Jul 02, 2025
On June 10, The Capitol Forum spoke with Beth Baltzan, Senior Advisor at The Capitol Forum and former Counselor for Trade and Investment at USTR, and Davis Warlick, Chief Operating Officer at Parkdale Mills, to discuss national security implications of the textile and apparel industry and fraud in the cotton supply chain. The full transcript, which has been modified slightly for accuracy, can be found below.
NEIL TRACEY: Hi, good morning and welcome to our Conference Call on the “Textile Ecosystem in the Carolinas and Central America”. We’re going to be covering today the sort of national security implications of the textile and apparel industry and fraud in the cotton supply chain.
I’m Neil Tracey. I’m a Correspondent here at The Capitol Forum. And I’m joined today by my co-host, Beth Baltzan, who’s a Senior Advisor at The Capitol Forum. Before coming to us, Beth was the Counselor for Trade and Investment at USTR, following a whole host of different roles in trade policy.
Beth and I are joined today by Davis Warlick, who’s the Chief Operating Officer at Parkdale Mills, which is the world’s leading manufacturer of spun yarns. Davis brings a deep experience from a company that has been really good driver of innovation in textile manufacturing for over a century and really has placed a strong emphasis on research and development.
And my understanding, and Davis, correct me if I’m wrong, is that the vast majority of Parkdale’s operations are in the U.S., but Parkdale also operates Summit in Mexico and Central America. So, speaking with Davis is really going to offer us, I think, a unique perspective on the evolving challenges in the cotton and apparel supply chain. So, I’m very excited for this conversation.
Beth and Davis, thank you so much for joining us.
DAVIS WARLICK: Neil, thank you for having me. I’m honored to be here.
NEIL TRACEY: Thank you. Thank you for coming. Beth, maybe I’ll kick it over to you if you want to start out and ask Davis. I know you had some ideas.
BETH BALTZAN: Yeah, thanks so much for that introduction, Neil. Great to see you as always, Davis. Davis, I wonder if you could help us, a lot of Americans and people generally, I don’t think appreciate that we still have a robust textile and apparel industry in the United States. And a lot of it is right in the Carolinas where you are, and you’re an important part of it. I wonder if you could basically give us a primer on textile and apparel manufacturing in the U.S.
DAVIS WARLICK: Sure. Textile is everywhere. It’s long been a robust industry in the U.S., both today and throughout our history. The United States has been actively involved in it for hundreds of years, and over that time, the industry has evolved significantly. We have evolved as well. Our company, Parkdale Mills, we were founded in 1916 here in Gastonia, North Carolina. Most of our mills were in the Carolinas over the last 100 years, but now we’ve grown more globally. We operate textile manufacturing facilities in six countries. We operate facilities in seven states. We’ve diversified beyond just being a commodity yarn and textile manufacturer. Today, we’re not only involved in yarn and textile production, but we’ve also expanded into cotton-based health and beauty products, as well as advanced materials.
We are one of many diversified, textile manufacturers in the US. We are a part of a pretty vast supply chain. In the United States, it truly is end-to-end. The US textile industry employees over 500,000 people. Our industry makes over 8,000 different products for the United States military and we export products globally. It’s definitely not your grandmother’s cotton mill anymore. I mean, this is an extremely high-tech industry that makes applications for the aerospace, for military, for apparel, of course, home and bed products, automotive.
So, it really covers a wide range of products and sectors. And we do that very well in the United States. Don’t let anyone tell you that this industry doesn’t.
BETH BALTZAN: Thank you for that. So, maybe we can go back to the pandemic. Because all of a sudden, we found ourselves unable to access masks, personal protective equipment. People on the front lines of the health crisis were dying. How did your industry respond?
DAVIS WARLICK: Yeah, that was a really difficult time for everybody in this country. But if there was one thing I was so proud to be a part of was the response we had to the crisis as a company and especially being a part of the U.S. textile industry during that period of time.
You know, just like many things that we started to realize, if you offshore everything, including PPE, in times of need, it’s going to be very difficult to verticalize and to respond. And I think that’s one of the reasons that the U.S. textile industry historically has always been a backbone to this country in defense, either in healthcare and military.
Our business was started in 1916, making parachute threads for the World War I effort. And every war and every crisis since in the United States, our company and the US textile industry has stepped up and answered the call. The pandemic was no different. We went from not being supply PPE, but unable to access the most basic inputs of PPE, the man-made fibers, the non-wovens, the raw materials that go into PPE. Most of those critical supply chains were established in Asia. And when you had a global pandemic like we did, that overreliance put US citizens at risk.
Basically, overnight with the help of the Kim Glas of the NCTO, and many, many other textile companies in the US and with the help of the administration – pulled together a response that within days had the entire supply chain end-to-end across the entire country, making face masks, making gowns, making swabs, testing swabs. One of our companies, U.S. Cotton, was making the diagnostic COVID swabs.
