Business for Development Business for Development Trade in Textiles and Clothing Trade in Textiles and Clothing Eastern Europe and Developing Eastern Europe and Developing County Clothing Manufacturers County Clothing Manufacturers and Competitiveness after 2005 and Competitiveness after 2005 Presentation by Presentation by Mr. Matthias KNAPPE Mr. Matthias KNAPPE International Trade Centre UNCTAD/WTO International Trade Centre UNCTAD/WTO Chapel Hill, North Carolina, 14 October 2004 Chapel Hill, North Carolina, 14 October 2004
1. Business for Development Trade in Textiles and Clothing
Eastern Europe and Developing County Clothing Manufacturers and
Competitiveness after 2005 Presentation by Mr. Matthias KNAPPE
International Trade Centre UNCTAD/WTO Chapel Hill, North Carolina,
14 October 2004
2. ITC has 5 Organisational Goals
Facilitate integration into the world trading system.
Support national efforts to design & implement trade
development strategies.
Strengthen key trade support services.
Improve export performance in priority sectors.
Foster international competitiveness within the small and
medium-sized enterprise (SME)
3. The importance of the product sector of T&C for
Developing Countries
World trade in T&C 353 billion US$ (clothing 201 billion
US$)
Accounts For 7% of Global Merchandise Trade & 14% of
Employment. Share of clothing in total merchandise trade: LA 10%,
Africa 21%; Asia 9%
Many DCs (extremely) dependent on clothing exports
4. Structure
Selected
regions
trade in T&C
Competitiveness Challenges at the trade policy level
Competitiveness Challenges at the micro level
5. Dependence of the EU market (% of total T&C exports
Source: EU
6. EU Imports: 1995 to 2003 Source: EU
7. Close linkages with EU due to OPT business Source: EC)
8. US Imports from SSA 2001 - 2003 Source: OTEXA
9. Who is using AGOA Preferences? Source: OTEXA
10. US Apparel Imports from Africa by Product Source:
OTEXA
11. US Imports from CBI by Product in 2003 Source: OTEXA
12. US Imports from Andean Countries by Product in 2003 Source:
OTEXA
13. Summary
Since early 1990s exports to EU have been growing
Almost 50% of exports is in knit or woven garments
Highly constraint categories with high quota utilisation
rates
In DCs this product dependence is even higher
High dependence on European and North American market
14. Structure
Selected
regions
trade in T&C
Competitiveness Challenges at the macro level Competitiveness
Challenges at the micro level
15. 1. Challenge: Removal of the Quota System
1 January 2005: Integration of T&C into the normal WTO
rules after 30 years of restrictions
Artificial advantages will disappear and existing trade
patterns will blow up
Companies will gain market share based on competitiveness
rather than quotas
But: What after loss of quota-free benefits?
16. And with it prices will fall further More supply and quota
rents disappear Source: Robin Anson, Director Textiles
Intelligence; ITMF, Dresden October 2003;
www.textilesintelligence.com and Textile Outlook International No.
110 March-April 2004
17. China: Unit Value Change in EU after product integration in
2001 Underwear Parkas Pile Farbrics Art. Fabrics Track Suits
18. Post-2004 Sourcing Pattern Source: US Department of
Commerce: Report to the Congressional Textile Caucus on the
administrations efforts on textile issues; Washington, September
2002
19. Quota Removal: Norway experience
Quoatas were removed in 1998
20. 2. Challenge: Erosion of Preferential Duty-free Market
Access: DDA
What remains: Duty advantage
EU: 4% Yarns; 8% Fabrics; 12% Clothing
US: 12-17% Cotton Apparel; 25-32% MMF Apparel
DDA aims at reducing high tariffs, tariff peaks and tariff
escalation
Source: OTEXA & EC
21. Erosion of Benefits: EU FTAs & RTAs
If not multilateral then bilateral!
