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The Competitive Status of the U.S. Fibers, Textiles, and Apparel Complex A Study of the Influences of Technology in Determining International Industrial Competitive Advantage Prepared by the Fibers, Textiles, and Apparel Industry Panel, Committee on Technology and International Economic and Tracle Issues of the Office of the Foreign Secretary, National Academy of Engineering and the Commission on Engineering and Technical Systems, National Research Council W. Denney Freeston, Jr., Chairman Jeffrey S. Arpan, Rapporteur NATIONAL ACADEMY PRESS Washington, D.C. 1983

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N OTICE: The pro ject that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the Councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for 'their special competences and with regard for appropriate balance. This report has been reviewed by a group other than th e a uthors according to procedures approved by a Report Review Committee consisting- of members of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The National Research' Council was established by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and of advising the federal government. Th e Council operates in accordance with general policies determined by the Academy under the authority of it s congressional charter of 1863, which establishes the Academy as a private, nonprofit, self-governing membership corporation. The Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in the conduct of their services to the government, the public, and the scientific and engineering communities. It is administered jointly by both Academies and the Institute of Medicine. The National Academy of Engineering and the Institute of Medicine were established in 1964 and 1970, respectively, under the charter of the National Academy of Sciences. This project was supported under Master Agreement No. 79-02702 between the National Science Foundation and the National Academy of Sciences. Copies available from National Academy Press 2101 Constitution Avenue, N.~. Washington, D.C. 20418 Printed in the United States of America First Printing, December 1983 Second Printing August 1985 Third Printing, March 1987

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Participants at Meetings of the Fibers, Textiles, and Apparel Panel, Committee on Technology and International Economic and Trade Issues Panel W. DENNEY FREESTON, JR., (Chairman), Associate Dean, College of Engineering, Georgia Institute of Technology JEFFREY S. ARPAN, Professor, International Business Program, and Director, Center for Industry Policy and Strategy, College of Business Administration, University of South Carolina MARY EILEEN BARRY, Assistant Professor, Consumer Affairs Department, School of Home Economics, Auburn University JAMES R. BERCAW, Manager, Product Services and Technology, Textile Fibers Department, E.l. DuPont de Nemours ~ Co. LAURENCE A. CHRISTIANSEN, JR., Editor-i - Chief, Textile World, McGraw-Hill Publishing Company EDWARD F. JOHNSON, Senior Vic - President, Prescott, Ball and Turben STIG A. KRY, Chairman of the Board, Kurt Salmon Associates, Inc. ROBERT MALPAS, Group Managing Director, British Petroleum Corporation, U.K.* RICHARD STEELE, Executive Vic - President, Celanese Fibers International (retired) LAZARE TEPER, Director of Special Projects, Office of the President, International Ladies' Garment Workers' Union FRANK X. WERBER, Vic - President, Research dc Development, Technical Center, J. P. Stevens, Inc. *Formerly, President and Chief Executive Officer, The Halcon SD Group. .

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Rapporteur JEFFREY S. AKPAN, Professor, International Business Program, and Director, Center for Industry Policy and Strategy, College of Business Administration, University of South Carolina Consultants JOSEPH PELZMAN, Associate Professor of Economics, The George Washington University BENGT-ARNE VEDIN, Research Program Director, Business and Social Research Institute, Stockholm, Sweden Additional Participants WILLIAM ]. DULICA, Assistant Director, Industry Assessment Division, Office of Textiles and Apparel, International Trade Administration, U.S. Department of Commerce DAVID EDGELL, Director, Office of Policy and Research, U.S. Department of Commerce JOSEPH MINTZES, Consultant/Economist, Washington, D.C. PAUL T. O'DAY, Deputy Assistant Secretary for Textiles and Apparel, International Trade Administration, U.S. Department of Commerce SUNAIYE OKUBO, Policy Analyst, Division of Policy Research and Analysis, Scientific, Technological, and International Affairs, National Science Foundation ROLF PIEKARZ, Senior Policy Analyst, Division of Policy Research and Analysis, Scientific, Technological, and Inte national Affairs National Science Foundation ALAN RAPOPORT, Policy Analyst, Division of Policy Research and Analysis, Scientific, Technological, and International Affairs, National Science Foundation Stat f HUGH H. MILLER, Executive Director, Committee on Technology and International Economic and Trade Issues MARLENE R. B. BEAUDIN, Study Director, Committee on Technology and International Economic and Trade Issues ELSIE IHNAT, Secretary, Committee on Technology and International Economic and Trade Issues STEPHANIE ZIERVOGEL, Secretary, Committee on Technology and International Economic and Trade Issues 1V

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Committee on Technology and International Economic and Trade Issues (CTlETI) Chairman N. BRUCE HANNAY, National Academy of Engineering Foreign Secretary and Vice-President, Research and Patents, Bell Laboratories (retired) Members WILLIAM J. ABERNATHY, Professor, Harvard University Graduate School of Business Administration and Chairman, CTIETI Automobile Panel JACK N. BEHRMAN, Luther Hodges Distinguished Professor, Graduate School of International Business, University of North Carolina CHARLES C. EDWARDS, President, Scripps Clinic and Research Foundation and Chairman, CTIETI Pharmaceutical Panel W. DEINNEY FREESTON, JR., Associate Dean, College of Engineering, Georgia Institute of Technology and Chairman, CTIETI Fibers, Textiles, and Apparel Panel JERRIER A. HADDAD, Vice-President, Technical Personnel L)evelopment, IBM Corporation (retired) MILTON KATZ, Henry L. Stimson Professor of Law Emeritus, Harvard Law School RALPH LANDAU, Chairman, Listowel Incorporated* and Vic - President, National Academy of Engineering JOHN G. LINVILL, Professor, Department of Electrical Engineering, Stanford University and Chairman, CTIETI Electronics Panel *Formerly, Chairman of the Board, Halcon SD. v

