China’s clothing manufacturing capabilities are so advanced, and still so relatively cheap for US fashion labels, that right now there are few good substitutes for producing there. But as Chinese production costs begin to creep up, American brands are scouting out other options, primarily in Vietnam, India, Indonesia, and even the US itself.
The chart below is based on a survey (pdf) of US fashion industry executives conducted by Sheng Lu, an assistant professor at the University of Rhode Island, and the US Fashion Industry Association. The scores represent a weighted ranking of how strongly the survey respondents expect to increase or decrease sourcing in a given country.
The US imports nearly all of its clothes—97.5% according to the American Apparel & Footwear Association—so any changes in the composition of its sourcing could have a major effect abroad. But it would take a lot of change to make much of a dent in the volumes sourced from China, which produces by far the largest share of clothes worn in the US.
China has a robust textile industry—it owns the bulk of the world’s polyester production and is one of the top producers of cotton—making it easier to manufacture clothes there than in countries such as Vietnam, which frequently import their textiles from China. (Meanwhile, India looks like it will surpass China this year as the world’s top cotton producer.)
The researchers note that “fashion companies are NOT moving away from China.” (The emphasis, in all caps, is theirs.) Rather, they’ll just be diversifying where they do business.
While Bangladesh remains a top destination, mostly because it has some of the world’s lowest wages for garment workers, US companies do appear to be cooling on it somewhat. Only 42% of the executives surveyed expect to increase sourcing in Bangladesh, down from 65% last year. Survey respondents voiced concerns about political tensions in the country. It probably doesn’t help that Bangladesh has become the poster child for garment-industry worker abuse and exploitation since the Rana Plaza factory collapse.
Indeed, Bangladesh trails the US in terms of expectations for increased sourcing. But don’t count on American brands opening their own factories at home. “Although U.S. fashion companies are interested in sourcing more ‘Made in USA’ products, there is no evidence that companies are shifting their business models back to manufacturing,” the survey report notes. (Executives from 30 US fashion companies, including clothing labels, retailers, importers, and manufacturers, took part in the survey; 60% of the companies represented have more than 1,000 employees.)
Whether US president Barack Obama is able to secure the US a place in the controversial Trans-Pacific Partnership (TPP), a free-trade deal that the country has been negotiating with 11 other nations primarily in the Pacific Rim, could determine whether there really is an increase in domestic sourcing. Economists expect the trade pact would shrink production of apparel and textiles in the US, and the survey found that 72% of respondents would expect to get more of their textiles and apparel from TPP members if the deal passes. The deal already includes Vietnam and could see China join, which would only make it easier and cheaper still for US companies to source in those countries versus at home.