Some of the companies that competed generally in their markets were all working together as one to pull together that supply chain. I think a lot of the workers in the American textile industry were heroes during that period of time because of the response. So many industries get their shine when times are good – but you find out how important industries are when times get bad.
BETH BALTZAN: That’s amazing. So, when we talk about manufacturing in the United States, and in the last 10 years, we’ve seen a real focus on too much of manufacturing in the United States being offshored, and that we need to have manufacturing here at home.
I’ve been surprised, because in the conversation we’ve had over the last, say, six months, the conversation around manufacturing from a lot of economists and academics seems to go out of its way to say that we don’t need to make textiles and apparel in the United States, that it is your grandmother’s industry, that these are low-tech jobs that we ought to offshore and focus on other things. And I wonder what your response is to that.
DAVIS WARLICK: You know, it’s very relevant that you brought that up because we’ve heard it in the news and the media recently about our industry in general. And I think there’s just a general misperception about the industry, which is unfortunate and false.
I think of the U.S. textile industry as an innovation powerhouse. I think of it as a tech industry. And you say, well, why do you think that? I would say, come visit one our facilities and you can see for yourself. Or in general, let me tell you about the amount of polymer and fiber technology, high tech fabrics, that this industry is creating and people start to realize it’s a lot more than just yarns and fabrics for socks, that this industry is making highly technical applications for many industries – we a huge supplier to the United States military, aerospace, and automotive.
You think about some of the great innovations that we all benefit from today started in the United States and started with innovators in textile companies. You know, you look at polyester, nylon, Kevlar, carbon fibers, all of these innovative products that keep our frontline workers safe, line autos, that we wear daily, that fill our closets. A lot of that innovation was started here in the United States. And unfortunately, the innovation was created here but now some of the supply chains have been built elsewhere.
But I think back to your point, it is so critical to have a U.S. textile manufacturing base. I mean, it is a critical industry. And I can’t say that clearly enough. U.S. textiles is a critical industry, not just for the response with the military and all those products, but it’s a huge employer with 500,000 employees throughout the United States. We are the second largest textile exporter in the world, our industry is. And so, the US industry is exporting goods. Our company, we are exporting into the CAFTA region, into the Western Hemisphere, into Mexico, but also a lead supplier in the US. Every job that we create in the US textile industry has a three-to-one multiplier. This industry is a job creator here in the US, we are a large exporter. Not many US industries can say that – we can. We are a critical industry. And I think having a strong base, a strong industry here in US is crucial. Let me quote Andy Warlick, who’s our chairman. He talks about Baskin-Robbins ice cream. And he says, hey, look, for Baskin-Robbins to be innovative and have all the flavors that it has when you walk in the door, they have had to make and sell the vanilla and the chocolate flavors very well. Because those are the primary flavors that help create scale and the opportunity for investment and the innovation for the new flavors you may need or like.
I use that example because, yes, we can produce very low-cost inputs for socks, for hosiery, for T-shirts. We do that well as an industry today and should protect that, because if we don’t have that base load, we’re not able to do the innovation that I mentioned earlier, like fiber and polymer technology for aerospace, textiles for the medical industry like consumable textiles, body protection improvements, and light weighting technology with carbon fibers. All those innovative flavors in fabric and fibers are supported by the vanilla and chocolate flavors of product – they work together. They keep the industry strong and so you can lead in innovation and have the best talent.
BETH BALTZAN: So, does that mean for those who would say, oh, great. Well, we should have a textile apparel that focuses only on national security. Is that just not enough to keep the whole system going?
DAVIS WARLICK: I don’t think so. I certainly think that you have to have a strong domestic market. You want the best engineers, you want the best entrepreneurs, investing here in the United States. Again, this industry is a competitive exporter on many items outside national security products.
I’ll use my company, Parkdale, as an example. We have a large base load of commodity products we manufacture. We’re one of the largest yarn manufacturing companies in the Western hemisphere. We invest heavily in our facilities in automation. Beth, you’ve visited our facilities. You’ve seen the amount of technology, AGVs, robotics, that we have in our facilities. Those facilities can run commodity types of products at very low cost, as low-cost inputs within the apparel supply chain, textile supply chain.
But at the same point in time, one of our facilities additionally is making yarns for the military. It’s making yarns for upholstery fabrics that go into the automotive industry, for aerospace. And so, by being able to have the expertise built with that base load and to be able to be a part of a commodity, large scale supply chain allows us to invest in the technology and the automation to do those other critical components.
So, I do think that’s why in general, I 100 percent believe that the U.S. textiles is a critical industry. You know, we can’t make it here. How can we protect here? And to be able to make it here, we have to be able to have a level playing field globally to be able to produce those types of commodity types of products and the products that help spur the innovation.
