Newsletter: April 2002
TEXTILE RESCUE PLANS
Introduction
Worldwide
textile and apparel industry is going through a period of change and
transition. The challenge of staying competitive in this mature and
overcrowded marketplace is already taking its toll on some companies, and an
industry-wide shakeout is looking increasingly likely over the next few
years. But despite this there are key areas if growth and avenues of
opportunities for the most strategically aware suppliers. Besides, some of the countries are adopting rescue plans either as a whole
headed by the government or individually. Lets find out more in this
feature.
Philippines
: $8m Garment Rescue
Plan Targets US
A new US$8 m development package has been proposed by the Philippine government in a
last ditch attempt to help the country's struggling garment and textile
industry maintain its dwindling share of the US market in the face of stiff
competition from China and fast- rising apparel makers in Asia and Latin
America.
The Garments and Textile Export Board (GTEB) and
the Department of Trade and Industry (DTI) are confident their 'Garment
Export Industry Transformation Package' will help the sector generate
exports of $4 billion by 2005 - when the United States abolishes its quotas
and competition for this lucrative market intensifies.
The bulk of the funding will go towards setting
up two skills and technology training academies to provide courses on
industrial sewing machine operation, pattern making, production supervision,
and product development.
Also available under the programme will be
low-cost financing, substantial cuts in government fees and penalties,
faster customs processing, and plans to set up marketing desks in New York
and Hong Kong.
Other incentives focus on slashing quota fees by
30% - a
move likely to generate P100 million in savings for the industry. The GTEB
has also allocated a third of the annual incremental quota it gets from the
United States to reward apparel and textile makers for strengthening their
operations. And penalties on industry players who fail to use up their
quotas have
been waived.
Trade and industry secretary Manuel A Roxas II
told a press briefing: "Within 34 months we expect to have a
competitive, viable and vibrant garments and textile export industry
employing at least 400,000 workers with exports of at least $4 billion in
2005."
He stressed, however, that the initiative is aimed at
strengthening the Philippines' hold on the US market. He added that although
garments and textiles are the country's second biggest dollar earner, the
industry's growth has been dependent on the guaranteed market access
provided by US quotas (accounting for 87 % of
the $3 billion in exports last year). Of the $2.6 billion of exports to
quota countries, 76% or $2.2 billion went to the US. Philippines' ranking as a supplier to the US
dropped to eleventh (based on quantity) and ninth (based on value) in 2001.
Six years ago the country ranked seventh in both quantity and value.
Thailand : Turn into a Fashion Hub
A
major new international fashion show based on the world-famous London
Fashion Week will be held in Bangkok later this year. The autumnal event,
called “Bangkok, A World Fashion City”is part of an ambitious
government-backed action plan to turn its apparel industry into a leading
regional fashion and design hub by 2005.
It
will feature famous designers and models. It also aims to increase the value
of the industry by at least 120 billion bath by promoting Thai brand names.
More than 1.2 million people work in the nation’s clothing industry across
9,000 factories operated by small and medium-size enterprises.
In
line with the above action, an ambitious Thai garment manufacturer
and exporter plans to transform itself into a fashion company through the
creation of a new fashion label and recruitment of top designers. Apparel
Avenue Co intends to become a fashion firm by 2006 by emphasising
"Original Design Manufacturing" (ODM) instead of "Original
Equipment Manufacturing" (OEM).
The company plans to have three experienced fashion designers by the end of 2002 and at least eight by 2006. It currently has only one. They want to use their own brand names to penetrate both the local and particularly the Asean market by taking advantage of tariff reductions under the Asean Free Trade Area.
New Zealand: Apparel Import Duty Review Underway
Government officials began a
review of import duties post-2005 in a move which could affect up to 20,000
jobs in the country's important textiles, clothing and footwear industries.
Tariffs of up to 19% are currently imposed on the industry until
July 2005, but the Ministry of Economic Development is now seeking
submissions on what should happen after that date. Union chiefs fear any reduction or abolition in the tariffs would lead
to widespread job losses. The tariff review is expected to be completed by
March 2003.