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E. RAY McCLURE, Program Leader, Precision Engineering Program, Lawrence Livermore Laboratory and Chairman CTIETI Machine Tools Panel BRUCE S. OLD, President, Bruce S. Old Associates, Inc. and Chairman, CTIETI Ferrous Metals Panel MARKLEY ROBERTS, Economist, AFL-CIO LOWELL W. STEELE, Consultant--Technology Planning and Management* MONTE S. THRODAHL, Vice-President, Technology, Monsanto Company *Formerly, Staff Executive, General Electric Company . V1 Corporate Technology Planning,

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Preface In August 1976 the Committee on Technology and International Economic and Trade Issues examined a number of technological issues and their relationship to the potential entrepreneurial vitality of the U.S. economy. The committee was concerned with Technology and its ef feet on trade between the United States and the other countries of the Organization for Economic Cooperation and Development (OECV). Relationships between technological innovation and U.S. productivity and competitiveness in world trade; impacts of technology and trade on U.S. levels of employment. Effects of technology transfer on the development of the less-developed countries (LDCs) and the impact of this transfer on U.S. trade with these nations. Tr ade and technology exports in relation to U.S. national security. In its 1978 report, Technology, Trade, and the U.S. Economy,* the committee concluded that the state of the nation's competi- tive position in world trade is a reflection of the health of the domestic economy. The committee stated that, as a consequence, the improvement of our position in international trade depends primarily upon improvement of the domestic economy. The committee further concluded that one of the major factors affecting the health of our domestic economy is the state of industrial innovation. Considerable evidence was presented during the study to indicate that the innovation process in the United * National Research Council, 1978. Technology, Trade, and the U.S. Economy. Report of a workshop held at Woods Hole, Massachusetts, August 22-31, 1976. National Academy of Sciences, Washington, D.C. . ~ V11

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States is not as vigorous as it once was. The committee recorn- rn ended that f urther work be undertaken to provide a more detailed examination of the U.S. government policies and practices that may bear on technological innovation. The f irst phase of the study based on the original reco m- m endations resulted in a series of published monographs that addressed government policies in the following areas: The International Technology Transfer Process.* The Impact of Regulation on Industrial Innovation.* The I mpact of Tax and Financial Regulatory Policies o n In dustrial Innovation.* Antitrust, Uncertainty, and Technological Innovation.* This report on the fibers, textile, and apparel complex is one of six industry-specific studies that were conducted as the second phase of work by this committee. Panels were also set up to address automobiles, electronics, ferrous metals, machine tools, and pharmaceuticals. The objective of these studies was to (1) identif y global shifts of industrial technological capacity on a sector-by-sector basis, (2) relate those shifts in international competitive industrial advantage to technological and other factors, and (3) assess future prospects for further technological change and industrial development. As a part of the formal studies, each panel developed (1) a brief historical description of the industry, (2) an assessment of the dynamic changes that have been occurring and are anticipated as occurring in the next decade, and (3) a series of policy options and scenarios to describe alternative futures for the industry. The primary charge to the panel was to develop a series of policy options to be considered by both public and private policymakers. The methodology of the studies included a series of panel meetings involving discussions between (1) experts named to the panel, (2) invited experts from outside the panel who attended as resource persons, and (3) government a~encv and congressional representatives presenting current . . ... .. ~7 ~ ~ governmental views and summaries ot current oelloerallons and oversight efforts. The drafting work on this report was done by Dr. Jeffre y Ar pan, University of South Carolina. Professor Arpan was responsible for providing research and resource assistance as well as producing a series of drafts, based on the panel deliberations, which were reviewed and critiqued by the panel members at each of their three meetings. *Available from the Office of the Foreign Secretary, National Academy of Engineering, 2 10 1 Constitution Avenue, N.W., Washington, 1).C. 20418. . . . vail

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Contents SUMMARY THE TEXTILE COMPLEX The U.S. Textile Complex, 3 Description and Comparisons of Major Segments in a Textile Complex, 8 In ternational L) if f erences in T extile Co m plexes, 1 7 2 TH E CHA NGI NG E NVI RON ME N T Economic Changes, 27 Changes in Technology, 41 Changes in Government Policies, 49 C ORP ORATE RE SP ON SE S A N D ST RATEGIE S U.S. Firms, 56 Japanese Firms, 59 European Firms, 61 Retailers and Designers, 6 3 4 FUTURE SCENARIOS, P OLICY OPTION S. A N D THEIR IMPLICATIONS The Basic Scenario, 67 Government Policy Areas and their Potential Impact, 68 General Policy Considerations, 83 Summary and Conclusions, 83 BI OGRAPHICAL SKETCHES 3 27 56 66 87 1X

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The Competitive Status of the U.S. Fibers, Textiles, and Apparel Complex

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