NEIL TRACEY: That’s super interesting. Beth, I hope you don’t mind if I jump in quickly because this reminds me of a lot of different conversations that we’ve been having recently, really concerning labor as well and how if you offshore some of these jobs you were talking about it being — you need the engineers, right?
Can you speak a little bit more about how if you offshore some of these jobs, you lose that expertise and that labor and that doesn’t just come back like that. I think that’s an interesting point and it ties into a lot of things that I’ve been hearing.
DAVIS WARLICK: I think that definitely happens. I think if you look at just on the R&D side, something that we do currently today, our company spends a lot of money on R&D trying to create new polymer and fiber technology. An example is our patented CICLO, fiber technology. It will change the world – the technology is a gamechanger – but commercializing this product at first was difficult- because much of the expertise and equipment had gone overseas. So not only was it harder to develop, but we risked IP theft. So great US innovation in polymer and fiber technology gets more difficult to launch. That expertise that was here when you had companies like DuPont that were creating Kevlar and Spandex and polyester nylon, some of those innovative fibers that we all use today. If we want to create the next generation of great technology, we need to have the expertise and manufacturing capability here.
And so, I think if you don’t have a strong domestic industry then you won’t have the expertise nor the ability to launch the next greatest U.S. patented technology that could benefit all sectors, but just military or our frontline heroes.
So, we certainly don’t want to lose that as a country, which is why this industry is critical. However, we have seen a shift where certain countries in certain parts of the world try to verticalize the entire process, to access IP, and go about it within any means to do so. And when that happens, you aren’t just outsourcing for lower cost – you are printing a one-way ticket to the innovation, IP, and capabilities which aren’t going to return.
BETH BALTZAN: Davis, you used the phrase level playing field and I wonder if you could explain what you mean by that.
DAVIS WARLICK: Right now, with the media and everything that is going on politically today, you’re hearing a lot more about tariffs and trade, probably more than we have in 20 or 30 years. And level playing field can mean a lot to different people. But for us, just in our perspective, there’s nothing more that I want to do than create more U.S. jobs and support our workers in our facilities. We have the best, most efficient workers in the world yet trying to find export markets, new markets, to sell our products and compete fairly is challenging if there’s not a level playing field. We just need a fair, level playing field and we can compete. Many countries that produce and export similar products to us, receive lower duties and lower barriers of entry when they export to the US. When we try to export our products into those same markets, we are hit with higher duties, subject to VAT, and other taxes and costs. In some markets, our products are artificially higher cost because of things like currency devaluation. Which further distorts the playing field. Let’s use the hot topic of reciprocity. Shouldn’t our great workers in the US get the same shot to access those markets as the workers in those countries get to access ours, which is ours is the largest in the world? Reciprocity would at least level the tariffs and costs of entry to those countries similarly to what we experience when exporting to those same countries.
You know, trade and tariffs are being heavily discussed today. But this isn’t new for our industry.
Example, we saw a huge shift in trade that started in the 90s. The trade liberalization and globalization movement that saw things like China joining the WTO, this really impacted the U.S. textile industry. Every industry. We have had to fight and pivot to survive and adapt to these changes. This industry is resilient.
We started reinvesting back in technology and automation, understanding that maybe there wasn’t a level playing field moving forward, that there was going to be a new norm. That we would need to be that much better and efficient to be able to compete.
Where we saw opportunities in which the theory of reciprocity existed – we actually started investing. We started investing not only in the US but in the countries in which we established free trade agreements in which established trade rules, like rules of origin, would give US companies a fair chance. Where labor and environmental rules were required, like CAFTA and USMCA. Where Bi-lateral trade could be beneficial to both or all countries. Where rules and standards matched our values as US manufacturers – have had the confidence to reinvest in the US to serve those markets but additionally to build and invest in those countries.
BETH BALTZAN: I think in some cases, there’s an assumption that every domestic manufacturer only wants to make in the United States and doesn’t engage in trade policy. But you’re an example of a company that has been supportive of the right kind of trade agreement. You used the phrase rules of origin. For people who don’t know what that means, those are the supply chain rules that tell you essentially how much production has to happen in a combination of the United States and those free trade agreement partners, whether it’s Central America, whether it’s Mexico and Canada. And those rules were designed specifically for textiles to incentivize production in the region.
And that’s an example, I think, curious for your views about a tool that can create nearshoring opportunities, which is supposed to be one of the lessons from the pandemic. We want things closer to home for all sorts of reasons, that resilience piece, moving away from having these far-flung supply chains. Are you seeing that opportunity in other places? What is your experience with these supply chain rules? Are they holding tight? What would you like to see in that space?
