U.S. and Chinese Participation in the Apparel Industry
Tyler’s (1995) historical and sociological monograph about the garment industry in the United States is evidence of just how much has changed in the apparel industry in this country over the course of its history. From the 1880s onward, the economy of the United States shifted from agriculture to industry, and the expansion of a wealthy class serve to create a demand for goods that could be produced domestically (Tyler, 1995). Among the goods that were particularly popular were clothing items for a consumer public that was becoming more concerned about its appearance. During this period, it was relatively inexpensive and easy for the United States to source the raw materials for clothing. Cotton grown in the South, for instance, was a natural resource that facilitated the birth of the garment and apparel industry in the United States and sustained it for many years (Tyler, 1995).

Other social developments facilitated the domestic production of clothing. Transportation systems, for instance, had developed adequately so that finished goods could be packaged and distributed to retailers across the country (Tyler, 1995). Labor laws had not evolve significantly by this point, but that too was a boon to the emerging apparel industry in the United States (Tyler, 1995). Factory owners could—and did—exploit women, immigrants, and young people, paying a pittance for long hours of intense, tedious work (Tyler, 1995). Tyler (1995) refers to this particular period of the American garment industry as a “notion of a heaven-sent economy operating outside the rules and regulations of legislatures” (p. 5). With the rise of unions, however, particularly in the late 1920s and 1930s, the golden age of apparel in the United States was experiencing the first hints of its twilight hours. Child labor and fair wage laws impacted clothing manufacturers significantly, as their profits were dramatically undercut by increased overhead (Tyler, 1995).

At the same time, American apparel manufacturers were beginning to get their first taste of foreign competition. The so-called “one-dollar blouse” was a Japanese garment that “sold retail at prices below domestic wholesale” (Tyler, 1995, p. 266). Both the origin of the competition and the dynamics that characterized the threat that it represented to American clothing manufacturers remain consistent with contemporary dynamics in the American clothing industry, a fact which will be explored at greater length later in this review of the literature. Interestingly, the ways in which the American clothing industry responded to the Japanese “menace” of the one-dollar blouse mirror the strategies that the industry continues to use today, more than a century later (Tyler, 1995, p. 266).

Apparel industry executives quickly realized that they could not compete with Japan’s low production prices, even when tariffs were factored into the equation (Tyler, 1995). As a result, the American apparel industry made a grudging compromise with itself and with the growing apparel industry in Asia. The United States would strive to establish informal trade agreements with Japan for the purpose of importing clothing (Tyler, 1995). The United States clothing industry recognized that such agreements would permit the country, both on an industry level and on a national level, to benefit from Japan’s bargain prices. American importers could pass the low prices on to their customers, who were expected to increase the frequency and the quantity of their purchases as the result of affordable clothing at a retail rate. In this way, the economy would be stimulated by increased consumer participation, a win-win situation for the United States and for Japan, which would gain a powerful trading partner.

These early trade agreements were spearheaded and negotiated mainly by garment workers’ trade unions (Tyler, 1995). Although the unions were deeply concerned about fulfilling commitments to their members, they realized that attempting to compete with Asian apparel producers was simply impossible. Not only were the Japanese wholesale and retail prices far lower than those of the U.S. apparel industry’s products, so too were the wages that they paid their workers. Although workers in the American garment industry did not consider themselves to be paid particularly well, and even though worker exploitation continued until the middle part of the 20th century, American garment workers were still paid an average of ten to 20 times more than the Japanese garment worker (Tyler, 1995). Acknowledging these realities, the unions adopted a compromise policy and reached out to Japanese industry executives and the Japanese government. Their goal was to strike a viable balance between import rates and domestic production. The ideological basis of their approach was described by Tyler (1995) as follows: “The idea was to live and let live, to keep America’s doors open to imports but to regulate the inflow of garments and the outflow of jobs….” (p. 266). In this way, “the hundreds of thousands [of garment workers and their families] dependent on garment jobs for survival should not overnight find themselves jobless and penniless” (p. 266).

Achieving balance and compromise, however, was a complicated process. The first step in defining and implementing the trade agreements between the American and Japanese garment industries was a tentative one. As Tyler (1995) explains, the American garment industry wanted its Japanese counterpart to initiate and implement voluntary export quotas so that the United States would not be flooded by overstock. Although Japan agreed, after much persuasion and negotiation, the voluntary export quota was largely ineffective, as there was no entity charged with overseeing enforcement of the quota (Tyler, 1995). There were also no obvious consequences for failing to abide by the quota. Later, when the two countries arrived at a mutual agreement on quota levels, these were also determined to be ineffective after only a brief period of enactment. In addition to the same enforcement problems experienced before, the terms of the quota agreement were never well-defined. To identify just one example, if Japan did not fulfill its quota in one year, it could roll over any unused portion of the quota into the next year, creating a cumulative import total that might be unexpected and unmanageable for the United States (Tyler, 1995). Continuing to grapple with the business and economic problems posed by Japanese imports, problems multiplied exponentially for the American garment industry. A handful of other Asian countries, including China, started their own apparel manufacturing businesses and began exporting to the United States. When more stringent trade barriers were erected by the United States, Asian manufacturers avoided the unofficial embargoes by exporting to third countries that served as intermediaries, forwarding the merchandise to the United States and sharing the profits with the producer and original exporter (Tyler, 1995).

