World Sock Capital Suffers From Duty-Free Imports

Sock machines have a metal tube in the middle with dozens of needles that act like robotic claws, grabbing pieces of thread and knitting them. Every few minutes, each machine spurts out what's called a sock core, a gray sock tube with the toe still open. Workers then sew the seam by hand.

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Tracie Myrick irons socks at WY Shugart and Sons, a family-owned factory started in 1937.

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Gerald Kelly, owner of KHH, a sock-making company, moved his factory from Fort Payne, Ala., to Honduras.

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There's no question that globalization has been really bad for the sock industry of Fort Payne, Ala. Just a few years ago, the town called itself the sock capital of the world, and with good reason: Most of the town worked in the sock business.

There were more than 150 sock factories, churning out a big chunk of the socks worn in the U.S. But lately, there has been a flood of cheaper socks coming in from China, Pakistan and Honduras. It has devastated Fort Payne. Two-thirds of the town's sock mills have closed.

Jimmy Baker is one of the survivors. His company, Baker Hosiery, is hanging on. He has seen most of his neighbors go out of business.

Baker started the company almost 30 years ago, when he was 22. Like most sock men, Baker doesn't have a lot of education, but he's smart. He's polite and a bit tough; he looks like he could lift a Matec Mono 4 knitting machine right over his head.

As it happens, he has 250 of those Matecs humming loudly in his knitting facility.

There are hardly any workers on his knitting floor. Sock machines knit automatically.

Each one is about the size of a large washing machine. There's a metal tube in the middle with dozens of needles that act like robotic claws, grabbing pieces of thread and knitting them. Every few minutes, each machine spurts out what's called a sock core, a gray sock tube with the toe still open.

Baker tells me he can make a sock core just as cheaply as anyone in China or Honduras. The machine costs the same. So does the yarn. There's hardly any labor.

The big cost, and the reason more than 100 Fort Payne mills have shut down recently, comes in the next step.

"Generally, the biggest difference is the closing of the toes or the seaming of the sock," Baker said.

Take your shoe off. Look at your sock. That little line near your toes, that seam — it is what's killing the U.S. sock industry.

It costs more to seam a sock in the U.S. than it does in China or Honduras.

It doesn't cost a lot more, just a little. But that difference is enough to wreak havoc.

The Sewing Floor

On Baker's sewing floor, there are four women sitting in front of specialized sewing machines. It takes about five or six seconds to sew each sock toe. The faster the sewer can work, the more she makes.

Sock workers are paid per sock, rather than an hourly wage. They generally make 22 to 30 cents for every dozen pairs of socks they sew. In Honduras or China, it's a penny per sock cheaper to sew a toe closed than in the U.S.

And those pennies add up. Baker sells more than 100 million socks a year. Nationwide retailers are buying billions of socks a year. Those retailers are not going to spend a penny more per sock.

So, Baker and others decided the only way to save the U.S. sock industry was to persuade the Bush administration to reverse a decades-old policy. Back in 1984, the U.S. wanted to help the poor Central American nation of Honduras — where democracy had only just replaced a military dictatorship — by allowing duty-free exports of socks whose toes were seamed there.

Today, Baker wants the U.S. to rescind that deal and re-impose the old sock tariff of somewhere around 14 percent.

Baker says that for him, getting this tariff back is life or death. With it, his business will thrive. Without it, he's doomed. He'll close up shop. And so will most American sock makers. But the president is a committed free-trader. He believes that tariffs hurt the U.S. economy.

Why in the world would President Bush go along with reinstating the tariff?

There's only one reason: a deal President Bush struck late one night in July 2005.

The Deal

That July night, Bush met with Fort Payne's congressman, Robert Aderholt, to talk about tariffs and the sock business.

That meeting was, most likely, the moment Aderholt had more power than at any other time in his life. The House was voting on CAFTA, the Central America Free Trade Agreement. The vote was an exact tie. Aderholt was the holdout. And President Bush very much wanted CAFTA to pass. So, Aderholt offered the president a deal: He could get his big free-trade deal only if he rolled back free trade on one industry, the sock industry.

"I told him this was what I needed," Aderholt said. "This was the one thing I had great concerns about."

That night, President Bush agreed to Aderholt's deal. CAFTA passed. And the White House gave itself a self-imposed deadline of Dec.19, 2007, to put back tariffs on sock exports from Honduras.

Jimmy Durham, the county economic development officer, shows just how grim things have been for the sock business here.

On street after street, he points to buildings that used to house sock mills, most of which are now gone. With all these businesses shuttered, you might think Durham is in despair about the future of Fort Payne. He isn't.

Those closed sock factories are reopening as new businesses.

He points to Steadfast, which makes bridges; Ferguson, a major plumbing supply company; a distribution center for Children's Place; two new metal tube manufacturers; a high-tech label maker. For a town of only 13,000 people, this is a lot of new, good-paying employment. These jobs pay more than sock-making jobs.

In fact, most of 4,000 recently laid-off sock workers quickly found new jobs. It's an irony that reversing this tariff — fought for so hard by some in Fort Payne — will likely have its biggest impact thousands of miles away in Honduras.

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