DAVIS WARLICK: I would say it’s a huge priority for us to make sure that those free trade agreements, CAFTA, USMCA, and others keep and reinforce trade rules like the rule of origin, which ensure the countries and companies actively participating can benefit. Strong rules of origin is the key to success and must be maintained in agreements like these. This spurs investment and these tools allow companies to reinvest in these participating countries. This benefits all and can create more nearshoring opportunities. An example, we have an incredible cotton farming industry in the United States, which is fourth largest grower of cotton globally. In our supply chain, we buy 100% of our cotton from those US farmers, supporting those farmers and all of their vendors and communities. We convert that cotton into yarn. We export that into Central America, for instance, maybe Honduras, where fabric transformation occurs. And it comes back to the United States in the form of socks, of t-shirts – duty free. Many people and companies in this supply chain benefit.
This allows us to continue investing in our US facilities- because we know that these rules are established, like rules of origin, and the rules are being reinforced.
Likewise, we are investing currently in Honduras, which is a part of CAFTA. This facility will be highly automated and will be a part of that same value chain. We ship US grown cotton to this facility and the yarn must originate in one of the countries in the trade agreement. Without the rules and frameworks, we wouldn’t have the US investment nor the Honduras investment. It is critical that these frameworks exist and are being upheld – so the best practices in labor, environmental, and all the things that we value here in the United States, consumers value, are being followed and upheld.
Nearshoring can happen and can expand at great speeds if these rules continue and enforcement continues. The Western Hemisphere, CAFTA, USMCA, etc –can do a lot more than the basics in textiles, than socks and t-shirts. I think the Western hemisphere is a perfect place for brands, retailers and companies to be investing in – because of these trade agreements and the rules established. The Western Hemisphere has expertise, can achieve globally competitive costs, provides brands shorter lead times, better sustainability, and much better resiliency. And I also believe it is a great way to make reshoring to the US a reality – by taking more steps towards the Western Hemisphere first.
NEIL TRACEY: So, maybe this is a good time to segue a little bit into some of the challenges that you’ve seen in terms of enforcing those rules of origin, making sure that they’re being followed. Generally, do you see those rules of origin being followed? Or do you see any cotton coming in, or other products coming in, and sort of abusing those rules of origin?
DAVIS WARLICK: I can only speak for us. The supply chains we serve throughout the Western Hemisphere, like our domestic markets, USMCA, or CAFTA- all have rules established in which we comply with proudly. The fiber or the yarn in those instances must originate from the participating countries.
But if you want to discuss it more broadly, anytime that you have multi-step supply chains and globalization, it becomes very difficult, complex, to track transparency. I believe it becomes hard to be able to understand who, what, where the inputs are coming from. The ability to track this to prevent any issues and to catch any bad actors is very difficult. I know we have heard of many cases in other trade agreements in which commercial fraud is prevalent in which importers are not complying with the rules of origin and are doing so through nefarious tactics like falsifying certificates of origin, misclassifying the origin of raw material inputs in the qualifying garments, or simply creating fraudulent documentation to evade duties. There have been numerous reports that are public that describe this.
From our experience, we see many companies consistently doing the right thing. There are also companies that genuinely want to do the right thing — they believe they are — but sometimes a country or supplier within their supply chain isn’t aligned. And that can be difficult to catch, simply because of how complex these supply chains are. In textiles, for example, you might have fiber, yarn, fabric, cutting and sewing — multiple steps, multiple companies, and often multiple countries involved before a garment is finished. With that many moving parts, the complexity increases, and so does the risk. It creates opportunities for bad actors and non-compliant things to happen.
My hope is that customs enforcement continues to receive strong investment particularly in automation and compliance tracking. That kind of infrastructure helps support the companies and brands that are doing things the right way and making it easier to identify those who aren’t. With stronger customs enforcement, I believe we’d see a boom in nearshoring and a real opportunity for job growth here in the U.S.
Another area of concern and opportunity is the use of customs workarounds, particularly the de minimis rule. It’s become a major talking point on Capitol Hill. Right now, we’re seeing around four million packages coming into the U.S. every day duty-free, many of them apparel. As long as the declared value is under $800, there’s no duty, and those shipments often bypass CBP entirely.
The question is – shouldn’t these garments and their supply chains be held to the same rules and traceability standards that we’re expected to follow? In fact, some companies have built entire business models around exploiting this loophole — essentially creating a backdoor free trade agreement with the U.S., allowing goods to enter the market without oversight or accountability. Hopefully this administration is going to get that loophole closed.
NEIL TRACEY: Yeah.
BETH BALTZAN: Davis, could you explain just a little bit more what de minimis is? Because you live and breathe it every day. But I’m not sure other folks know exactly how it works or doesn’t work.
DAVIS WARLICK:
Sure. So, I am not an expert here so you will have to fact check me – but think of de minimis meaning small, minimal. So the when the law was put in close to a hundred years ago, it was basically saying let’s waive duties on these minimal, small shipments because these are low value. At the time I think it was for items under $1.00. So, when my grandmother took a cruise and brought back her puka shell necklace from Aruba – customs wasn’t fired up about collecting taxes on it. That was the spirit and intent- under $1.00.
