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Industry Unraveled

How an enclave of thriving private companies in Fort Payne was undone by trade policy and a political rebuff that viewed textiles as an American industry “past its prime.”

Karl Wright watches the machinery hum in his Soft Touch Hosiery plant in Fort Payne.

Karl Wright watches the machinery hum in his Soft Touch Hosiery plant in Fort Payne.

It can take just a single loose thread to start the unraveling. A flaw forms in one area and begins to spread. Before long, if nothing is done to stop it, the whole thing might fall apart.

In a way, that is what happened to the sock and hosiery industry of Fort Payne, though it can be difficult to pinpoint the precise thread that led to the collapse of the once-thriving business. Some suggest it began in 2001 with the acceptance of China into the World Trade Organization, making it considerably more affordable for U.S. companies to import items made in that country. Others point the finger squarely at the enactment of the Central America Free Trade Agreement in 2005, which brought cheap labor to this side of the globe. Still others say it’s a combination of several things, including the recession of 2008 and a spike in the price of cotton in 2010-11.

Whatever the exact reason, the bottom line is that over the past 15 years, the hosiery industry in the Fort Payne area has gone from employing approximately 8,000 people to less than 1,000. And much of that reduction has occurred since the passage of CAFTA, which eliminated trading tariffs with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.

Socks move quickly from yarn to product to package at Soft Touch Hosiery in Fort Payne.

 

“CAFTA pretty much took the sock industry out of the United States,” says Charles Cole, who was chair of the Domestic Manufacturing Committee of The Hosiery Association at the time of CAFTA’s passage. “The sock industry was already feeling some effects from free-trade legislation with China, Pakistan and Vietnam, but CAFTA was the biggest blow, because it was so much easier to do business in the Central American countries. It was much closer to the U.S., so travel was not a big problem.”

Indeed, to ship products from China to the United States can take more than a month. From Honduras, a sock that is knitted on a Monday can be in the port of Charleston by Friday. Suddenly, with the passage of CAFTA, cheap labor was literally only days away, and all areas of the U.S.-based textile industry began to suffer.

“Before that, we were competing against Pakistan and China, and it would take six weeks on the water for them to deliver,” says Karl Wright, owner of Fort Payne’s Soft Touch Hosiery. “So even though it was cheaper to buy from over there, we still had a little bit of an advantage with delivery. But this close to home, that made it tougher to compete. We knew (CAFTA) wasn’t good. It made things a little shaky.”

Why, then, was CAFTA passed in the first place? If the end result of this legislation was the elimination of U.S. jobs throughout the textile industry, why would government officials ever want it to be enacted?

Jonathan Shugart says he asked that question to a Washington lobbyist. At the time, Shugart was president of the Fort Payne sock manufacturer W.Y. Shugart & Sons. He was concerned that all these trade agreements were putting companies like his in jeopardy, fears that turned out to be well founded, since Shugart & Sons closed in 2011, after nearly 75 years in business.

“That lobbyist told me the federal government doesn’t care about our industry because it’s not high-tech. It’s not exciting like the computer industry,” Shugart says. “Textile has sort of a negative connotation these days. It’s seen as an industry that’s past its prime.”

Major retailers supported CAFTA because the lack of tariffs would lower their overall cost to purchase merchandise. In addition, Cole says that proponents argued CAFTA would open up markets for American manufacturers to sell their products, though the manufacturers primarily were in electronics, automotive and other high-tech industries. To many observers, it seemed inevitable that textile manufacturers in the U.S. would suffer to some degree.

Of course, individual politicians usually are concerned about the effect legislation has on their immediate constituents. That is why many people were confused and even angry when U.S. Rep. Robert Aderholt, whose district includes the Fort Payne area, voted for CAFTA after initially voicing his opposition.

“You bring up Aderholt’s name in Fort Payne, and there are still people who will dog-cuss him,” Wright says.

In theory, Aderholt cast the deciding vote, since the House of Representatives approved CAFTA 217 to 215. But as often is the case in the world of politics, reality is a little more convoluted than perception. In fact, both Cole and Shugart praised Aderholt’s handling of what they say was a difficult situation.