India
: Takes Proactive Steps
Tapping
the Domestic Market
The
Indian apparel market, with a growth rate of 5-6%, is one of the fastest
growing market in the world. There is a high increasing population of Indian
consumers who are young, trendy and have high purchasing power, shifting
towards contemporary clothing from traditional one. The number of readymade
trousers sold locally, for example, rose form two million pairs in 1985 to
14 m pairs in 2001.
The
use of the domestic market as a leverage for exports is a new dimension. The
world textile-garment trade exports have indicated that a major feature of
the 2000s will be the shifting of garment production to regions of both
production sourcing and consumer markets. India with a population of more
than 1 billion, is eminently suited as a candidate for outsourcing as well
as for domestic retail sales.
New
Sizing System
Almost
80% of the garments manufactures in the world today are using the
traditional size chart. Initial analysis has proposed to divide the Indian
male population into 15 distinct shape clusters. The work is going on to
understand the proportions and correlations between the dimensions of each
of these clusters, to establish the critical dimensions of Indian bodies the
sizing system is being looked upon as a powerful tool.
New
Textile Policy
The
New Textile Policy was announced by India’s Ministry of Textiles in 2000
to enhance foreign direct investment and R & D. A major Indian
initiative was the Technology Upgradation Fund (TUF) of US$5.3 billion
providing concession loans to modernize units.
Singapore
– Aggressively Establishing Trade Pacts
Singapore has been aggressively seeking trade
pacts with many nations.
It has already signed free-trade agreements with New Zealand
and Japan. It
is in the midst of negotiating with United States, Canada
and Australia. FTAs are
trade agreements that lower or scrap tariffs and enhance trade among a small
group of countries.
During
this fifth round negotiation on 22-26 Oct. 2001, substantial
progress occurred on drafting the customs administration text and achieving
a full understanding on the approach for rules of origin. Progress was also
achieved on the investment chapter. On textiles
and apparel, both sides reached an understanding on the importance of
information and appropriate controls.
In 1999, Singapore was the source of about $337 million (80.6 million square meter equivalents) of textile and apparel products. Majority of this – about $326 million – was apparel. In that same year, Singapore imported about $55.7 million worth of textiles and apparel from the United States -- $9.9 million worth of apparel, $6.9 million worth of yarns, $16.5 million worth of fabrics, and $22.4 million worth of made up articles.
There
are more than 140 garment factories and about 40 knitting, dyeing, finishing
and printing factories operating in Singapore, employing about 10,000
workers. Besides the United
States, which is the destination of about half of Singapore’s textile and
apparel exports, Singapore ships garments to the United Kingdom, Germany,
France, Malaysia, Canada, and Japan.
On the other hand, the
national American Apparel and Footwear Association (AAFA) has commented on
several aspects of the on-going negotiations with Singapore for a bilateral
Free Trade Agreement (FTA)
especially on the following 2 aspects :.
1.
Rule of Origin
It was proposed that rule of origin for the textile and apparel sector along the lines of the Breaux-Cardin rules of origin – which essentially confer origin on the location of the garment’s most important assembly operation – as the operative model.
A more restrictive rule, such as one that requires
fabric or even yarn to originate in one or both countries, would be totally
unacceptable. Singapore produces little fabric or yarn and cannot be
reasonably expected to do so in the near future. Moreover, it does not import much fabric from the United
States, despite the fact that Singapore is one of the few countries in the
world that maintains virtually no import barriers to U.S. textile products.
Because of distance, cost, and the current lack of market barriers,
Singapore is not expected to increase its consumption of U.S. textile
products under the proposed FTA. Therefore, if garments are required
to contain U.S. or Singaporean fabric or yarn before they can benefit from
the agreement, very few garments, if any, will be covered.
Much of the existing trade under such a rule would be excluded from
the agreement entirely.
2. U.S. Duties and Quotas
The
average trade-weighted duty rate faced by imports of textile and apparel
products from Singapore exceeds 20 % (compared with about 11 %
for imports from the entire world).
Moreover, Singapore’s apparel exports to the United States faces
quotas on 26 categories. AAFA encourage the quick phase out of these U.S. maintained
barriers. They suggest
that quotas be lifted immediately and that duties be placed on a suitably
quick phase out period of 3-5 years. Given the relatively low levels of
trade with Singapore, AAFA
believe that such a plan would have minimal disruption for the U.S. industry
while fostering additional trade links based on existing trade ties.