The threshold remained low for many years at like $8.00 and then it moved to $200 in the US but then again in 2016 they took it to $800. This is not minimal. So all of these companies started taking advantage of the $800 limit and we saw a massive increase in undetected goods flood the country – a lot of it apparel. Today it is around 4 million packages a day entering under the de minimis rule. This is coming in duty free and without any inspection.
But let me also put this into perspective. We are the only large market that has done something like this. China for example, where most of the de minimis shipments are coming in from. China, If we ship similar goods from here to China – their de minimis threshold is $8. Ours is $800. This has basically created a backdoor free trade agreement with the US and companies have set up entire business models to exploit this. This hurts US workers.
BETH BALTZAN: So, that’s sort of what we’ve seen with Shein and Temu and those types of companies?
DAVIS WARLICK: Once they changed it to $800 and it became basically a free-trade agreement with the world’s largest market, ours, many companies are using this loophole to their advantage. It should be fair and go back to its original intent. This hurts US workers and US companies.
And what you risk in 4 million packages a day coming in without detection – goes back to what Neil asked about earlier regarding cotton. Yes – we have all read that there are parts of the world in which the practices used to farm cotton that may not be aligned with our values or practices in the US. This goes for labor and environmental as well. But, with a loophole that big, as de minimis is today, 4 million packages a day, that is a way for those practices to go undetected and to enter this market. US consumers wouldn’t be ok with many of these practices if a company did these in the US, so why should we be ok with importing those behaviors in? Loopholes like De Minimis allow that to happen here.
NEIL TRACEY: Yeah, can you spell out a little bit more some of those? Because I think that’s an interesting contrast with what you were talking with some of these CAFTA and USMCA providing rules that everybody has to follow in terms of labor standards and environmental standards.
Can you spell out a little bit more some of those bad practices that maybe you see outside of the USMCA or CAFTA in places like China? I know, like the Uyghur forced labor, obviously, is front of mind for a lot of people. Can you spell out a little bit more beyond that, what sort of labor and environmental practices sort of concern you within those supply chains?
DAVIS WARLICK:
Let me go back to the example I gave about our own supply chains, which is what I can speak to most directly. All of our cotton, for instance, our starting input, is grown here in the United States. That’s where traceability begins. In the U.S., we have the USDA, which classes every single bale of cotton grown in the country. They take samples from every pound of fiber, assign an identification number, and record specs like quality and origin. That information is passed along to buyers and enables us to trace raw materials all the way back to the specific farms and gins where they were produced.
Thanks to that, we receive documentation that allows full traceability of all raw inputs. When we export our yarns to countries within trade agreements like the USMCA, we’re required to meet what are called “fiber-forward” rules of origin. That means all raw materials including the cotton must originate from participating countries. The USDA’s classification system makes it possible for us to trace and comply with those rules 100%.
Under CAFTA, for example, the rule shifts to yarn-forward which means the yarn itself must be produced in one of the participating countries. Fiber and yarn represent the first and second stages of the supply chain, so these rules require a real investment up front from companies from the raw material all the way through the final production to ensure eligibility for duty-free access.
I believe these rules and frameworks work and they can be strengthened further through continued investment in technology. It is a big challenge today customs enforcement faces – in tracking the origins of inputs, you know which country they came from, which supplier was used, who the importer of record was. There’s a lot of opportunity for technology to streamline that process and support enforcement.
We’re already seeing industries explore blockchain and other traceability tools. I’d love to see those applied more in customs in our markets – especially to ensure that companies playing by the rules like ours who are investing, creating jobs are protected. The more tools they have, the more jobs that could be created here.
NEIL TRACEY: Yeah. Beth, I’d love to get your take on some of this too. Because when you’re speaking about this sort of trans-shipment of cotton, maybe getting thrown in and mixed in with cotton, that is USMCA or CAFTA compliant. How do you sort of work with other countries to try and make sure that your customs and border patrol and the sort of similar agencies in other countries are working together in order to address this issue? Because, I think, given your time in government, speaking to some of those sort of collaboration issues, I think that’d be very interesting to hear from you.
BETH BALTZAN: One of the real challenges we’ve encountered in trade over the past 10 to 15 years is shifting away from the idea that the purpose of customs and border protection is to facilitate trade. It used to be called the customs service. And sometimes you got the feeling that they were service oriented towards the importer.
And that meant there was a real devaluation of the enforcement side of the equation, especially as we had the war on drugs and then 9/11. And a lot of the attention was focused on issues other than whether people were cheating at trade. And in my experience, there was a high tolerance for cheating and we had to fight pretty hard to get people to realize that it was really, really hurting American industry, American workers, compromising our national security. So, that’s part of the reason I know that there’s a real tendency to dismiss manufacturing in the U.S. and to think that everything can be offshored.
So, there was just a whole way of thinking that had to change. And we had a fight in 2015 over whether the customs bill should be called the customs facilitation and enforcement bill. We wanted it to be called the customs enforcement and facilitation bill. So, that’s emblematic of that kind of fight.
