Letter to President Bush Regarding Strong Dollar

Print Version

 
Published: June 11, 2002
 

The President
The White House
1600 Pennsylvania Avenue, NW
Washington, DC 20500

Dear Mr. President:

The undersigned organizations are writing to describe the devastating impact that the over-valued dollar, now at a 16 year high, is having on the U.S. textile sector and to urge the Administration to take immediate steps to bring the dollar back down to normal, historic levels.

As you know, the U.S. textile industry is suffering its worst economic crisis since the Great Depression. Since the dollar began to surge in value in 1997, over 175,000 textile workers have lost their jobs and over 215 textile plants in the United States have closed.

The Asian currency devaluation in 1997-98 and the "strong U.S. dollar" policy instituted at that time are the root cause for this devastation. As of last year, the dollar had increased in value by an average of 40% against the leading Asian textile exporting countries. Prior to the dollar’s surge, the U.S. textile industry was enjoying some of its best years in history and recording new highs for shipments, profits and exports.

Since that time, the strength of the dollar has allowed Asian exporters to cut their prices by an average of 23% and caused Asian textile and apparel exports to the U.S. to increase by an astonishing 6 billion square meters, an increase of 65%.

As a result, U.S. textile profits have virtually disappeared, shipments have declined by 25% or $12 billion, exports have fallen by $2 billion and a swath of misery has spread across the Southeast. (see below)

This impact has hit not only domestic textile manufacturers but cotton and wool growers, textile machinery suppliers and man-made fiber manufacturers. It has also devastated small towns across the Southeast that have depended for generations on domestic textile manufacturing.

In addition, the problem of the over-valued dollar impacts virtually every manufacturing and agriculture sector in the United States. The National Association of Manufacturers estimates that half a million manufacturing jobs have been lost in the last 18 months just from lost export orders. That figure does not include hundreds of thousands of jobs lost because of a surge in artificially low-priced imports.

We also note that the International Monetary Fund (IMF), the Organization for Economic Development (OECD), the European and Canadian Central Banks and even members of the Federal Reserve in the United States have all expressed alarm over the continuing rise in the dollar’s value.

In February, despite stagnant economic activity, rising imports and a dramatic jump in the current accounts deficit, the Federal Reserve reported that the dollar had hit a new high, with a 31% increase in value against the world’s major currencies since 1997.

It is clear that economic fundamentals are being overridden by a belief in the market that the U.S. Treasury will act to support a "strong dollar." As we have described, this policy is now having a devastating impact on the textile sector.

The last time the dollar surged out of control occurred was in the early 1980’s during the Reagan Administration. At that time, Treasury Secretary Jim Baker took strong action, in concert with other major trading nations, to restore the dollar to sound, stable levels. That action set the stage for over a decade of dollar stability and U.S. export growth.

We firmly believe that for the textile crisis to end and for the industry to return to health, the United States government must act to return the dollar to its normal, historic range. We strongly urge you to act quickly to accomplish this.

Thank you very much.

Sincerely,

American Textile Manufacturers Institute
Northern Textile Association
Georgia Textile Manufacturers Association
The Association of Georgia’s Textile, Carpet and Consumer Products Manufacturers
Alabama Textile Manufacturers Association
North Carolina Manufacturers Association
South Carolina Manufacturers Association
National Cotton Council
American Cotton Shippers Association

cc:
Donald Evans, Secretary of Commerce
Paul H. O’Neill, Secretary of Treasury
Robert B. Zoellick, Office of the U.S. Trade Representative


"Strong Dollar" Policy Devastates U.S. Textiles
Props Up and Supports Competitive Asian Currency Devaluations

The textile industry, one of the largest manufacturing sectors in the United States, employing almost half a million workers, has been devastated by the rise in the value of the dollar.

Last year, 116 textile mills were closed and 67,000 workers – 13% of the sector’s entire workforce – lost their jobs. Since the dollar began its rise in 1997, 177,000 textile jobs have been lost and 215 textile mills have been closed in the United States.

Price pressures that began with competitive Asian currency devaluations in 1997 and a strong dollar policy since that time have caused a 4-year cycle of deflation in U.S. textile prices.

As a result, since 1997, near-record industry profits have turned to losses and losses have turned to mill closures, job layoffs and textile bankruptcies. The dollar’s relentless rise has been a key factor in plunging the industry into its worst economic crisis since the Great Depression.

A number of the country’s largest and most modern textile firms have gone bankrupt – including, during the last six months, Burlington Industries, Guilford Mills, Malden Mills, CMI Industries and Galey & Lord.

Day and Night for the Industry: 1997 vs 2001

Prior to the dollar’s rise, the industry was healthy and growing. In 1997, industry fiber consumption was a record 17 billion lbs, industry shipments were a record $84 billion, capital expenditures were a near record $2.7 billion, textile exports (including cut pieces) were almost $17 billion, a new record.

Since that time, the dollar’s relentless rise, particularly against the currencies of major Asian exporters, has shattered the competitive structure of the industry, causing a huge import surge while collapsing major export markets.

Over the past five years, the dollar has appreciated in value by an average 40% against the top ten Asian textile-exporting countries.(1) The dollar has also risen strongly against the euro and the Canadian dollar.

As imports have surged (see box), major textile export markets have collapsed. Since 1997, U.S. textile exports to Asia have fallen 26% while exports to the EU are down 27%. Textile exports to the industry’s two largest markets, Canada and Mexico, fell 8% and 13% last year.

(1) Includes an appreciation of the dollar of 41% against the Korean won, 47% against the Pakistani rupee and 76% against the Indonesian rupiah. China, has de facto devalued by sharply boosting its "export tax rebates" to all time highs.

Dollar’s Rise is Key Cause of New Destructive Cycle in Textiles

1. As Asian Currencies Fall, Asian Prices Drop

Change in Prices During:

Stable Dollar

(91-96)

Over-Valued Dollar

(97-01)

Asian yarn

6%

-27%

Asian woven fabric

38%

-14%

Asian knit fabric

4%

-38%

Asian apparel

3%

-17%

2. Asian Price Drops Cause Asian Import Surge (millions of units)

Change in Imports During:

Stable Dollar

(91-96)

Over-Valued Dollar

(97-01)

Yarn (kg)

9

40

Woven fabric (sme)

-54

159

Knit fabric (sme)

58

57

Apparel (doz)

64

220

3. With Prices Way Down and Imports Surging, U.S. Textiles Are Devastated

Change During:

Stable Dollar

(91-96)

Over-Valued Dollar

(97-01)

U.S. plant closings

n/a

215

U.S. textile shipments

$7 billion

-$13 bil

U.S. textile exports

$6 bil

-$2 bil*

U.S. textile job losses

-36,000

-177,000

Sources: Import price and volume data – USITC; plant closings – ATMI; textile shipments and job losses – Census; textile exports – Dept. of Commerce. *decline in 2001.

For more information on the impact of the over-valued dollar on U.S. textiles, click on "the textile crisis" tab at www.atmi.org

For information on the impact on U.S. manufacturing, go to www.nam.org and click on "International trade issues"