“I feel like our congressional contingent responded well to us,” Shugart says. “We lobbied them a number of times. They were very approachable and responsive to our needs. I know Robert Aderholt fought CAFTA until the last minute.”

Aderholt’s office did not respond to an interview request for this story. According to Cole, Aderholt changed his vote on CAFTA to try to gain some concessions from President George W. Bush’s administration to help the hosiery industry once it became evident the legislation was going to pass one way or another.

“I was dealing with Congressman Aderholt, Secretary of Commerce (Miguel) Gutierrez and U.S. Trade Ambassador Rob Portman the night CAFTA passed. We were all on the telephone during this vote,” Cole says. “Congressman Aderholt called me and said Ambassador Portman and Secretary Gutierrez wanted to know what it would take to get his vote on this bill, to get the sock industry to support it. He said there were four other congressmen waiting and wanting to talk with Portman, but that we had the first chance.

“I had a letter from the Secretary stating they would put a moratorium on socks for five years, and then phase out the quotas and tariffs at 20 percent each year for the next five years. That would give the sock industry a little leeway to realize that this is coming, and we have to start branching out and doing business in other countries. But all this was going to be after-the-fact.”

Railroad tracks run in front of the city’s oldest mill, now closed.

 

Few of the promises actually panned out. For example, the moratorium on tariffs lasted only two years, not five. Still, Cole says he believes Aderholt made the right decision in trying to salvage something for the sock industry out of what he says was the inevitable passage of CAFTA.

“I told (Aderholt) that based on this letter saying what the Commerce Department would do, we’d be far better off for him to vote for it and us get something, than for him to vote no and the next congressman votes for it and we get nothing,” Cole says. “Politically he still gets a lot of heat for it, but I think he has gotten a bum rap. In my opinion, Congressman Aderholt did everything possible to help our sock industry.”

Besides, Wright says he is not sure that CAFTA by itself led to the demise of the Fort Payne sock industry, though it might have been the domino that set up the big fall. He said that took place two years later, in 2007, when Montreal-based Gildan Activewear acquired V.I. Prewett & Son, a Fort Payne supplier of socks that had annual sales of nearly $200 million.

“Prewett was by far the largest hosiery mill in Alabama and one of the largest
in the country, and they had all these feeder mills and subcontractors whose only customer was Prewett,” Wright says. “They were shipping 150,000 packs of socks a week, and within six months of that deal going through (with Gildan), every one of those socks went to Honduras.

“I don’t think Gildan would have been interested in buying Prewett if CAFTA hadn’t passed. It may have happened anyway, but CAFTA certainly made it easier. And when that happened, we all pretty much knew the writing was on the wall.”

A handful of sock manufacturers, such as Soft Touch and Cooper Hosiery Mills, have survived in Fort Payne, and some smaller niche manufacturers, such as Zkano, have cropped up in recent years. Wright says Soft Touch is coming off its best year since 2007, with nearly $5 million in sales, including exports to Saudi Arabia.

“What saved us was we had a direct-sales customer base, plus we had our own finishing mill,” Wright says. “A lot of the mills would just send raw socks off the machine to Prewett, and Prewett would bleach it, finish it, package it and sell it. When Gildan bought Prewett, that was the end of that. So the ones that didn’t have direct-sales contacts or finishing capabilities, they were almost automatically out.

“We survived, but barely. We just hung on. We had some loyal customers, and then were able to slowly grow it. We managed to keep our head above water until things got better.”

However, while the situation may have improved, things will never again be like they once were, back when Fort Payne proudly proclaimed itself to be “The Sock Capital of the World.”

“It’s a hard thing to look back on,” Shugart says. “The hosiery industry in Fort Payne has fed, clothed and educated a lot of folks over a number of generations. And to see that decimated to what it is now, it just breaks your heart.”

Cary Estes and Cary Norton are freelance contributors to Business Alabama. Both are based in Birmingham.

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