This story is part of a special report on visualizing Georgia's rising trade ties with India, completed with support from the Consulate General of India in Atlanta. Learn more about the consulate here
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When Palmetto Industries International Inc. started in Augusta a little more than 30 years ago, it was still feasible in the U.S. to make woven plastic bags for products from imported sugar and rice to exported clay and chemicals.
In the post-NAFTA era of free trade, however, the South’s textile advantages eroded, and much of the production in the space moved overseas, first to China, then elsewhere as that country moved up the value chain.
“These are commoditized products,” said founder and owner Shankar Balan, who grew up around family friends’ textile factories in India, during this year’s U.S.-India Business Summit at Georgia Tech.
It was on a golf trip to Augusta that Mr. Balan saw an opportunity to purchase the building off Tobacco Road where he first set up shop. A year later, in 1995, he had already launched a joint venture in India and grown revenues to $3 million.
“Way back when I started, 100 percent of the product we sold in the U.S. was made in the U.S.,” he said, but it was already becoming clear that offshoring some production would be inevitable. “Today, unfortunately, 0 percent is made in the U.S., and the industry has grown exponentially, but 70 percent of the products come from India today.”
Despite its successes moving away from China, Palmetto today finds itself squeezed by an unforeseen tariff hike on Indian imports as it “flexible intermediate bulk containers,” or FIBCs, into U.S. ports like Savannah, contributing to the record traffic Georgia’s gateways have enjoyed from India as U.S. companies diversify their Asian supply bases.
Trade negotiators for U.S. and India remain in talks to remove the tariffs, which can reach as high as 50 percent in some categories, presenting a cost that Mr. Balan “was not expecting — and not this bad,” he told Global Atlanta.
Mr. Balan understands the impulse to re-shore as much manufacturing as possible, a stated goal of the Trump administration and the surface-level objective of the president’s protectionist moves. But even if higher costs could be addressed — and even after accounting for the U.S. advantage in land and logistics — the technical knowhow is simply no longer available here, Mr. Balan said.
“The problem, in our industry at least, is that we lost the domain expertise a long time ago.” Skills like cutting and sewing are practically extinct in the U.S., gone with the South’s shuttered textile mills, he said.
“We don’t have any of that here in the U.S. anymore, so it’s not going to be easy to flip a switch and then bring back jobs.”
That is especially true considering the infrastructure Mr. Balan and the Palmetto team have set up in Pondicherry, India. In 2006, the company acquired its former supplier and set up a vertically integrated facility where polypropylene enters on one side and bags come out on the other.
Controlling the process from end to end allows Palmetto to ensure products meet American standards, which is particularly vital when food safety regulations come into play.
Most end users, he said, care less about where the bag is made and more about quality and risk mitigation.
“Ten years ago, that was a question: why are you not moving out of China? Now it’s a question of, ‘Hey, are you looking at Africa?’ Customers are not talking about bringing jobs back here. They just want to mitigate risk. Mexico is not an option either today, at least in our space,” Mr. Balan said.
Still, Palmetto plans to increase its business with India in the coming years, having opened a dedicated office in the country in September. That same month, the company was expressing optimism on U.S.-India trade talks. Indian Prime Minister Narendra Modi and Mr. Trump held another call Dec. 11.
A commitment to quality remains at the forefront, whether it’s a sand bag for public safety and disaster preparedness, a 50-lb. dog food bag, or a 10-ton liner to prevent contamination inside a shipping container.
At the India factory, the company has invested in renewable energy, rainwater harvesting and provides housing and meals for employees and education through 12th grade for their children. Made across the world, Palmetto’s products are exported from Georgia, either to its own customers or carrying other products made or mined in the state.
“For us, a bag is not a bag; a product is not just a product,” Mr. Balan says in a video on the company’s website. “We are here to make sure that whatever a customer needs, we go to whatever it takes. That’s our philosophy.”
Learn more about the company and its history here, or watch a video below: