SGMA’s Lin: NMI garment is now a sunset industry

Last of two parts

SGMA chairman James Lin, whose factory has been operating on Saipan for the last 18 years, said garment orders are already being diverted to China, calling the CNMI’s apparel industry as a “sunset industry.”

In an industry presentation held Wednesday for the Saipan Chamber of Commerce’s membership meeting at the SandCastle of the Hyatt Regency Saipan, Lin said increasing manufacturing costs have resulted in decline in sales. In 1989, Lin said his company’s sales reached $180 million—almost double the 2004 sales of over $100 million only.

These factors have prompted his company to reduce its workforce from over 2,300 in 1999 to 1,750 in 2004.

Lin said Saipan’s garment industry needs support to maintain four major aspects in its operations: competitive pricing, quality of manufacturing, delivery, and compliance with Occupational Safety and Health Administration’s and other regulations.

The industry’s problem, however, is losing the most important aspect—competitive pricing—when quota restrictions are lifted this Dec. 31, 2004. “If lost, even Doug Rogers is not sure if orders will be placed on Saipan,” Lin said. Rogers, vice president for business administration for Polo Ralph Lauren Sourcing Co. Ltd., earlier underscored the bleak fate of the industry if it could not maintain its competitiveness once quota restrictions are lifted.

Lin said the CNMI government should maintain wage and tax levels. He also said the value-added requirement to avail of duty-free exports to the Unites should be reduced from 50 percent to 30 percent.

“I can assure that everything is fact and not illusion,” Lin said before the Chamber of Commerce’s members. “I hope all here in this room are all magicians and make all these problems disappear.”

‘30-M JOBS WILL BE LOST’

Approximately 30 million jobs will be lost once quota restrictions are lifted, with 90 percent of U.S. garments made from foreign countries. Lost jobs will be present in Cambodia, Indonesia, Africa, small Asian countries and the domestic United States.

Former CNMI Attorney General and special trade counsel Rexford Kosack also said that the domestic industry in the United States would suffer and result in some 600,000 lost jobs.

Kosack spoke about how Saipan’s garment industry evolved from a sweater-assembly industry in the 1980s to the cut-and-sew industry that it is today. Currently, there are 25 garment factories in the Commonwealth.

Kosack said the World Trade Organization set a 10-year-plan to abolish quotas in 1995. He said the motive was to assist developing countries, while the World Bank even assured more aid to these countries with the adoption of the WTO plan. In 2001, China joined the WTO.

Kosack said that, while China already enjoys 17 percent of the world market, the World Bank projects that it would skyrocket to 45 percent next year with the WTO arrangement. In Japan and Australia where there are no quota restrictions, China enjoys 70-80 percent of the market.

One way to maintain quota restriction on China is for the United States to strike an accession agreement with China to prevent market disruption, Kosack said.

He said, however, that the issue would be a tough decision for the U.S. government after China lifted quota restrictions on practically all industries, ranging from telecommunications to agriculture.

“China is the largest market for U.S. goods, growing at 20 percent per year,” he said. “What happens in 2005 is really unknown.”

He expressed hope, though, in the resiliency of the local apparel industry, saying the sector has already gone through several crises and has survived. Kosack said, however, that the industry’s wide stewardship and government help would assist the local garment sector cushion the inevitable impacts.