Martin's Textiles

What are the strategic risks and benefits of outsourcing production of the Temecula plant to contract manufacturers in China?

2a. Consumers would certainly see a hike in prices on the imported product and in turn could affect the consumer’s ability to afford neither the domestic made clothing nor foreign made clothing.

• The enormous surplus of labor in China imperils workers worldwide as international competition puts incessant downward pressure on wages and working conditions, leading the apparel and textile industries to favor the cheapest and most Draconian producers.

You will use the critical thinking skills you have been developing to identify violations of the Universal Intellectual Standards and Logical Fallacies in the essay, “Sweatshirts from Sweatshops” on pages 406-408 of your textbook.

If the government enacted a special tax on imported clothing making the selling price equal to the selling price of clothing made in the United States, shoppers would see imported items with much higher prices in discount stores. If the prices of clothing made in sweatshops and in the United States were comparative, shoppers would consider the trade-offs and opt to buy clothing made in the United States for higher quality, loyalty to United States workers, and the health of our economy (Mankiw, 2011, p. 4). Wal-Mart and “big-box” stores that sell so many imported clothing items would see a decrease in sales. Shoppers would choose to buy clothing at stores that sell clothing made in the United States. These stores would see an increase in sales.

Although globalization allows for most products to be produced at a more efficient rate, it also has the capability to mar the economies of municipalities in first world countries. In Pietra Rivoli’s book The Travels of a T-Shirt in the Global Economy, she discusses the different viewpoints of opposing sides of an on-going battle to reduce the amount of tariffs and quotas put on the textile industries of foreign countries. For decades the textile industry in America has been on a noticeable decline, with outsourcing to third-world countries to blame. Although both faction’s viewpoints on the benefits of such outsourcing, both realize that there is only one way to gain the results they seek; which is to petition to the congressmen, including high ranking officials such as the president, in Washington D.C.

The relevance of this book can be measured by its ability to speak to the everyday individual, who may or may not know anything about economics, and plant the seed toward global economic education. It provides a keen social awareness to people who may or may not ordinarily care about international economics and can have an eye-opening effect toward what really happens in the textile industry.

This means that people that were not able to afford the products can now buy them causing an increase of sales in The United States, Mexico and Canada. No tariffs allowed businesses to compete in the world marketplace to expand and deliver customer goods. Big manufacturing companies saw that the cheap labor was available in Mexico and moved their manufacturing companies. Many of these companies had unions and the unions were negotiating for higher wages. This could have caused a company to go bankrupt or invest in machines (robots) to replace people. This in turn led to manufacturing companies moving to Mexico in order to make profit and continue lower prices. As a business owner I would agree that just keeping a company afloat is not good business. Profits need to be met or company can go bankrupt and jobs will be lost. Many people lost their jobs due manufacturing companies moving to Mexico for profit. About 700,000 jobs were lost in the United States with 55,000 being in Texas. Pg 18. Texas Public Policy released a study that “El Paso is reported to be "hit" the hardest by NAFTA. About 10,000 workers have been effected by the loss of jobs, yet the El Paso region has an increase of exports creating 38,000 jobs since NAFTA”. Economic growth is seen in El Paso. El Paso is growing and seems to be under construction for the last 5 years. The transportation industry is booming as evident by new businesses being built such as motels and convenient stores near the main highways. Construction to accommodate the transportation industry creates new jobs which leads to economic growth. In the last five years of traveling to El Paso and back to Corpus Christi, no matter the time of day, the highways are busy with big truck/18 wheelers. Texas has

Lululemon’s ability to source profitably merchandise may be affected; if new trade restrictions are imposed by The United States and other countries where products are produced or sold. These may include additional quotas, duties, tariffs, or other restrictions or regulation. Moreover, China increased in labor cost and other factors associated with production could increase the cost of product. (“Lululemon Athletica Annual Report, 2012”).

Tens of thousands of Americans could lose jobs following President Trump’s decision to slap hefty tariffs on imports of those products from other countries. The U.S has been in great debt lately and Donald Trump has decided to do something about it. Trump has approved to impose tariffs of up to 50% on imported washing machines and solar panels. The move came after a petition was filed by Whirlpool, a U.S.-based washing machine manufacturer facing tough competition from LG Electronics and Samsung, both based in South Korea. Trump's actions are in line with his "America first" campaign pledge, but tariffs may not have the desired effect. The main goal of the tariff is to level the playing field for the American company, which has

Although the Chinese apparel manufacturers would lose profitability due to rising cotton prices and competition from emerging countries, they stand to gain the most from the removal of U.S. quotas and tariffs. According to the author, in 2007, 95% of the 20 billion garments Americans made were purchased overseas. Due to U.S. trade barriers, China’s share of the U.S. apparel import was only 30%. Once these barriers were removed, Chinese apparel would flood the American market due to their low cost and dominance in garment manufacturing. Experts predict that China could eventually supply 85% of U.S. apparel. As they increase their market share in the

LBS Textiles is a firm that designs fabrics for wholesale markets in North-East America. The company has experienced a modest growth over the last three years.

I think it also works to undo the notions that China was stealing away all our jobs in the apparel arena, because despite the complex protectionist measures taken, America still lost lots of jobs in the textile industry. The author points out that this is because of technology, and that when it really comes down to it, China is losing their textile jobs at a rate faster than the U.S. did (142). She also goes over some of the unintended consequences of the measures such as increased material costs as a result of the increased import barrier (142). She also suggests in this section as an alternative to erecting trade barriers, to instead compensate workers of the losing industries, known as the compensation principle (151). Lastly, with the lift of the measures and quotas by 2005, there will be a new surge in Chinese goods to America, as illustrated in figure 9.1, page 167. China’s percent increase after release from the quotas will measure some 900%.

The shifts in the jeans manufacturer Levi Strauss’s global strategy could vividly demonstrate how global sourcing strategy works and affect its supply chain. At first, the company was created in the USA. As it developed and became a global company, they began to employ workers all over the world. However, in face of fierce competition, Levi Strauss started to shift its operation to lower-cost countries in the late 1980s. By the year 2003, Levi Strauss closed the last four plants in North American and ‘has become an entirely offshore producer’ (Dicken 2011 p.318). The German fashion company Hugo Boss also provides similar example. In face of high production cost, namely high labor cost in domestic market, more and more fashion retailers choose to outsource their production. Moreover, some fast

Assume that you are executive of a large U.S. multinational cooperation planning to open a new manufacturing plants in China and India to save on labor cost. What factors should you consider when making your decision? Is labor outsourcing to developing countries a legitimate business strategy that can be handled without risk of running into a sweatshop scandal?