China clothing maker to locate in Arkansas, hire 400

Little Rock preferred site for plant; deal has $2.7M in incentives

Suzhou Tianyuan Garments Co. will be the first Chinese company to manufacture clothing in the United States and it will do so in Arkansas, according to an announcement Thursday.

It was the second announcement in six months of the intentions of a Chinese company to locate a plant in Arkansas. Tianyuan has agreed to hire 400 full-time employees at an average wage of $14 per hour. It manufactures clothing for Adidas, Reebok and Armani at five factories in China.

Arkansas, like many other Southern states, has lost thousands of textile and clothing manufacturing jobs to lower-paid workers overseas.

Gov. Asa Hutchinson, who left for China on Saturday with the hopes of attracting another Asian company to the state, made the announcement Thursday via videoconference. In April, Sun Paper, another Chinese company, announced it would build a $1 billion pulp mill in Clark County near Arkadelphia.

Tianyuan officials did not participate in the videoconference, which occurred late in the evening in China.

"In previous decades, we have lost manufacturing certainly to Mexico, we've lost manufacturing to China," Hutchinson said. "Now we see that same manufacturing wanting to return to the United States of America."

The governor said Little Rock is the preferred location for the $20 million investment, but the company is not obligated to locate in the capital city.

Arkansas has agreed to more than $2.7 million worth of economic development incentives, and Little Rock and Pulaski County have agreed not to charge the company up to 65 percent of its property tax obligations, according to an agreement signed by state officials and Tianyuan's president.

Arkansas Economic Development Commission Director Mike Preston said during the teleconference the company wanted access to the North American market.

Hutchinson said the deal was driven by Arkansas' central location in the hemisphere and in the United States, as well as slowing economic growth in China.

"The Chinese economy has matured to the extent that they want to look beyond simply the consumer market here [in China]," Hutchinson said. "They want to tap into the consumer market across the globe."

Likewise, Sun Paper wants to move into Arkansas because of the availability of trees, the governor said.

Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas at Fayetteville, said in an interview that the economic growth in China has lifted wages there while worker pay has remained relatively steady in the United States.

And while China's economy is still growing, that growth has slowed, so the market for apparel and other products may be more lucrative in the United States than in China. That's despite the fact a stronger dollar makes it more expensive to buy goods from the United States and less expensive to import them.

"Companies are always looking to be in the right place, to have the best access to their market at the lowest cost," Deck said. "The Chinese consumer may not be the target demographic in the way that they have been in the past."

During the videoconference, Preston said Bentonville-based Wal-Mart's Made in the USA campaign is also a driving factor for companies locating domestically.

"That's something that's taking effect over here," he said. "It's getting a lot of companies interested in doing business with Wal-Mart, knowing that Arkansas is a good place to have that manufacturing."

Manufacturing as a percentage of Arkansas' economy continues to decline, Deck said. Even if the value of the goods made in Arkansas was holding steady, fewer workers would be required to make them because of increased automation.

"Anytime you see job creation in the manufacturing sector, it's very surprising because manufacturing has become so efficient -- so amazingly efficient -- that we just don't create as many jobs even if manufacturing output is moved to the state," she said. "You just don't see the investment dollars creating as many jobs anymore because those dollars go toward these very high-tech machines."

Hutchinson called Tianyuan "highly automated."

Arkansas, like other states, has lost thousands of textile and clothing manufacturing jobs to foreign competitors over the past several decades.

According to data from the U.S. Census Bureau, Arkansas employed about 10,000 people in textile mills, textile product mills and apparel manufacturing in 1998, the earliest year that such data is available online.

In 2004, about 4,000 people worked in the industry.

A decade later, the number had dropped to between about 1,400 to 2,000 people.

"Bringing garment manufacturing back to Arkansas is probably met with some initial skepticism because everyone thinks, well, we've lost shoe manufacturing, we've lost some of our apparel industry in the past," Hutchinson said.

For example, in 2001, Aalfs, a maker of private-label bluejeans for J.C. Penney, Tommy Hilfiger and others, cut about 750 jobs in Mena. Munro & Co. of Hot Springs, which made shoes, said it would cut 260 jobs. Capital Mercury Apparel Ltd. laid off 140 people in Salem and 35 to 40 people in Gassville.

Fruit of the Loom, the second-largest employer in Osceola, told its 793 employees it would close its then-13-year-old plant in 2000.

Crompton Mills, a longtime textile plant in Morrilton, closed and put 1,100 people out of work in 1985. The town was hit again in 1999 when Levi Strauss & Co. pulled out of the town to use foreign manufacturing, costing 600 jobs.

The North American Free Trade Agreement, or NAFTA, which went into effect in 1994, was widely blamed for the loss of clothing and fabric manufacturing jobs to Mexico, according to archived news reports.

But Kaye Crippen, an associate professor of merchandising, textiles and design at the University of Arkansas at Pine Bluff, said the industry's exodus started well before the 1990s because wages were so much cheaper elsewhere.

When Asian currencies collapsed in the late 1990s, products there became cheaper. China also joined the World Trade Organization in 2001, which eliminated textile quotas by 2005.

Also, automation, which helps the United States compete with cheap labor elsewhere, has not affected the clothing industry as much as other manufacturing, Crippen said.

"We don't have robots so much in apparel manufacturing as we do automated machines," she said. "It's low-tech and it's always been highly labor intensive, so that's one of the reasons that high labor costs were so important in driving it offshore."

As such, training a workforce will be an issue, but she hopes the university can help train local people seeking jobs.

News reports indicate that some new fabric plants have opened in North Carolina and South Carolina and elsewhere in the South, but Lloyd Wood, spokesman for the National Council of Textile Organizations, said the textile side of the business is highly automated, unlike clothing manufacturing.

Still, cheap energy, lower transportation costs, access to cotton and, most importantly, shorter turnaround times are helping both textile and apparel manufacturing in the United States, he said.

Wood said Adidas is opening its own factory in Georgia to make shoes. According to a news release from Hutchinson, Tianyuan currently makes 90 percent of the garments under the Adidas brand.

"We have some advantages that people might not think about," Wood said.

Asked why the new apparel jobs hadn't been targeted at the Delta -- which sustained some of the heaviest textile job losses -- Hutchinson said there are Chinese apparel manufacturers looking at eastern Arkansas and the Delta.

"Those are ongoing discussions," he said.

The governor called Thursday's job announcement an opportunity.

"I think it's probably an indicator of more people coming back," Crippen said of Tianyuan. "I'm not quite sure where it's all going to go, but this is a major announcement."

A Section on 10/21/2016

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