And I bring that up because that’s a fight that we’ve been having in the United States. I’m not sure other governments are necessarily at that point where there is this real focus on cheating and addressing cheating because cheating is unfair.
This whole framework of using trade to find the lowest possible cost, whether that means you’re using forced labor or you’re ignoring your environmental obligations, you’re not enforcing your rules, really led a lot of people to turn a blind eye to that kind of cheating.
When we were in, we didn’t want to do traditional free trade agreements partly because the textile rules, thanks to people like Davis, are meant to really incentivize manufacturing among those trading partners. The rest of the industrial rules, except for maybe autos, are extremely leaky. So, you get a lot of content from non-partners. That’s not supposed to be the purpose of the agreement.
So, we said, coming out of the pandemic, we really need to rethink supply chains overall. We didn’t do those tariff cuts. What we wanted to focus on was some of these other issues. And what I really wanted to focus on was some of this custom stuff.
There was a step forward in USMCA to push for better customs-to-customs enforcement of the rules. That was a real step forward. What can we do with our other trading partners to continue to build that out? And in some of these developing economies, not being able to enforce at the border is depriving them of really basic revenue they need to run their governments.
So, we’re not there yet. There’s a lot more work that needs to be done. We were interested in blockchain as an opportunity to do that. It just takes a lot of elbow grease and it’s a different way of thinking than how the system has been hardwired for 30 years.
NEIL TRACEY: So, actually, both of you brought up blockchain. And I’d love to hear more about how that could be used to try and prevent customs fraud here. Because I’ll be honest with you, I still don’t totally understand it. So, if either of you could really jump in on that and maybe speak to how that could be used, that’d be incredible.
DAVIS WARLICK:
What I can speak to is this. We’re seeing incredible advancements in technology across many industries. That includes tools that put traceability right at our fingertips. The potential is there not just to track the origin of raw material inputs, but also to validate their volumes. For example, if you’re importing finished garments, there should be a clear record showing how many pounds or units of each input were required to make those garments. That kind of transparency would allow us to verify that the numbers add up that the inputs align with the outputs, and that every step of the supply chain is compliant. But that is hard to do today. But we should make it easier for customs to do this with technology. They have their hands full. This could help validate those rules of origin are being followed. I think when companies have confidence that the rules can be upheld and fraud can be detected- it gives companies assurance to keep investing in the United States, and in those countries which the trade agreements exist with those rules. Everyone knows the rules and the rules are being refereed and enforced. That’s why I care about helping our country with resources for enforcement. I think it can help create more jobs here in the US which I am passionate about. I believe it can level the playing field and be a win-win for everyone.
BETH BALTZAN: And what I had heard from someone from the outside who was really encouraging us to look at this is that there’s a way to compare export values on the outgoing side, import values on the incoming side, match those up and start to take a look at who’s being honest about what they’re shipping out of the country and what you’re bringing into the country.
So, that kind of technology where customs agencies across borders can work with each other to try to see who’s gaming the system, that seems like a real opportunity.
And I really want to stress, Davis, one of the things that struck me when we visited your facility was that label that you guys had on your product that allowed the tracing of the cotton all the way back.
And what we saw out of the pandemic, if you want to fix some of these choke points that were exposed during the pandemic, you need to have much more visibility into the supply chain than we have right now. And what we found, I thought we were going to have all sorts of tools to be able to learn that information. It turns out to be hard.
And some of the biggest companies in the world who told us they had first‑in-class supply chain transparency, once you get past those first three or four tiers, they actually don’t know. They’re relying on word of mouth or people filling out forms. Unless it’s conflict minerals. Conflict minerals, you’re required by Dodd-Frank to trace those.
So, there’s a big space there where we actually don’t know what’s going on, who’s making what, or what kind of labor and environmental practices are involved. So, if we can move and use technology to have much better awareness of what’s in the supply chain, we’ll be able to do a better job of tackling some of these problems.
NEIL TRACEY: Beth, I’d love to get your perspective on, you know, something Davis talked about in the beginning was the sort of, if you’re trying to import into the U.S., it’s very — not from CAFTA or USMCA — it’s very cheap, right? But if you’re a U.S. exporter and you’re trying to go to someplace else, there’s not really reciprocity in that sense.
One thing that we’ve talked about is having a sectoral approach to sort of trade in general. And can you talk a little bit about how having that sectoral approach and thinking about how the tariffs that you want to have on third‑party countries that maybe aren’t subject to one of your trade agreements, like CAFTA or USMCA, that have this fiber forward and yarn forward rule. Can you talk a little bit about how that sectoral approach could help solve that problem that Davis was describing?
BETH BALTZAN: Yeah, and this is where all the work that’s been done on textiles and apparel is really important, and in some respects can be a model for how we approach other industries. You talked about fiber forward, Davis, yarn forward.