By the 1950s, the problems of import-export dynamics between the United States and Asian countries had not diminished. On the contrary, they had increased and become still more complex. Tyler (1995) explains how the import-export ratios shifted dramatically and rapidly in the mid-20th century. He writes, “In 1955, apparel imports were only 3 percent of the U.S. market; by 1965, imports were 12 percent of the American market–a 300 percent increase in one decade” (p. 268). Although it was the Japanese who established the template that subsequent apparel industry import-export dynamics would follow all the way into the present century, the Chinese soon began outpacing their successful neighbor in the garment industry. Since that time, China has maintained dominance in the foreign apparel market, so much so that Japan has all but dropped out of apparel production and concentrated its energies on other market sectors. China’s closest competitors for American import dollars are its smaller neighbors, namely Cambodia, Indonesia, Thailand, and Vietnam (James & Minor, 2003). Yet close is a relative term. None of these countries is truly competitive with China—at least not yet—because of a number of critical variables. All four of these countries are much smaller in size and in population density than China, and their political, physical-industrial, social, and economic infrastructures are far less developed than those of China (James & Minor, 2003). Although they have begun to develop creative strategies for challenging China’s dominance, primarily by defining specialized niches with which China does not (nor need not) preoccupy itself, it is unlikely that any of these countries will threaten China’s dominant position as the number one exporter of apparel to the United States (“A Stitch,” 2005).

China’s Current Role in International Business and the World Economy
The historical overview offered above is particularly striking when compared with the contemporary import-export trade concerns that characterize the relationship between China’s and the United States’ apparel industries. Almost all of the dynamics, strategies, and outcomes identified by Tyler (1995) to explain the rise of Asian apparel manufacturers– and specifically, Japanese clothing manufacturers—and the presence of their imported goods in the United States can be discerned as characteristic of the current relationship between China and the United States with respect to the import-export of apparel. Unlike Japan, however, it became relatively clear in the early part of the present decade that China would be unlikely to enter into any type of voluntary quota agreement that would restrain the flow of goods of all sorts, including clothing, to the United States (Cass et al., 2003). The incentive to do so was virtually non-existent. China knew it had the upper hand in the trade relationship. Despite the fact that the United States was clearly one of the best customers China could possibly have, it was unlikely that this customer would find a better deal on clothing import rates anywhere else in the world. China had cornered the apparel export industry and had the soaring profits to prove it (Laws, 2005a).

The same threats that faced the American garment industry in the 20th century, however, became even more exacerbated by the unchecked flow of the import of Chinese clothing between 2000 and 2005, and remain concerns despite recent trade agreements, which will be discussed at greater length forthwith. Job loss was, and remains, one of the most significant threats of exceptionally high import rates for Chinese apparel. Domestic production of apparel, once so important to this nation’s industrial identity, has essentially disappeared due to the fact that the lure of outsourcing threatened jobs that, perhaps paradoxically, are going to the Chinese, has become irresistible. High import rates and dependence upon a single exporter, China, is also likely to pose substantial risks to the United States apparel industry, as well as the national economy. The rise of the so-called big-box chain stores, such as K-Mart, Target, and Wal-Mart, as well as clothing chain retailers such as The Gap, Banana Republic, Old Navy, and many more, has influenced the import-export dynamics of the apparel industry in such a way that the American economy has become dependent, to a certain extent, on the financial success of these stores (Grant, 2005). Wal-Mart, in particular, has gained a reputation as a “low-price leader” (Grant, 2005, p. B5), and so the importation of higher-priced clothing could not only hurt its bottom line, but also its reputation as one of the best-performing companies in the United States. Furthermore, higher prices would be likely to diminish the loyalty of customers who have come to expect and demand extremely affordable clothing (Grant, 2005). Lower profits at Wal-Mart, the number one company on the 2007 Fortune 500 list with 2006 revenue exceeding $351 million and profits for the same year in excess of $11 million, a 3.2% increase over the preceding fiscal year (“Fortune 500,” 2007), would be likely to have negative impacts on the American economy. For these reasons, American corporations are all but forced to continue buying from China, itself a “low-price leader” in the apparel export industry.