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Doomsday scenario unlikely, says CEO

Even if quotas disappear on schedule in 2005 — and he's not certain they will — Mackey McDonald, chairman and CEO of VF Corp., parent of Wrangler jeans, said he's not expecting a flood of textiles imports into the United States.

Since American textiles and apparel manufacturers only own a 7 percent share of the U.S. market, and exporting nations the other 93 percent, there's not much share left for them to grab, he said. But McDonald doesn't think the government will stand by and watch textiles quotas disappear, he told the audience at the Financo seminar.

"Textiles and apparel totaled 13 percent of the entire 2002 U.S. trade deficit of $48.4 billion," said Mackey — at $6.3 billion. "That's enough to trigger some federal government action."

Highlighting the shrinking of the American textiles industry over the past decade, McDonald pointed out that in 1992, American manufacturers held a 49 percent share of the U.S. market, which has dwindled to a 7 percent share.

Illustrating what's happened to an entire industry, McDonald said that in 1999, VF produced about 46 percent of its products in its U.S. plants. In 2003, VF was producing only 6 percent of its goods here. By 2008, he said, it will be down to 3 percent.

If the quotas do disappear on schedule, China may be the biggest winner, but it's not the only game in town, he said. "Indonesia, Cambodia and Vietnam, Hong Kong and Macau, India, Pakistan, Bangladesh, Mexico, and the Caribbean, they all pick up share. They are all low-cost, quick-response producers. In the next few years, you will see a lot more coming out of the Caribbean."

While 30 percent of VF's products were produced in Asia in 2002, 45 percent were made in VF-owned plants in the Caribbean and Mexico. But the scales are tilting in favor of Asia, and by 2008, he thinks, Asia's VF share will grow to 45 percent, while the Caribbean and Mexico will decline to 32 percent.

Even within the Asian bloc, he noted, market share continues to change hands.

As the global playing field changes both size and shape, VF's action plan is a moving target as well, said McDonald, as it evolves its strategic relationships from outright sourcing, to partnerships, to equity-stake joint ventures.

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