When I started off a long time ago as a trade person, that requirement that the yarn originate in the trade agreement area was considered protectionist. So, the fact that you were trying to incentivize production here was labeled as something we shouldn’t be doing.
And now, once we were in and we put out some papers at the end of the administration on supply chains, we said, look at what’s so great about these yarn forward, fiber forward rules. You are forcing that stuff to be sourced in the region. That is promoting resilience. That’s promoting nearshoring for those agreements that Davis was describing.
So, when you look at a particular sector and you focus on what you want out of that sector, you figure out if there are problematic actors in that sector, in other countries, you can figure out how to structure the rules of that sector so that you’re solving for that problem.
And if you choose a sector, you’re not ending up putting yourself in a situation of, well, I need to do this for a resilient textile and apparel industry, but I must trade that off for agriculture or autos or pharmaceutical rules or investment rules.
And you’re really empowering yourself to respond to what is a very different era. We’re just not in –whether you want to call it the neoliberal era, the free trade era — we’re not in that era anymore. We have to be more thoughtful and strategic about how we go about these things.
The other thing I want to say is how important it is that Davis emphasized the export orientation of your industry. Because that’s a little bit unusual in the U.S. All these agreements are often sold as, this is going to be great for exports, great for exports. And the U.S. just isn’t a huge exporter.
My old boss, Ambassador Tai, used to say, our superpower is consumption. We consume, and that’s why everybody wants access to our market. So, that lets us say, okay, Davis, you’re export oriented. What kind of a tariff regime works for the textile and apparel industry, which might not be the same dynamic for a different industry where we consume most of what we make of that product here. And if we lower tariffs on that sector, we’re inviting a flood of imports that is going to be problematic for that industry.
So, it lets you have a much more targeted approach as we think about how we’re shifting from an old way of doing things towards something that is, frankly, probably just going to work better.
DAVIS WARLICK: Our textile industry in the United States is a large exporter. We are the second largest textile exporter in the world. And I think if you were to ask academics and all the talking heads that always have opinions about trade, and about our industry, I think they’re shocked when they hear that. I think they’re shocked to hear that our cotton farmers, our yarns, our fabrics are exported to countries that are normally considered lower cost than the United States. And we’re able to do it competitively when the rules are fair and where there’s rules-based trade agreements that are set up. This is an incredible industry. We feel like our industry can do it just as well as anybody in the world when that playing field is fair. Maintaining the strong frameworks established in CAFTA for instance, where rules of origin exist – can help us produce jobs and be exporters. We can produce here and export and be apart of the whole value chain, companies and farmers can -where this framework exists, like what we see in the Western Hemisphere.
So maybe we should stop thinking so much about East to West. We think more North and South. We think more about the Western hemisphere as the next great frontier. Listen, I think people are shocked when they heat that only 12 to 15 percent of what we consume in the United States, 12 to 15 percent of the apparel is imported in the Western hemisphere. That shows you how dominant the Eastern in Asia is in the apparel and textile supply chains. I would say over the last five to 10 years, I think we can all agree that the cost competitiveness of the Western hemisphere is now at parity or sometimes even better than some of the countries that for years and years we heard about in Asia.
If we were to shift our sourcing share from 12% – 15% to let’s say 20% which really isn’t a radical change when you think about it – I’m talking the entire Western Hemisphere the impact could be huge. Even that small increase to 20% could result in the creating thousands and thousands of jobs – yes here, in the United States, but also throughout the Northern Triangle and across the Western Hemisphere.
I believe the biggest gains would come in regions that already have established free trade agreements with the US— where the rules are clear and the frameworks exist. That kind of shift could drive significant investment in the region and in the US. Trust me, our company is a perfect example of that. Our US operations make product that stays in the U.S. but they also make products that export to CAFTA, to USMCA, etc. We’ve been able to invest over the last 15 years, close to half a billion dollars in automation, in innovation in the United States, solely in the United States, because we are a participant in these export markets where these trade rules are upheld.
NEIL TRACEY: One thing you said earlier, Davis, too, on the jobs, was that your industry is a three to one multiplier. Can you dig into that a little bit more? What do you mean by that?
DAVIS WARLICK:
Absolutely. I feel incredibly grateful — I love what I do, and I love this industry. We have an amazing U.S. textile sector. I’m passionate about being a manufacturer too in general. Because we don’t just make products, we innovate, we create jobs and careers and we invest in communities. Manufacturers, especially in textiles, are not only job creators- but we’re also job multipliers. So your question about 3 to 1 multiplier- yes in the textile industry the multiplier effect is three to one. That means if we hire one person say, a new engineer in our factory it creates three additional jobs elsewhere. Think about all the vendors, technology partners, part suppliers, and even local utilities and municipalities that support a large-scale operation like ours or other manufacturers. Some of our facilities are massive anywhere from half a million to over a million square feet. They require significant energy, raw materials, and continuous investment to run.
