Future uncertain for Saipan garment industry

Petitions filed with the Committee for Implementation of Textile Agreements, national election results, the world’s clothing manufacturers’ competitiveness, and local determination will map the short-term and long-term future for the 20-year old apparel industry on Saipan.

This is what over 175 businesspersons, government employees, and other stakeholders gathered to hear at the November monthly membership meeting of the Saipan Chamber of Commerce, where industry experts disclosed how the end of the world’s decades-old quota system of exporting into the largest—and most lucrative—apparel marketplace will play upon the local Saipan factory operations, local businesses that depend on the factories’ continuance and government revenue and essential service delivery to the islands’ residents.

Several presenters took an attentive audience at the Hyatt Regency Saipan’s Sandcastle through a history of the Saipan garment industry, which first exported to the United States in 1983, brought a buyers’ and retailers’ perspective to continuance of highly sought orders for the world’s most famous clothing brand names, listened to the reality of the island’s second largest factory owner’s look into his own future and learned how the 25 locally licensed manufacturers will try to compete after a plethora of determining factors reveal themselves in the first year after the total phasing out of the quota system under the Multi-Fiber Arrangement.

The agreement, born at the Uruguay Round of Talks, also eliminated the old General Agreement for Textile and Trade and created the World Trade Organization in 1995.

A Timeline for the Industry

SGMA executive director Richard A. Pierce, who moderated the program, first introduced Rexford Kosack, an attorney in private practice, to provide the audience with a history of Saipan’s garment industry. Kosack was uniquely qualified to chronicle the industry, as the former CNMI Attorney General and head of the Office of Trade Counsel in 1986-1987. Kosack authored the Report to the Governor on Policy Alternatives for the CNMI Garment Industry.

It was the Policy Alternatives for the CNMI Garment Industry that outlined the basis for the later creation of the CNMI’s own version of a voluntary restraint and quota system; the still existing garment moratorium legislation that limits the number of factories, and factory employees, on the islands of the Northern Marianas.

As head of the Office of Trade Counsel, Kosack, and then Gov. Pedro P. Tenorio, are regarded by many to have stopped a federal threat to eliminate the industry and/or stop any chance of having the United States impose foreign country production quotas on the Commonwealth as early as 1986.

“On a note of optimism, the CNMI garment industry has survived several crises through wise stewardship of their industry and careful local government regulation…,” said Kosack.

Global Perspective

Next up was Douglas C. Rogers, vice president for Business Administration of Polo Ralph Lauren Sourcing Company Ltd., who spoke on behalf of his company’s long-term relationship with the CNMI, and as a U.S. brand name buyer in the worldwide marketplace.

Rogers outlined his company’s sourcing system, and like most buyers and retailers that exist in a highly competitive world of cost-conscious demanding customers, retailers most often maintain their relationships with their suppliers as long as cost, quality, deliverability and reliability are met. Saipan has met those expectations until today.

Rogers explained the impact that the quota elimination will have on their sourcing guidelines, and pointed out how China, with the world’s greatest potential for growth, will surely place pressure on many buyers to source a greater share of their orders from there.

Broken into two separate timeframes, from 2005-2008, and after 2008, Rogers anticipated that petitions being filed before CITA would limit China’s share of the U.S. domestic market, and therefore bring some short-term relief to other countries and Saipan. After 2008, this would be moot, as that ends petition filing before CITA.

Rogers ended by outlining—as his experience has offered a global perspective—possible solutions that Saipan may want to consider as a way to protect its valuable garment industry.

Focusing on wage rates, tax burden and a reduction in the value-added requirement for export under the CNMI’s trade incentive with the United States, Rogers said: “It’s all about staying competitive, and if not, then all you have to do is pick a date when Saipan manufacturing is over.

Ground Zero Perspective

James C. Lin, a 20-year Saipan resident and owner of United International Corp., a company with over 1,800 employees where there used to be 2,400, and chair of the Saipan Garment Manufacturers Association, focused on demonstrating, through his company’s performance over the past four years, what has happened to the industry’s viability.

Lin showed how styles of production have changed as a result of competition, how his workforce has had to be reduced, and how sales versus wage costs have greatly diminished his company’s profit, therefore, competitiveness.

Both Lin and Rogers expressed a desire to remain doing business together as long as they can, but both acknowledged the reality of what is at hand with CITA’s petition processing, a China and India that no one can gauge how long it will take to fully develop for sourcing for mainland buyers, and what will happen with the CNMI variables in local costs.

SGMA’s Pierce concluded the presentation by illustrating the industry’s contributions to the CNMI, its reduction in performance in sales and tax revenues and showed what any further reduction in sales would translate to in terms of spin-off revenue to local businesses, tax contributions and jobs.

An announcement was made that the SGMA and the Chamber of Commerce will offer another round of discussion before the CNMI Legislature in the next month, with new buyers from Asian sourcing offices to present their opinions and advice in hopes that they can continue doing business with the CNMI while prices, quality and performance are still competitive.

SGMA is comprised of 25 licensed apparel manufacturers on Saipan. The industry accounts for nearly 16,000 jobs directly in the factories and yields a third of budget revenue for the Commonwealth government. (AP)