By Haidee V. Eugenio
Variety Assistant Editor

GARMENT sales dropped by 43 percent or about $16.7 million in April compared to the same period last year with the closure of 14 garment factories on Saipan for their inability to compete with the low wages paid by Third World countries that can now export their cheaper garments to the U.S.
From about $38.4 million in April 2006, garment sales totaled only $21.7 million in April 2007.
The user fees collected by the government from the $21.7 million in sales for April did not even reach the $1 million mark.
“April user fees collected were $802,333,” said Richard A. Pierce, the special assistant for trade relations of Gov. Benigno R. Fitial and the garment industry’s former spokesman.
“Traditionally, April is the smallest sales month of the year for the factories. This year’s totals are a 43 percent drop from last year’s April sales,” he added.
This is the first time that the monthly user fees did not reach $1 million since about 1994, Pierce added.
The user fees are the taxes paid by businesses on locally manufactured and finished garment products. It is equivalent to 3.7 percent of garment sales.
The garment industry does not pay the business gross revenue tax.
“There are fewer factories and smaller collections for the CNMI as orders are now going to Asia where products are cheaper,” said Pierce.
Since the lifting of trade quotas in January 2005, 14 Saipan garment factories have closed.
Another factory, Top Fashion Corp., will be closing on July 2.
“Saipan factories are expected to continue to lose orders and eventually close completely as the U.S. Congress remains unresponsive to requests by the CNMI to amend general headnote (a), and the threat of wage rate hikes loom,” Pierce told Variety.
He said despite repeated pleas that the federal government amend general headnote (a) and not raise wages to the point of the ruination of the CNMI’s garment manufacturing industry, “quite the opposite is now occurring in Congress.”
“If anyone still actually believes a 50 cent increase seems like so little, pay close attention to what will occur within six months of the enactment of the proposed federally mandated wage hikes in the CNMI,” said Pierce.
He said the wage hike will result in “the end of the CNMI’s manufacturing base, and the impact on service and support business activity will be enormous.”
“There will be between 6,000 and 8,000 jobs lost in the CNMI,” he added.
He said garment buyers on the U.S. mainland are unwilling to place additional orders, and are reluctant to commit to seasonal sourcing in the CNMI, as increased factory production costs continue to rise.
“The buyers know very well the factories cannot compete with a higher wage structure, and will then be priced out of competing with China and other Asian production sites,” Pierce said.