Consumers will pay a premium only if there is a difference - real or perceived - that matters to them. Why should someone pay more for the exact same thing? So then if they are not the exact same thing, then manufacturers need to communicate somehow what that difference is and in a way that consumers care about.
Perhaps there really is no difference at the low-end of the price spectrum that consumers care enough about to spend more and you really have to restrict yourself to the upper end where your advantages come into play.
Local food is different than local t-shirts, sweaters and backpacks. People bring in factors such as carbon emissions, animal treatment, and healthiness. I am not aware of any comparable factors that people would consider when talking about clothing & bags. However, fit and uniqueness would matter - and those are typically the realm of higher-end clothing.
My best dress shirts are from an Indian-owned custom tailor biz operating out of Hong Kong that sends its fitting & sales team around the world. Custom-made without the typical custom-made price. So that's a business that survived (and I suppose is thriving) even though Hong Kong's textile business got thrashed once China opened up for production. They don't compete on price alone, but found a niche for themselves at the high-end (relative to other production in Hong Kong that used to exist there).
I was reading an article a while back about how China is increasingly no longer the world's cheapest place for production as its own labor costs rise. Up to 16 other countries are coming up to take that role now. So this problem isn't particular to any one competing country - it's just a reality that demand for labor can go anywhere. So then if you can't compete on low labor costs, you have to find some way to either do it differently with far less labor or make something that gives a benefit that is worth the difference in cost to the end-customer.
Or do both
I know that's easy to say but not easy to do.