their feet when it comes to diversifying their supplier base, Sheng Lu, professor of fashion and apparel studies at the University of Delaware, said at the United States Fashion Industry Association’s Apparel Importers Trade & Transportation Conference in New York City last week. 

The proof is in the numbers, he said. In a tally of the top 10 suppliers of clothing products to the United States from January to October, China accounted for almost 61 percent of imports with nearly 62,000 SKUs. Its next-closest rivals—India and Vietnam—barely registered as challengers with only 15,000 SKUs apiece. Cambodia was a distant fourth with 3,500 SKUs and Bangladesh an even further fifth with less than 3,000.

The problem is that finding a sourcing locale that can offer the same breadth of products as China remains a lift so heavy that it’s proven nearly impossible to budge, Lu said. Buying from China isn’t so much about price anymore but capabilities. While the types of apparel made by what he dubbed the “Asia 5”—meaning Bangladesh, Cambodia, India, Indonesia and Vietnam—have ticked up over the past year, there are still holes in what they can offer. The Asia 5 can only fulfill 71 percent of the tops and 47 percent of the dresses that China supplies, for instance.

The balance of offerings has also shifted, albeit not only for China but Asia as a whole. In 2018, products from Asia predominantly served the value market. Today, nearly half of Chinese apparel imports to the United States are earmarked for the mass segment, 15 percent for premium and over 34 percent for luxury. “I think you see that it will take time for companies to find China’s alternative,” Lu said.

While India might eventually come close to approaching China’s potential with its more or less self-sufficient and vertical supply chain and similar breakdown of exports by market, the Western hemisphere provides little respite. El Salvador and Guatemala, Lu said, are mostly in the business of making tops—T-shirts, most of all. On the other hand, only 5 percent of China’s American imports between January to October were tees, even though tops themselves made up nearly 39 percent of its SKUs. 

Beneficiaries of the Central America-Dominican Republic Free Trade Agreement, better known as CAFTA-DR, also traffic mostly in cotton and basic polyester products and not the specialized fiber types that China can give. And what remains of the U.S. textile industry is turning to industrial and medical textiles, which despite being more tech-driven and capital-intensive, are also more profitable. This could pose a problem for CAFTA-DR’s “yarn-forward” rule of origin, which confers duty-free benefits to apparel produced only using textiles from the United States, Central America and the Dominican Republic.

“Remember, the U.S. is supposed to be the leading textile supplier for Western hemisphere countries, and when Western hemisphere suppliers are already struggling with having enough of the right types of fabrics, the shifting nature of the U.S. textile industry probably will make the situation even worse,” Lu said.

Nations that are part of the expiring African Growth and Opportunity Act, or AGOA, face the same problem of simple, low-value goods that lack diversification. Clothing exported from Kenya between January and October amounted to 46 percent tops, with 19 percent T-shirts. Lesotho offered more of the same: 66 percent tops, with 44 percent tees.

One area where China isn’t king, however, is with so-called “sustainable” products made with recycled textiles. According to Lu’s research, Italy was the No. 1 supplier of that category with 2,700 SKUs from January to October, trailed by the United States with 1,400 and only then China with a mere 837. There is also plenty of room to grow in the area, since innovations like textile-to-textile recycling at scale are still fairly nascent and products remain limited to basic items such as T-shirts and jeans. But with further advances in commercialization, Lu said, there’s no reason why there wouldn’t be a wider and more complex variety of sustainable goods in the future with no exposure to China. 

“I like one phrase from ‘House of Cards’: If you don’t like how the table is set, turn over the table,” he said. “So if you cannot compete with China for traditional products, turn the table; really compete on sustainability.”