EU envisaged a Euro-Mediterranean Zone
Diagonal cumulation: Use fabrics from Egypt, trims from Turkey,
assemble in Morocco and export duty-free to EU
But: all countries need to have FTAs among them in place with
identical rules of origin requirements
22. 3. Challenge: EU Enlargement
Adaptation of EU lower tariffs (except Czech Rep., Slovakia,
Hungary) i.e. more competition
New EU members to apply quotas for 8 months
DCs: This violates WTO rules: Article 2.4 ATC & DSP
following EU-Turkey customs union
EU quota increase pro rata for new EU 10: China & HGK quota
increase extensive (old trade links)
category 6 (trousers):+50%;
category 4 (knit shirts): +41%
23. 4. Challenge: Erosion of OPT Benefits
Quota system & trade liberalisation with EU has faclitated
OPT
Based on competitive EU fabrics & low labour costs in OPT
countries
OPT to survive where EU fabric is competitive (mainly wool)
& where labour costs are low (CIS & Mediterranean)
Highly dependent on outside skills & decision making
T&C products as targets for retaliation in dispute
settlement cases.
New EU members take over EU cases
25. 6. Challenge: New Requirements
Social sourcing as a criteria for trade.
Corporate Social Responsibility project of FTA: EU platform for
monitoring social standards
EU: New origin marking and social label initiatives
ECO Labelling: Remain voluntary but can reduce market
access
26. 7. Challenge: China as a WTO Member
US clothing imports from China: 2002: +60%; 2003: +46%
Japan: In 2001 85% of all clothing imports from China
Australia: 69% (clothing) & 21% (textile) imports from
China
EU: 3 rd stage liberalisation: Imports from China increased by
46% (value) and 192% (volume)
However, accession protocol introduces possibility of new
quotas against China
USA: 3 cases under transitional textile safeguards.
27. Summary: / Challenges
1. Loss of Quota-free benefits
2. Erosion of Duty-free benefits
3. EU Enlargement
4. Change of OPT Business
5. Use of trade remedies
6. Changing Buyers Requirements
7. China as a WTO member
28. Structure
Selected
regions
trade in T&C
Competitiveness Challenges at the macro level Competitiveness
Challenges at the micro level
29. Manufacturing Manufacturing & Sourcing Manufacturing
& Sourcing & Product Development Full Service Value-Added
Buyers requirements Time 2005 1970 Changing Trade
Competitiveness
30. A Sector Strategy (Action Plan )
Develop overall country response
Build critical country mass
Build PPP based on strong sector associations
Do a sector value chain analysis
31. Knowledge about competitors
Quotas stifle competition
Now competitors are everywhere
32. Information on Sourcing and Supply Chain Management Skills
are key 75% of cost = sourcing Cost-structure of a woven shirt up
to the FOB point
33. Any reduction in purchasing and logistics costs has a
direct and large impact on export competitiveness A 10 % reduction
in the supply cost of fabric and trimmings = A 60 % increase in its
Gross profits without increasing sales Input supplies &
Logistics $0.75 Labour $0.07 Overheads $0.08 Profit now $0.16 $0.69
! Woven shirt: For every 1 Dollar earned approximately 60cts is
spent on inputs Action Plan: Sourcing (SCM) to Increase Profit
Fabrics: $0,59 Trimmings:$0.16 Labour $0.07 Overheads $0.08 Profit
$0.10
36. 4.- Understanding changing markets 1.- Sector Strategy
Development 2.- Understanding its own and competitors performance
3.- Developing fabric sourcing skills to become
full-packagesuppliers 5.- Applying e-applications in the T&C
sector Implementing tailor- made market penetration approaches in
line with buyer requirements New ITC T&C website Workshops
Tailored Product & Market Development The SHAPE The FiT
Sourcing Guide and database Business Guide in e-commerce for
T&C ITC Tailored Consultation What can ITC do for you Sourcing
Manufacturing Sales (+Marketing, and Services) Inbound Logistics
Customs, Import Clearance Outbound Logistics Customs-GSP/Quota
Export Clearance Sourcing Manufacturing Sales (+Marketing, and
Services) Inbound Logistics Customs, Import Clearance Outbound
Logistics Customs-GSP/Quota Export Clearance
