AAFA Government Relations Committee & Annual Sourcing Conference
I had the privilege of attending the AAFA's Government Relations Committee meeting in Washington DC last week as an observer. So, some observations: whether it's NAFTA, or what I think of as the 'lottery actions', the section 301-201-232 actions --- all things the administration can do on their own without Congressional review or approval (they remind me of a lottery not only because of the numbers but because the odds against winning are astronomical), no one on the committee or from the US Trade Representative's office knows exactly what is going to happen. Why not? Because the administration could change their minds and decisions at any point in time (as they did with the steel and aluminum tariffs this week). What was great, though, was that the AAFA Executive Committee voted to "come out swinging" in the words of CEO Rick Helfenbein. So, the AAFA hit hard in the press and in their outreach efforts to the administration and Congress on three things: (1) we're in favor of the administration's position on protecting US intellectual property; (2) nobody ever, ever wins a trade war; and (3) not us! Rick pointed out that apparel, footwear and accessories make up only 6% of US imports but we already pay 51% of all import duties! It was noted in the meeting that, while clothing and footwear were not only the original proposed list of categories for the first $50 billion in tariffs, sewing and embroidery and other industrial equipment used to produce apparel in the US was on the list! Not only would this negatively impact US manufacturing and jobs (and raise costs to consumers), it would hit those manufacturers who, under the Berry Amendment, provide made in USA uniforms, footwear and supplies for the US Military. Anyway, proud of the AAFA (and, separately, SPESA, who just submitted their own comments to the USTR's office).
We heard from Clete Williams who is special assistant to the President for International Trade Investment & Development. All due respect to Mr. Williams but, in his 30 minutes of comments and Q&A, he said close to nothing. Probably not his fault, though, because if he were to get out in front of his boss, he would probably be next one through the White House’s revolving door. He did note that to Mr. Trump 'America First' does not mean 'America Alone' and he stated that the goal of the administration’s tariff actions was to change behavior in a way that would avoid injury to US companies and consumers. Nicole Bivens Collinson of Sandler, Travis & Rosenberg astutely questioned why we would tax the American consumer in order to ‘punish China’.
We heard from John Leonard from US Customs and Border Protection who are responsible for policing our trade policies. He noted that over 41% of CBP tariffs ($13.5 billion) were collected from the textile/apparel/footwear sectors last year. Those tariffs were paid by 78,000 discreet importers who brought in merchandise totaling $121 billion in value in 2017.
Jim Ellis of BIPAC provided an extremely detailed 2018 election update down, in many cases, to the district (or as we say in my home state, Pennsylvania, the “re-district”) level. All in all, despite Trump’s troubles, Republican congressional retirements, redistricting, and passionate anti-Trump movements, Ellis was skeptical that the Democrats will gain majorities in either the House or the Senate. Then again, we’ve got a long way to go until November.
At the Sourcing Conference the next day, John Lund, chief supply chain officer at Chico’s (and brilliant, Renaissance man PHD who does not come from our industry), kicked it off talking about the ‘trust penalty’ and the ‘trust dividend’. When trust goes down (between brand/retailer and supplier), speed goes down and costs go up; when trust goes up, however, speed goes up and costs come down. Sounds simple, but so true. He noted that the whole concept of “supply chain” was antiquated because a chain is linear (and liable to break at its weakest link). Instead, he proposed that we think in terms of supply “ecosystems” which are composed of collaborative relationships and partnerships.
Angie Lau, CEO of HK-based intimates maker Clover Group, had lots of examples of the innovations they’ve brought and keep bringing to our industry. Developing product in a new fiber called Blue Matter, made from chitosan, which is extracted from shrimp and crab shells, means product that is biodegradable, hypoallergenic, and as soft as silk. She calls herself “digi-forward” and talks about their “bra-storming” sessions. Another innovation is a garment dyeing process called Go Color. Previously, bras, with 16 different components, required 16 different lab dips. Their process dyes the various components of different materials together in a finished bra but achieves uniformity of shade through all of them, requiring only a single lab dip.
In a panel on Innovation and Technology in the Americas, Juan Zigelboim, president of TexOps in El Salvador (and AAPN board member), spoke of “elevated collaboration” enabling not only speed to market but reduced risks as well. He spoke of why they invest in yarn on behalf of their customers (as opposed to greige goods) to achieve that speed because that gives him the ultimate flexibility, it can be re-purposed for multiple clients, and it represents only 2% of the MSRP of a garment.
In a session on “Preparing the Workforce of the Future”, Ronnie Start from FIDM kicked it off with “new is now”. Aaron Ledet of VF talked about the deficiencies in technical design today when previously nearly everyone involved in product had a manufacturing or engineering background. But even more importantly, he discussed the need for critical thinking skills and the need to learn how to ask “really good questions”, noting that behavioral skills are much harder to teach than technical skills. That led to a great follow-up comment from Ryan Lynch of BSI (British Standards): when assessing people to hire, he puts the candidates in a room with no doors and windows (figurately, not literally); whoever can get out, he hires. Again, it’s not about technical training but about critical thinking skills.
We also explored blockchain, or distributed ledger technology, and its potential benefits for so many parts of our industry enabling better transparency, trust and security, assisting in dispute resolutions, and eventually enabling paperless trade. We heard about a new IBM-Maersk joint venture doing just that. Jonathan Johnson from Medici Ventures talked about blockchain replacing traditional “trust brokers” like banks, factors, government agencies and agents, with “trust by technology”.
All in all, an extremely productive and insightful two days in Washington (and, maybe best of all, I got have dinner with our daughter!). Thanks, AAFA!