So Beth, for instance, our facility in Gaffney, South Carolina that you visited, it is a large facility, and it could consume every bale of cotton grown in the entire state – now we don’t because we source from many states – but you see what I am saying on the scale and impact. So that factory is supporting cotton growers, the cotton seed providers but then also the companies servicing the factory and the equipment.
And let me say this as well about being a manufacturer in the US that I am passionate about – our employees 40 to 48 hours a week of work at good wages and benefits. You look at other industries, like these service level jobs, you’re maybe getting 26 to 28 on average. And at those hours – they are officially not full-time, so they don’t qualify in some cases for benefits. And you’re hearing people talk about, I have to work two or three jobs at a time because of this economy. Let me tell you, you can get 40 to 48 hours working for a manufacturing company like ours, working as an engineer in a facility, getting higher pay, 40 to 48 hours a week, 401k, good health care benefits and a path to have a career not just a side hustle. A lot of the people that work in our company at the highest levels all started on our floor. Manufacturing in the United States allows you to do that. And so yea I have a lot of pride in being a U.S. manufacturer.
BETH BALTZAN: Davis, one of the things we had heard — this is maybe more of a comment, but you reminded me of it. Because a lot of people who are dismissive of reshoring, especially of textiles and apparel, think that these are really brutal, menial jobs.
And what you’re describing — but you’ll correct me if I’m wrong — is a combination of automation and job creation. So that you’re automating the backbreaking stuff that’s really hard on people. But by being able to automate that, you’re able to create jobs that are more value added. Do I have that right?
DAVIS WARLICK: Absolutely. And I go back to the example I gave earlier for the Gaffney, South Carolina facility in which I mentioned the cotton consumption. That facility, for what it produces per week, its capability to produce per week, back in the 80s would require over 1,000 workers full-time, 24-7, 365. We operate that facility with less than 150 a day. And the reason for that has been the constant reinvestment in technology. And instead of some of the processes that we had in the 80s and the 90s, early 2000s, we’ve replaced those processes with AGVs Automated Guided Vehicles, with robotics, with types of innovation that require engineers in a different skillset than in what we had required in the 90s and early 2000s. But now we hire people to work on that automation and work with the automation. And so, not only are we reinvesting on the equipment to make better quality, to have higher productivity, but we’re also reinvesting and changing the type of work and the types of skills that we need in those facilities. And that’s been constantly changing – but allows us to continue to hire and provide better, higher value jobs.
NEIL TRACEY: This has been fascinating. I’m trying to think if I have anything else that I need to make sure I ask. Beth, what about you?
BETH BALTZAN: I wonder, Davis, if you could talk, as we close things out, about the role of Parkdale in the community.
DAVIS WARLICK: Sure. Again, I can speak for Parkdale, but I think I speak for a lot of other American manufacturing companies. They’re deeply ingrained in the communities in which they operate. In some of the communities in which we operate, we’re the largest employer. And we take a lot of pride in paying good wages and providing benefits to people in those communities. The communities and our people are engrained in our culture for the past 100 years. If you walk around our office here, you see a lot of nameplates with 30, 40, 50 years of service in our company – and those people may have started in one of those communities but are here now and have been able to build an incredible career. I think that’s unique about our culture, but I see that in a lot of manufacturing companies. I see that in a lot of U.S. manufacturing companies that are fully committed to investing in their facilities, but also the communities, and creating careers and opportunities in those communities.
Our shareholders are deeply committed to the communities where we operate. Giving back is part of who we are. One example that comes to mind recently is with Hurricane Irene which caused significant flooding and damage at our Mountain City, Tennessee location. That entire region was hit hard. During that time, our shareholders created a fund to directly support employees affected. That fund helped cover essentials like food, pay bills, and be relocated. Every single employee who wanted to continue working was offered a chance to transfer to another Parkdale facility. And during that transition, we provided support for all of them to bridge the gap. Yea a hard time in that area. Had to step up when quite honestly, nobody in that area was getting much support from the government. Our people and team is everything to us at Parkdale. And that includes the community.
NEIL: Thank you so much for joining. I think for me this has been an incredible conversation. And I just want to say thanks to both of you. I really appreciate getting this opportunity. I couldn’t imagine two better people to have this like different perspectives, but to have this conversation with. So, I feel very lucky.
DAVIS WARLICK: Thank you for having me, Neil. And again, real honor to be even included for the conversation with such all-stars like Beth and Ambassador Tai. We as an industry really, really appreciate all their efforts in the previous administration. And hopefully, people will continue to listen to experts like Beth.
BETH BALTZAN: Thank you so much. I’ve heard you talk before, Davis, and I always learn something new. So, thank you very much.
DAVIS WARLICK: Thank you both.
NEIL TRACEY: Take care.
BETH BALTZAN: Bye.
DAVIS WARLICK: Bye.
